When the Toronto Stock Exchange opened Wednesday, Western Forest Products Inc. stock plunged on the uncertain future of Canada’s softwood lumber industry with the incoming, stoutly protectionist president of the United States.
The fortunes of British Columbia’s largest coastal forest company will be tied to how president-elect Donald Trump will change trade relations, just as the hard-fought 2006 agreement between the Canada and the United States on softwood lumber has expired.
Mr. Trump campaigned on a protectionist trade agenda, saying he would renegotiate or break the North American free-trade agreement – one of several related commitments that could disrupt global trading patterns.
Canada and its forest industry had pushed to renegotiate the softwood lumber agreement ahead of the U.S. election, without success. British Columbia, which accounts for half of Canada’s softwood lumber sales to the United States, sold $3.3-billion worth of timber to its neighbours to the south in 2015 under the now-expired agreement.
“It’s frustrating for the industry not to have been able to achieve a new agreement,” said Susan Yurkovich, president of the BC Lumber Trade Council. “But, sadly, this isn’t our first time at this. This is an issue that has been persistent and this is an industry that is resilient. We carry on.”
Ms. Yurkovich said she hopes that Mr. Trump’s commitment to grow the U.S. economy will lead him to consider the need for Canadian lumber. “The U.S. is a big trading nation; it is going to need to have trade agreements, unless they want to wall off their entire economy,” she said. “New construction is on the rise in the United States, and the U.S. industry can’t meet the current demand from consumers.”
They do need our product … and that means reaching an agreement between Canada and the U.S. on softwood lumber.”
In Mr. Trump’s victory speech, Ms. Yurkovich said she detected some softening of his rhetoric around trade when he said his administration will “get along with all other nations willing to get along. … We’ll have great relationships.”
The afternoon following Mr. Trump’s win, B.C. Premier Christy Clark said she is glad that the “ugly, terrible affair” of a presidential campaign is finished because U.S. trade negotiators had signalled they are in a holding pattern waiting for direction from their new leader.
“The reality is that a softwood lumber agreement is vitally important to British Columbia; it’s very important for Canada and it’s not really central for most of the American economic interests,” she said at an unrelated event.
She said she is unaware of Mr. Trump ever taking an interest in the softwood dispute, but she will work with the U.S. government to get a deal done. She also touted British Columbia’s strong relationship with individual states on the West Coast and said she would be working with various governors to help reach a settlement.
The province has sought to protect its forest industry – which is facing an additional challenge because of the mountain-pine-beetle infestation – by reaching new markets. Ten years ago, British Columbia sent two-thirds of its softwood lumber to the United States.
Today, more than half of British Columbia’s softwood is heading to China and other markets. However, Mr. Trump’s tough trade stance could affect those markets as well – his threat to impose a stiff tariff on Chinese imports could curtail China’s economic growth, which in turn would curb the appetite for B.C. products in that market.
Keith Head, a professor at the University of B.C.’s Sauder School of Business, said Canada would do well to press for an early resolution to the softwood lumber file – before the new president can upend trade resolution mechanisms that have served Canada well in the past.
“I’m not convinced he will be uniformly protectionist,” Prof. Head said Tuesday. “His approach is very much about blaming foreigners for what he perceives to be the problems in the U.S. – it’s about blaming the Chinese and the Mexicans, and in turn blaming the people who designed those trade agreements.”
While Canada and softwood lumber will not likely be high on his agenda in his first 100 days in office, Prof. Head believes Mr. Trump could make it much tougher for Canada to negotiate in the long run if he pulls out of NAFTA, or chooses not to abide by any adjudication by the World Trade Organization.
“If he refuses to respect their ability to rule against the U.S., then we don’t have that appeal avenue any more and then we have to accept what the U.S. offers. Then we are in a much more vulnerable position.”