The current softwood lumber dispute and economic
climate reminds me of the opening line of Charles Dickens' classic novel
of the French Revolution, A Tale of Two Cities. The story begins, “It was
the best of times, it was the worst of times, it was the age of wisdom,
it was the age of foolishness…”
As to the best of times,
in our industry consider that...
The industry is working
together on a number of fronts, a highlight of which in the U.S. is the
Sustainable Forestry Initiative. In a remarkable display of industry cooperation,
more than 200 firms are enrolled in SFI, representing 116 million acres.
In Canada, in cooperation with the government, more than 1,500 member firms
participate in the Canadian Standards Association.
In
Canada, British Columbia just announced a number of significant forest policy
changes aimed at expanding the role of market forces, improving industry
competitiveness and providing greater access to timber to resolve First
Nations and community issues. The changes represent a fundamental shift
in the province's forest policy and likely would have come about even without
a softwood lumber dispute.
Demand for softwood lumber
remains high. The industry publication Random Lengths says we're in the
midst of the best housing market in the U.S. in 16 years.
According
to last week's New York Times, housing construction grew 8.3 percent in
March, almost twice as much as economists had forecast, driven primarily
by low mortgage rates and warmer weather.
A low inflation
rate has helped the Federal Reserve hold interest rates at a 41-year low.
According to mortgage buyer Freddie Mac, the average interest rate on a
30-year fixed-rate mortgage reached a record low of 5.61 percent in mid-March.
With low interest rates and low lumber prices, it's a great time to be a
new-home buyer.
Unfortunately, however, it's not the
…”best of times…” to be a forestry industry CEO. Consider...
Prices
for softwood lumber are at 10-year lows.
Despite strong
housing starts, the industry is experiencing one of the worst years in terms
of profits.
As noted by our panel leader Bradley Meacham
of The Seattle Times, in a March 21st analysis, nearly 140 mills have shut
down in North America as a result of current market conditions and the softwood
lumber dispute, resulting in layoffs on both sides of the border.
Clearly, pain is being experienced on both sides. And unfortunately,
the worst of times may not be over.
Many years of government-managed
trade contributed to the over-capacity problem our industry now faces. If
the industry can't thrive under today's robust demand conditions, how will
it perform when demand ultimately weakens?
To illustrate
the size of the problem, let me give you some statistics on how much production
increased in just the past year.
According to Random
Lengths, there were nearly three billion board feet more softwood lumber
available to the U.S. market in 2002 than in 2001.
U.S.
production last year rose to 36.4 billion board feet. And that's a 5.3 percent
increase over 2001.
Canadian imports rose 2.3 percent
to nearly 19 billion board feet.
Imports from non-Canadian
sources also jumped – almost 40 percent to two billion board feet.
Let me conclude with these thoughts.
As it relates
to the softwood lumber dispute, I'm reminded of a rodeo announcer's phrase
– often heard during the steer-wrestling event – “And now folks, we're going
to see what happens when an irresistible force meets an immovable object.”
Now, I'm not saying who's “the irresistible force” or who's “the
immovable object” in this dispute. Suffice it to say those cowboys don't
always succeed in wrestling that steer to the ground the first time, or
even at all.
For Weyerhaeuser's part, we're pleased that
both sides have indicated a willingness to stop wrestling and are now working
together to arrive at a solution that will benefit stakeholders throughout
North America.
We believe it's a three-step process.
First, get us out of the quagmire of legal cases by implementing a short-term
border tax – or perhaps a temporary export quota system – that will effectively
regulate the amount of Canadian lumber exports. Either measure could rid
us of the egregious anti-dumping duty and reduce the uncertainty the current
process creates.
Second, through the use of the Department
of Commerce policy bulletins, implement genuine, long-term change to Canadian
stumpage policies. And let's give credit where credit is due, especially
for the work of Undersecretary Grant Aldonas, with help from Assistant Deputy
Minister Doug Waddell and many provincial leaders. Only by moving to what
the U.S. Department of Commerce has defined as a market-based system will
Canada be in a position to defend itself politically from the U.S. Coalition's
claims of unfair advantage.
And finally, let's have the
courage to look at alternative and creative ways of distributing the deposits
so that neither side is advantaged, but so that both sides benefit.
For example, we could use a portion of the deposits to aid displaced
workers… to make wood-based home ownership available to low-income families…
to fund a North American wood products promotion campaign… to provide for
electronic transparency of lumber sales in Canada.
Today,
more than ever, we need innovative solutions to this decades-old dispute.
And we're running out of time. If we can't come up with a solution, then
it will be done painstakingly by the courts – perhaps over a period of three
years or more.
I don't want to speak for everyone, but
my life would be much easier if I never again participated on a panel talking
about the Softwood Lumber Dispute!
By thinking outside
the box and cooperating, maybe, just maybe, both sides working together
can wrestle that old steer to the ground before the announcer – or in this
case, the bankruptcy judge – says, “Out of Time!”
Let
me conclude by asking you to join me in thanking Consul General Roger Simmons
and the Canadian Consulate, and especially Paul Boardman and the Center
for International Trade in Forest Products for generously hosting and arranging
this Forum.
