Countervailing Duty Could Destroy
Value-Added Manufacturing in Northern
BC
…….and so too could our outdated,
unworkable forest policies, our lack of
support services and our poor
investment climate.
Dialogue
 We encourage dialogue between the industry and
local governments. We need to ensure:
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Local governments understand the dynamics of the
industry, its drivers and its deficiencies.
An effective exchange of information so that local
government is kept aware of developing issues.
That local government understands the need for
reliability, consistency and supportive policy towards
industry.
A Leadership Role
 Prince George should take a lead role in developing
a new industrial strategy for further manufacturing
in the longer term.
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Develop a resolution through the resolutions committee
to embrace a new industrial strategy
Move the concept along with the North Central
Municipal Association to ensure wider acceptance
Involve the PG Development Corp. in the strategy
Crisis
 The value-added industry in Prince George is in a
near state of collapse. Some firms have failed.
 The primary industry is in dire straits. Prices have
slumped; uncertainty exists over the SLA; mountain
pine beetle epidemic could be devastating.
 The harvest sector is in a desperate position being
entirely dependent on the rest of the industry.
 Silviculture, engineering, forestry consulting and
many suppliers to the industry are hurting.
Why the Trouble?
 The past year has seen a number of companies in
trouble. Some reasons, that apply to both primary
and secondary sectors, are:
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High costs - materials, labour, energy
Uncertainty - market access, land claims, tenures
Weak public policy - poor decisions
Government interference - FRBC, JPC, resulting in
handouts and bailouts
Structural Problems
 Industrial Strategy: The economic strategy for
northern BC is badly outdated and has been driven
mainly by resource exploitation from the south.
 Tenure Reform: There is an urgent need to review
the tenure arrangements under which the industry
operates.
 Forest Legal Framework: The laws and
regulation surrounding the forest and related acts
are complex, convoluted, out dated and badly in
need of reform.
Structural Problems
 Stumpage: Although an integral component of
forest policy, stumpage is the key to fundamental
change. It is not a target revenue provider for the
provincial general revenue coffers.
 Market Access: Two critical issues threaten market
access for B.C.forest products to international
markets. These are the Canada-US Softwood
Lumber Agreement (or its successor) and
environmental certification of our forests.
Market Access
 The Softwood Lumber Agreement has provided
some stability to trade with the US BUT it has been
the single biggest negative impact on growth to this
economy.
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It affects both primary and secondary industries
As a result of it, strategic partnerships and supply
agreements have blossomed between primary and
secondary manufacturers
It has forced further manufacturing in BC but if
conditions change, this could be forced south of the
border
CVD …. Inevitable
 The US based Coalition for Free Lumber Imports
fully expects to file a case of injury on April 2nd
seeking countervailing duties against Canadian
exports of lumber when the SLA expires.
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Rate expected to be 20% to 40%
Directly penalizes further manufacturing in northern BC.
It is now minutes to mid-night and we are no closer to a
solution and there is still no cohesive strategy
US Protectionist Trade Law
 The US has an extensive body of protectionist trade
law. Besides a CVD, there are 3 other “tools” they
can use. All are devastating to all levels of industry.
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Safeguards -Trade Act 1974: Temporary duties, quotas,
or other import restrictions, to give domestic industry the
opportunity to recover its competitiveness.
Anti-Dumping Duties – Tariff Act: Determines whether
imports are sold at unfairly low prices.
Section 310 – Trade Act: Foreign trade practices are
found to be illegal, unreasonable, or discriminatory, and
burdensome to US interests.
Value-Added Position
 The Value-Added Industry is trying to achieve
exemption from a CVD on the basis that:
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It pays full market value for all inputs
It does not hold timber licences that may be construed as
being “subsidized”
It has never received any grants, subsidies or incentives
from any level of government.
It competes freely with other manufacturers in North
America, or the rest of the world for that matter, to
purchase finished, kiln dried lumber at whatever market
forces determine the price to be.
What might happen?
 While Canada has > 30% market share, no matter
what we do, including allowing log exports, the US
will continue its action.
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Recall 1986 - CVD all round including those found to be
below de minimus (insignificant) level of 0.5%. Brink
Forest Products was one of those.
This time the claim will be for all products from every
province including those formerly excluded. Everything
in; Everyone in.
What to do about it?
 Prince George has a lot at stake Collectively we
must take some short-term action:
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Become vocal about the issues affecting the region
Support the position of exemption and insist on free trade
Reduce our reliance on the US and commodity markets
by adopting an industrial strategy geared at further
manufacturing
Build the support services to meet the needs of a new
strategy
Industrial Strategy
 In the longer term a comprehensive industrial
strategy for the forest industry must be devised and
implemented.
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Attention must be paid to the growth of the whole sector
Forest policies, regulatory procedures and economic
incentives must be developed to provide increased
business stability and entrepreneurial opportunities to
logging and trucking contractors, value-added operators
and primary manufacturers
Such policies and opportunities will strengthen local and
regional economies.
It will require RADICAL change
Leadership Required
 Prince George must play the role of leader
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There is no place on earth that has better fibre
There is no better infrastructure, transportation
system and quality of life than we find here
Nowhere else is located as strategically we are to
the markets of the Far East, Europe and the
largest consumer market of them all, the USA
What Should the City Do?
 PG can support a new industrial strategy by:
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Supporting the development of services that underpin
successful world class manufacturing excellence. e.g.
wood technology education and training; value-added
incubator services.
Creating an attractive investment climate; no surprises
(e.g. OCP); minimal bureaucracy
Provision of first class services – roads, utilities, and
infrastructure
PG Development Corporation
 Now that the PG Development Corporation falls
under the city’s wing:
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Have it work with industry on a new industrial strategy
Help build the entrepreneurship that is required to
stimulate new private sector investment and innovative
ideas
Have it help develop the support infrastructure needed
like the Wood Technology Centre, the Value-Added
Incubator and others
We Can Do It!!
 Lets build a dialogue between the industry and local
government and understand the basic drivers of
success
 Lets take the leadership role and spread it out to
other northern communities
 Lets use the economic development resources that
we have, like the PG Development Corp. and put
them to work on a new industrial strategy
Lets Do It!!
 Lets insist on northern solutions for northern
problems
 Lets insist that the implementation of policies by
government ministries, agencies and crown
corporations that are located in the North actually
function for the North
To Action!!
 Lets implement an industrial strategy that
encourages and fosters the establishment and
diversification of environmentally responsible and
sustainable industry which will provide a sound
economic foundation for the North, jobs for its
people, and a secure future for its communities.