A window of opportunity

Today offers yet another indication of just how bad the softwood lumber capitulation is for Canadian industry in the longer term, as the CP reports that Canadian producers are scrambling to ship as much lumber south as they can before the deal goes into effect:

A delay in implementing the Canada-U.S. Softwood Lumber Agreement is angering American lumber producers.

The Washington-based Coalition for Fair Lumber Imports said Monday that Canadian exporters are taking advantage of the delay to flood the U.S. market with lumber before export taxes kick in under the agreement...

The federal government announced late Friday that the planned Oct. 1 implementation would be delayed until Nov. 1 to give more time to work out technical problems, especially related to the withdrawal of dozens of legal cases connected with U.S. lumber duties.

The American duties totalling 10.8 per cent are supposed to be replaced by a Canadian export tax of about 15 per cent, based on current lumber prices.

A spokesman for the U.S. Trade Representative's office would not comment on the coalition's complaints except to say it wants the agreement to come into force as soon as possible...

Vancouver lumber analyst Kevin Mason said that while statistics aren't available yet, his discussions with U.S. buyers and lumber brokers suggests the coalition is right.

“Definitely the Canadians are shipping every stick of wood they can because effectively you're operating on a duty-free mindset,” he said...

Canadian companies must sign waivers agreeing to accept about 80 per cent of their refunds — in a program administered by the Export Development Corp. — to satisfy that clause in the deal.

But Mr. Mason, a partner in Equity Research Associates, said once the U.S. payment is accounted for, exporters will get back 100 per cent of their duties, which makes it attractive to ship lumber now instead of waiting for the higher Canadian export tax to kick in.

While I naturally wouldn't be one to take CFLI's word for much, it appears that a neutral analysis also suggests a surge in current exports in an effort to avoid the Cons' export tax.

Of course, the increase only goes to show how much better off Canada's producers would be in the absence of the U.S.' wrongfully-imposed duties. Which should make it all the more appalling that PMS has managed to lock the industry into even higher levies in the long term...but should also offer the producers still pushing ahead with litigation a glimpse of what the market could look like if they follow through. After all, given the choice between actual free access and a deal so bad that its only positive effect lies in the fact that it hasn't been implemented yet, it shouldn't be hard to tell which will actually lead to a sustainable industry.