Ottawa touts 'majority' in softwood deal
OTTAWA, VANCOUVER -- The Canada-U.S. softwood lumber dispute moved closer to conclusion yesterday as Prime Minister Stephen Harper said that a "clear majority" of forestry producers in all regions support his government's draft deal, and that he will take it to Parliament next month.
The government had said it would need producers representing 95 per cent of the tariffs owed to Canada behind the deal, along with all companies litigating against the United States. In the end, neither test appeared to have been met. Mr. Harper and other officials wouldn't say what percentage of the companies was behind the deal.
"This agreement demonstrates what can happen when governments roll up their sleeves, focus on their objectives and set out to get things done," Mr. Harper told reporters yesterday outside the House of Commons.
The government again didn't say how it calculated the company's views -- one vote per company, weighted by export volumes, or something else -- but one official did confirm that the tallying was conducted without the help of an auditor or other third party.
Under the agreement, first reached in April, the U.S. would return about $4-billion (U.S.) of almost $5.3-billion in punitive duties that it has collected from Canadian companies since May, 2002. It would also require Canadian companies to drop about 30 lawsuits.
Some companies see the agreement as the best available deal, despite its flaws. "It is time to put this dispute behind us," said Jake Kerr, chief executive officer of Lignum Forest Products LLP in Vancouver. Others, even some of those that ultimately supported it, remain sharply critical.
Vancouver-based West Fraser Timber Co. Ltd., for one, said it would support it, even though it had "serious reservations" about both the substance of the deal and the process that led up to it.
Some companies said it was particularly important to end the dispute before the softwood market suffered any further declines.
Many in the industry believe that things could get worse in the coming months, as the U.S. housing market and key Asian economies have sent lumber prices plunging close to an all-time low in Canadian dollar terms.
"We are looking at a very bad lumber market through 2007," said Don Roberts, an equity analyst with CIBC World Markets.
Analysts are hoping that if provinces like Ontario and Quebec agree to place quota-based export restrictions on their lumber sectors as soon as the softwood deal is implemented, it will ease the flow of timber into the United States and allow prices to recover.
Companies that are expected to be affected most by the agreement include highly leveraged firms like Western Forest Products Inc. of Duncan, B.C., and Montreal-based giant Tembec Inc.
When it recoups 80 per cent of the duties it has paid since May, 2002, Tembec is expected to receive a refund of $254-million, an amount if will likely use to ease its debt burden.
Others such as International Forest Products Ltd. and Canfor Corp. are in for what CIBC's Mr. Roberts called "an embarrassment of riches," once the duties are paid back.
Mr. Harper said the vote would be a confidence motion, which means its failure would prompt a federal election.
Even NDP MP Peter Julian, a harsh critic of the deal, acknowledged that an election is unlikely. After last week's support for the deal by the Quebec industry, it's very likely that the Bloc Québécois' caucus of 51 MPs will vote with the government. Their support would ensure the passing of the government's motion.
U.S. trade lawyer Elliot Feldman said most of the existing lawsuits automatically become moot now that most of the companies have shown their support. The exceptions are three Chapter 11 claims filed by Canfor, Terminal Forest Products Ltd. and Tembec.
Canfor has said it supports the deal, and Mr. Feldman said Terminal's case has been weakened by the fact that Tembec successfully challenged the legitimacy of a tribunal set up under the North America free-trade agreement to consolidate the three cases. Since Tembec withdrew from the tribunal, Mr. Feldman said it has the only viable case that would remain if the softwood deal comes into force.
