The side deal that Canada and Japan cut to the Trans Pacific Partnership trade agreement on Canadian restrictions to raw log exports includes a mechanism aimed at smoothing over future irritants.
The mechanism is a bilateral committee on forest products, which is to begin operations five years after the TPP comes into force, assuming it is ratified.
And that committee might wind up revisiting the issue of Canadian restrictions, which Canada kept in force in the side deal, though Japan pushed hard through the negotiations to bring them to an end.
There are differing views emerging on what the deal means.
Japan is B.C.’s third biggest trade partner in both logs and lumber. In 2014, B.C. exporters sold about 1.5 million cubic metres of raw timber — mostly Douglas fir logs — worth $194 million, out of overall provincial shipments of 5.9 million cubic metres.
That, however, is dwarfed by B.C.-Japan trade in lumber, which involved 2.1 million cubic metres in 2014 worth $731 million.
Trade interests on the Canadian side are touting the side deal as maintaining the status quo for Canadian and B.C. export rules, which require that timber be proven to be surplus domestic needs before export permits are issued.
“What we’ve done is eliminate one aspect, one barrier to the export of logs to Japan,” said Abbotsford MP Ed Fast, who was the minister of international trade during the TPP negotiations.
That concession, Fast said, was that so long as applications to export logs met the surplus test, Canada “will not stand in the way of issuing an export permit.” As it stands, ultimate approval of permits remains at the discretion of government.
No one from new International Trade Minister Chrystia Freeland’s office was made available to speak to the issue Tuesday, but Fast said he is “absolutely certain that Japanese negotiators understood (the contents),” said Fast, “and we certainly expect the Japanese to live by the commitments we’ve jointly made.”
However, as news to the TPP’s contents is filtering out to the industry, there appears to be a different interpretation of what the side agreement means, said Rod Bealing, executive director of the Private Landowners Association.
“Japan is telling its industry and sawmilling sector that there is a change (in export restrictions),” said Bealing, who represents the owners of private timber lands in B.C. that also oppose B.C. and Canada’s export restrictions on logs.
Bealing pointed articles in the Japanese trade press explaining the side letter, which indicate a bigger change.
“Canada will relax log export regulations,” according to the translation of an article from the Japanese Trade Journal.
Bealing’s group also obtained the translation of a web page from Japan’s Ministry of Agriculture Forestry and Fisheries, which estimated that Canada’s domestic log prices would rise as a result of changes in rules to better reflect log prices on international markets.
Bealing said the Japanese argument against export restrictions has been that the surplus test effectively sets two prices for B.C. logs, a domestic price and an open market price.
Log exporters are required to advertise the timber they have available, which domestic producers can claim as long as they pay what provincial officials deem is a fair price, even if that is lower than the international market price.
“That’s a subsidy,” Bealing argued, and there would have to have been be bigger changes in the Canadian restrictions than the guarantee of permits that Fast talked about for the Japanese to expect a bigger swing in domestic prices.
A trade official from the Japanese embassy in was not available Tuesday to speak to The Sun, but in November, diplomat Tomotaka Shiraishi told the publication Embassy that “both countries will take appropriate actions” as a result of the side agreement.
From B.C.’s perspective, the side agreement maintains the status quo in trade regulations.
“What the side letter does is it provides an opportunity for continuing dialogue and discussion,” said Steve Thomson, B.C. Minister of Forests, Lands and Resource Operations. “But it doesn’t at all change the current restrictions that are in place.”
Thomson recently returned from a trade mission to Japan and China and said that other than some discussion among the Japanese trade press, the topic of the TPP was not a major focus of their meetings with Japanese officials and industry groups.