Trade impacts the softwood lumber industry in massive amount this was proven when the softwood lumber dispute happened between Canada and the United States. This was one of the largest trade disputes in modern times and effected British Columbias economy the most out of all of the provinces. British Columbia is the largest exporter of softwood lumber in Canada, the biggest sector that was hit was the small business sector. There are three different parts of the forestry industry, the logging industry, the wood manufacturing industry and the pulp and paper manufacturing industry. There are other industries that are affected by the forestry industry like the trucking industry. I am writing this report to explain how supply, demand, monopolies and what advantages there are in the softwood lumber industry, I am also going to explain the problems that the softwood lumber industry is facing and how Canada is overcoming them.
What is the softwood lumber industry?
To first know about the softwood lumber industry, you need to know what it is; softwood lumber is lumber that is from coniferous species like pine, spruce, fir and cedar. It is primarily used for construction and made into two by fours for framing, plywood for walls, and it can also be made into flooring. It is also occasionally furniture for with in the home. Most of the homes and buildings build within the United States of America are built with Canadian lumber.
With proper conditions softwood lumber is one of the best building materials out there, it is also very appealing because it is a renewable resource that is very sustainable and all you need to make it is sun, water, and soil. Using softwood lumber as a building material has many benefits other than it being renewable it is also an insulator, where concrete or steel are cold, wood retains heat. Softwood lumber is also completely biodegradable and can be recycled into new products such as paper and pulp to make new products. With proper planning softwood lumber is also one of the most durable products to build with, as long as a quality product is used and things like insects and moisture is controlled it will last and stay strong for a very long time.
There are different ways that lumber is also graded there is construction lumber that is divided into three categorys non-stress, stress and appearance. And then there is remanufactured lumber. Each one plays an important but different role in the building of a building.
The softwood lumber industry is an industry that encompasses many different jobs and supports many communities across Canada. Some of the industrys that are under the soft wood lumber industry are logging or harvesting, trucking, production, falling, manufacturing. During the softwood lumber dispute over twenty thousand of these jobs were lost over a six year span between two thousand and two thousand and six because of plant closing due to restructuring of the system.
The softwood lumber dispute and damages to the economy
The softwood lumber dispute was a dispute between Canada and the United States of America, the center of the dispute was that the Canadian government was unfairly subsidizing their own lumber. Most softwood lumber is owned by the province and rates are set by them not a competitive market. In the United States of America the prices are set by a competitive market and the Americans believe that by harvesting the timber at a below market price this is an unfair subsidy. According to United States laws subsidized goods that are coming in to the country at below market costs are subject to tariffs that will bring the product up to market cost, they added a ten percent then later on twenty seven percent export tax to lumber from some Canadian provinces. The argument was over weather Canada or the United States of America should college this tax.
The United States was currently collecting and the total earned was over forty six million dollars. The United States of America cannot supply the demand for lumber within its own country and is dependent on Canada to supply it; Canada now supply one third of the United States of Americas needed lumber. Because Canada can sell it at a much cheaper cost then the United States of America can due to the fact that the provincial and federal governments in Canada can subsidize the cost of producing and manufacturing it then creates a demand for Canadian lumber that is in a semi-limited supply until more can be imported making it more demanded then the United States of Americas lumber.
With the United States of America being the main foreign market for Canadian soft wood lumber and the fact that Canada has never expanded their markets past the United States of America this makes Canada very dependent on the United States of America to buy our exports. When the demand for Canadian lumber went down in two thousand and six it hugely affected the Canadian market mostly in eastern Canada, in western Canada there was more harvest happening because of the pine beetle invasion meaning they needed to harvest infected trees faster, creating a huge supply but nowhere for it to go. With having such a high supply the prices dropped lower.
In two thousand and six the united states of America and Canada signed an agreement, which bans the united states from launching new trade actions, returns four billion dollars to Canada while the united states of America keeps one billion, and prohibits the united states from pulling out of the softwood lumber agreement without six months notice and they cannot re impose taxes and duties on Canadian lumber until one full year after the agreement ended. By doing this it creates a stable environment for trade and gives the Canadian softwood lumber industry a chance to recover their losses over the past years.
Canada has always had an advantage over the United States of America when it comes to softwood lumber because of the Americans demand for it and Canada having a huge supply. The agreement that was signed between the two countries now protects Canada from being over taxed by the Americans, and now a monopoly cannot be created.
http://www.bcstats.gov.bc.ca/data/bus_stat/busind/trade/swl.asp http://www.statcan.gc.ca/pub/11-621-m/11-621-m2007055-eng.htm http://www.madisonsreport.com/archivesJune09.html