Softwood Lumber Agreement: a tale of different values

Following last week’s post, I’ve had time to think about this issue.  There are so many parts to the SLA (acronym insiders use).  Some of which can be addressed in an agreement and much of it that cannot.  It’s been my opinion for some time that the Canadian producers get hit with this duty because the US Government can’t get out of its own way.  Think about it.  The US Government has to impose a duty and/or quota system to protect US mills from lower pricing pressure.  In many cases because the mills don’t have an affordable supply of logs. And in many areas, not even enough logs to run a mill.   Isn’t interesting that now the US Forest Service is now trying to figure out what to do with logs in many market areas?

Let’s contrast how the two countries operate their respective Forest Industries:

USA and Canada value their forests differently

Canada treats its Forest Industry with respect.  Many of the mills have active, long-term Forest Licenses.  This allows the company to manage that license to standards set by the Ministry of Forests.  The company lays out a management plan, then asks for Ministry of Forests to review the plan.  Once all measures have been addressed, approval is granted, and the company carries out those management plans.  Many of these licenses have been significantly reduced in size over the years to create a system that is more market-based.  Much of this resulted from SLA disputes.  The US Coalition for Fair Lumber Imports frequently accused the Canadian government of subsidizing the mills because so much of their supply came from these licenses.  Many of these mills are in very remote communities with most the land base controlled by the government.  In the case of British Columbia, the mills pay a high local tax to the community that it serves.  This gives the community and the mill a common goal to keep the mills running and the people working.  The Canadian government has a history of working with these Forest Industry companies to make sure they have what they need so they can compete and stay viable.

The United States government controls vast forest lands in the western states.  Historically the Forest Service, Bureau of Land Management, and the States managed these lands aggressively and consistently.  There were no forest licenses like in Canada, but Timber Sales were the way the wood was sold.  The projects were regular, and it gave the mills a chance to buy enough logs to manage their business for a year or more based on the wood “under contract.”  This was the way the West was managed until the late 1980’s.  Many people in the US decided the heavy-handed approach by the Forest Service on public lands was no longer acceptable.  This brought on protests and legal challenges.  Resulting in the Forest Service essentially shutting down their entire forest management system.  The federal timber volume went from over 12 billion board feet of logs per year to less than 2 in a couple years.  This devastated communities.  The federal government had abandoned the rural communities where their forests were located.  Hundreds of mills went out of business and were closed.  Instead of figuring out how to address and mitigate the concerns of Americans, the Forest Service just stopped serving the forests.

Today the US Forest Service has recovered by way of collaboration to sell between 2 and 3 billion board feet annually.  Still nowhere near the treatment necessary to combat catastrophic wildfire risk and forest health concerns.  To add perspective, more timber falls over and rots every year than is harvested.  Environmental concerns impacted the States and other land agencies, but they were able to mitigate concerns with new management plans.

So now we have a situation where the Canadian government has adjusted their policies to better reflect market pricing while the US government stopped making logs available to mills.  Now another part of the US government is called in to remedy to the market effect caused by Canadians selling too much wood into the US marketplace.

This is what happens in the West every summer due to overstocked forests.

Does anyone else see a deeper problem here?  The US Forest Service and other landowners now have an extreme need to manage and restore the forests, yet in many cases, there’s no mill to take it to.  I attend conferences and speak on this subject regularly.  It’s almost like being in some bizarre world where few understand economics and the idea of letting entrepreneurs solve problems by making material available.  Mills in the North America were created originally by providing an available natural resource and allowing the market to work itself out.

Is there a need for the SLA?  I think so, but I would personal like to see a more sophisticated way of looking at it. One that takes into account all types of data to ensure it’s fair to all.  In the meantime, the US Government needs to ask itself a question….. Why are we working hard to help an industry with trade adjustments while we don’t substantively address our forest health issues?  Better management of Forest Service lands using a conservation ethic while making sure that the North American playing field works for North America, not just Canada or the United States appears to be the best answer.

9 thoughts on “Softwood Lumber Agreement: a tale of different values”

  1. Well said Russ. Fact is that 1/3 of the lumber used in US home construction comes from Canada not because its cheap but because we, in one of the most generously timber endowed nations in the world, choose not to cut but instead to burn. Happy Holidays.

  2. Russ

    Couldn’t agree more with what you have said and echo Larry’s comments as well

    very thoughtful and concise post.

    I would like to share it within a group of us (AFRC and Trust Beneficiaries) that met with the new Commissioner -Elect of WA St DNR and frankly, with Ms Franz herself. I think she would find this insightful based on her stated interest in the rural areas of the State and those location’s issues with shall we say “un-healthful” Forest policy.

    Let me just say, that if Canadian Mills wish to send lumber our way w/o restrictions, then they should be just as open to sending us raw logs

    (By the way – what are you doing up at 4:14 on a Saturday morning???)

    Happy Holidays

    Joe Monks

    1. Joe,

      Thanks for reading and commenting. That all sounds fine with me. My latest post touches on the log exporting issue.

      I don’t know why it showed up as 4:14am. I certainly wasn’t up then.

      Happy Holidays to you and yours as well

    1. Dave,

      Thanks for your comments. I don’t think enough people are standing up to be part of the process. Logic and good thinking should dominate this negotiation, but it seems like ego and political posturing get in the way.

  3. Wow this brings together two vital topics, that long term are so important to Americans.. unfortunately the bulk of America is not aware of the mismanagement involved in a world class resource–OUR NATIONAL FORESTS! It is really important to all Americans that we rectify this, sooner rather than later.

  4. Hi Russ,
    Great piece …
    Is there any chance we could reprint, Softwood Lumber Agreement: a tale of different values, in Logging and Sawmilling Journal (www.forestnet.com ) ?
    Cheers,
    Paul MacDonald
    Editor

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