Canadian Timber, Eh

For the past few years there has been this running dispute between Canada and the United States over the price of imported timber from the western Canadian provinces (this problem, incidentally, does not occur in the east). The United States insists that Canadian timber companies get to cut timber off Crown (government owned land, which is most of the timberland in Canada) for pennies per hectare, whereas American timber firms must pay market price for their timberland.
This wasn't as much of a problem a decade or two ago, when timber companies still had large contracts to cut on federal forests here in the US, as they were getting a relative steal on that land too. But things have changed, and almost all the timber coming out of the U.S. is off private land and therefore is more expensive than timber coming out of Canada.
I am all for free trade, and have supported NAFTA, and now support the on-coming CAFTA (central American free trade agreement). I was very critical of Bush when he decided that we needed a tariff on Steel, as imported Asian steel was hurting out industry. But I'm not so sure the Americans are on the wrong side of this issue. It's hard to compete in a free and open market when someone's taxpayers are supporting the industry in another country. This issue has only come up as the US has stopped that practice, but I think that the U.S. has a right to protect it's timber economy until such time as Canada reforms it's timber industry.
Here was a press release today.

The Canadian government sent what it called an initial proposal to the U.S. to gauge its interest in returning to negotiations in the softwood lumber dispute. The five-page document outlined what Canada is seeking to settle the longstanding dispute. It calls for the U.S. to revoke the current countervailing and anti-dumping duty orders, and Canada then would apply an export tax on lumber shipments to the U.S. The proposal does not give a specific level for that export tax. It also calls for the U.S. to refund 100% of the duties already collected, with interest, since they were levied in May 2002. It also stipulates that for the duration of the agreement, the U.S. government would not file a CVD or AD investigation on Canadian lumber imports, and that the U.S. industry would not undertake any new cases. Under the plan, Canadian provinces would be able to reduce or eliminate the export tax if they completed specific reforms of their timber policies. A spokesman for the Coalition for Fair Lumber Imports said they declined comment until they had time to study the document.

What Canada is saying here is that they are conceding that there is an issue with their industry and it needs to be reformed, but that they want the money that comes from making the situation equitable, instead of the US profiting from this.
In a way I can see their point. The Canadian government gets a pittance from timber companies (when they should be charging more for the use of their land), the timber companies benefit, but then get charged the difference in order to export to the U.S. market. The U.S. gets money that the Canadian government should have been getting if they charged market rates for use of the land.
But the question is, why don't they just reform their timber leasing practices? The press shot above kind of indicates that is where they are going, but the demand that the U.S. give back all the money they have collected so far might be asking a lot. Call it the penalty for not addressing the problem in the first place and trying to fight the U.S. on the issue for the last 4 years.

There is another issue here too. Canada has threatened to retaliate against the U.S. by boycotting certain products of ours, like wine. Rogue pundit has thoughts about this.
I mean really. The U.S.: "We feel you are unfairly helping your timber industry, so we're going to protect ours a little bit."
Canada: "Waaaaaaaaah! Oh yeah? Well, we're not buying any more of your wine. How do you like them apples, eh?"
Whatever.

Update: "The Coalition for Fair Lumber Imports, the U.S. industry group that filed the duty petitions, said today that it expressed to the U.S. government its "strong support for face-to-face negotiations" with Canada. While the Coalition noted there are aspects of the proposal that they do not support, they called the proposal 'a positive step and a show of good faith.'"