BATTLE WITH U.S., GOVERNMENT INACTION COSTING US $100 MILLION
March 21, 2019
New Brunswick Premier Blaine Higgs is in a fighting mood these days. He set off for Washington, D.C. recently, focused on overturning the punitive duties imposed on New Brunswick softwood by the United States government.
He appears determined to overturn the duties, which have cost the forestry industry of this province more than $93 million in 2018.
When you add in just a couple of the other costs of this fight, that’s about $100 million being sucked right out of our economy at a time when no one can afford it – not the forestry industry, not the government and certainly not the taxpayers of this province.
“If we don’t have a fair marketplace we will fix it. — Premier Blaine Higgs
Given our premier’s focus on fiscal issues and the province’s net debt of $14.1 billion, he is right to be concerned about this issue.
But, as previous premiers have discovered, taking on the might of the U.S. government is not easy and the chances of success are slim to none. If he does succeed, it will be too little too late.
His chances of success are far greater here at home. Because the villain in this battle is not the American government, but the New Brunswick government itself. Yes, that’s right: the provincial government is to blame here. The good news is that Premier Higgs can fix it.
Throughout recent history, our exports of softwood to the United States have been exempt from the punishing American duties imposed on other provinces. That’s because we had a truly competitive market for wood here, dominated by fair pricing.
But our market is no longer competitive and our pricing is no longer fair, crippled by the government’s own practice of allowing those who dominate the industry in this province greater access to Crown wood at cheaper prices.
WE NEED TO LISTEN TO THE EXPERTS, NOT JUST THE INDUSTRY
The Americans are pointing to our unfair market as justification to impose the duties, backed by their own investigations and the work of none other than this province’s independent Auditor-General.
Repeatedly, over the last decade or more, New Brunswick auditors-general have warned that governments were not following their very own forestry laws and practices.
As recently as 2015, Auditor-General Kim MacPherson even voiced concern that government may be in a conflict of interest – its mandate under law is to ensure private wood represents a proportional source of supply to mills but increasing the take of Crown wood bolsters revenues to help the natural resources department balance its budget.
“In such a situation it is not possible to be confident that the prices paid in the market are in fact fair market value…. The royalty system provides an incentive for processing facilities to keep prices paid to private landowners low…. — Michael Ferguson, NB Auditor-General 2008
The government, bowing to pressure from industry, has been steadily increasing access mills have to Crown wood. The government’s own figures show more than half of harvested timber now comes from Crown land, while about 15 per cent comes from private woodlots. In its investigative ruling, the U.S. Department of Commerce expresses concern about the increasing reliance on Crown wood and notes worry among private woodlot owners. We know all too well how impossible it is to compete with the low prices created by a market saturated by Crown wood.
The U.S. department also noted concerns about an uncompetitive market were brought to the New Brunswick government’s attention in 2008 by then-provincial auditor-general Michael Ferguson.
“The fact that the mills directly or indirectly control so much of the source of the timber supply in New Brunswick means that the market is not truly an open market,” the late Mr. Ferguson said. “In such a situation it is not possible to be confident that the prices paid in the market are in fact fair market value…. The royalty system provides an incentive for processing facilities to keep prices paid to private landowners low….”
The commerce department noted that has not changed in the years that followed. It is a situation the 42,000 woodlot owners in this province are well acquainted with.
THE FAILURE TO ACT HAS LED TO THE PUNISHING U.S. DUTIES
Unfortunately, previous governments have turned a blind eye to the unfairness that is now entrenched in the market, and to their own obligations under the law.
This failure to act has led to the extraordinary penalties the Americans are imposing today. The past Liberal government under premier Brian Gallant responded by hiring former U.S. ambassador to Canada David Wilkins to fight the duties – an effort that has cost taxpayers more than $950,000 so far – and by recruiting a big consulting company to prepare a report arguing the Americans are wrong.
Add that to the $93,471,132.02 in duties imposed by the U.S. government on New Brunswick softwood in 2018, and it is clear that this province is paying dearly for an unfair and uncompetitive market that governments have been warned about for more than a decade.
Before his trip to Washington, Premier Higgs suggested to reporters he would act. “If we don't have a fair marketplace,” he said, “we will fix it." We hope so. We can’t afford not to.
Thank you for listening,
Rick Doucett President, New Brunswick Federation of Woodlot Owners