A lumber yard near Vancouver, B.C., on July 6, 2022.JENNIFER GAUTHIER/The Globe and Mail
A Canadian forestry research centre that has led efforts to expand the use of mass timber in British Columbia and Quebec is being accused by the U.S. lumber industry of receiving unfair federal and provincial subsidies.
The move is part of a new offensive in the long-running trade dispute over Canadian softwood sold south of the border.
The research centre, FPInnovations, is a private not-for-profit organization that works out of laboratories in Vancouver, Quebec City and Pointe-Claire, Que. It aims to spur innovation and growth in the forest products sector, including by researching and promoting the use of mass timber, a type of building material that consists of layers of wood bonded together for added strength. Its research benefits its members, a who’s who of Canadian forestry companies.
In a complaint lodged with the U.S. Department of Commerce this past summer, a U.S. lumber industry group, COALITION (short for Committee Overseeing Action for Lumber International Trade Investigations Or Negotiations), alleged that FPInnovations is helping Canadian producers gain an unfair advantage over their American competitors.
The complaint, citing FPInnovations’ financial reporting from the 2021-22 fiscal year, says the Canadian government provided more than $21-million in funding to the research centre. It notes that FPInnovations also had partnerships with the governments of British Columbia, Alberta, Saskatchewan, Ontario, Quebec, Nova Scotia, New Brunswick, the Northwest Territories and Newfoundland and Labrador.
The B.C. government, for example, provided $5.8-million to FPInnovations in the 2021-22 fiscal year, while the Quebec government chipped in $6.7-million.
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“In the absence of such funding, FPI’s members would presumably be required to self-finance” this type of research and development, COALITION said in its submission to the Department of Commerce.
A joint filing by the Canadian, Alberta and Saskatchewan governments counters that COALITION’s arguments are without merit. “New subsidy allegations with respect to alleged programs do not meet the standard required for the Department to initiate any further investigation,” it says.
Last month, the Department of Commerce opted to defer a decision on whether to launch an investigation into FPInnovations until its next administrative review, later this year. It also deferred decisions on three other claims from COALITION: one about alleged unfair subsidies provided by the Alberta government for carbon capture, utilization and storage; and two about training programs, one in Alberta and the other in Saskatchewan.
“These four allegations are new to this segment of the proceeding, and include extremely complex issues,” the department said in a recent memorandum.
The Department of Commerce has decided to investigate a fifth allegation from the lobby group, about research-and-development tax credits in Saskatchewan.
COALITION is led by the U.S. Lumber Coalition. Its members include Seattle-based Weyerhaeuser Co.
Forestry companies based in Canada that are FPInnovations members include West Fraser Timber Co. Ltd. WFG-T, Canfor Corp. CFP-T, Tolko Industries Ltd., J.D. Irving Ltd. and Paper Excellence Group, which completed its purchase of Resolute Forest Products Inc. last year.
The Department of Commerce has the authority to adjust U.S. lumber tariffs on Canadian softwood, after reviewing submissions from a range of interested parties. In recent decades, the U.S. has repeatedly levied duties on Canadian softwood in retaliation for what it has deemed to be unfair provincial subsidies. The dispute stretches back to the early 1980s.
Inside the never-ending softwood lumber trade war between Canada and the U.S.
The last time Canada and the U.S. reached an agreement on softwood trade was in 2006. That agreement expired in October, 2015, with no replacement.
Most forests in Canada are on Crown land, where buyers pay “stumpage fees” to provincial governments for the right to log. The U.S. has alleged that the fees are too low, and that they amount to government subsidies.
The U.S. has levied countervailing duties in retaliation, focused on the stumpage system. It has also imposed anti-dumping duties in response to Canadian lumber allegedly being sold at below market value.
In the Department of Commerce’s latest assessment, it announced last month that the combined countervailing and anti-dumping duty rates will rise by this autumn to 13.86 per cent for most Canadian softwood producers, compared with 8.05 per cent currently.
Eric Parnes, a lawyer representing the Canadian government, has said the notion of bountiful timber in Canada is outdated.
“There has long been a perception that Canada’s forests are endlessly abundant and readily available to lumber producers. Whatever the reality of that perception may have once been, it is very much not the case today,” he told the U.S. International Trade Commission in October, according to a transcript.
The Canadian government is challenging the lumber tariffs under the United States-Mexico-Canada Agreement, which allows Canada and the U.S. to set up trade panels to settle disputes. Canada also complained about the softwood dispute to the World Trade Organization in 2017.