PROCESSWEST Magazine Online

Pulp & Paper: Trade agreements offer hope for some

January 17, 2016   Don Horne




Flip open the business section of any Canadian newspaper these days, and it’s difficult not to find something about a number of monumental trade agreements that Canada is in the midst of negotiating. All have new rules related to trade in forest products.

Clearly, the Canadian forest industry is headed toward a time of much more liberalized trade, which could have a positive impact on the bottom lines of many pulp and paper producers.

The biggest prize is the recently minted Trans-Pacific Partnership (TPP) agreement. The 12 signatories to the agreement are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, representing 800 million people and 40 per cent of global gross domestic product.

If the TPP is ratified, it would be difficult for the U.S. to justify the recent tariff it has applied on supercalendered paper exported from some eastern Canadian-based companies. Also, Vietnam’s 25 per cent tariff on newsprint will disappear in three years after ratification, followed by Malaysia’s 10 per cent tariff in five years and Australia’s five per cent tariff immediately.

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On uncoated paper and paperboard, Vietnam’s 27 per cent tariff will be gone in three years, Malaysia’s 25 per cent in 10 years and Australia’s five per cent tariff when the deal is ratified. On carton boxes and packing containers, Vietnam will remove its 24 per cent tariff in three years, Malaysia will remove its 25 percent tariff in five years and Australia will dispense with its five per cent tariff upon ratification.

On sanitary and household papers, Vietnam will remove its 25 per cent tariff in three years, Malaysia its 30 per cent tariff in five years and Australia its five per cent tariff when the deal is done.

Finally, on printed materials, Vietnam will dispense with its 25 per cent tariff upon ratification, Malaysia will eliminate its 20 per cent tariff in three years and Australia will remove its five per cent tariff upon ratification.

While opening doors, the TPP could witness a radical change in Canadian forest product trade with TPP countries. For example, experts in international trade law say the TPP will supersede all bilateral agreements between countries, which would eliminate the need for a new Softwood Lumber Agreement (SLA) between Canada and the U.S.

It is unlikely our neighbours to the south would want to negotiate a new deal with Canada while opening its doors to free trade in softwood lumber with other TPP countries. Nor would Canada likely agree to be part of any SLA if competitors such as Chile, Australia and New Zealand would gain free access to the U.S. with their softwood products.

On balance, however, it’s obvious that Canada’s pulp and paper sector stands to benefit on trade of finished products if the TPP is ratified. However, that’s not the case when it comes to free trade of raw logs. If trade in raw logs from Canada is left unshackled, suffice to say that from a Canadian forest industry standpoint, we won’t be in Kansas anymore.

Just consider the significant drop in access to merchantable timber in B.C. as a result of the devastation wrought by the Mountain Pine Beetle. There is no question that greater access to raw materials, whether it be logs or wood chips, will create a tight and expensive fibre supply situation in B.C. What should be of concern to Canada’s pulp and paper sector — especially in the face of a dwindling log supply in B.C. — is the ability to attach “letters” to the TPP.

These are specific side deals that individual countries can negotiate between themselves on specific commodities. The federal government has revealed that one such letter on forest products already exists between Canada and Japan, although the details have yet to be revealed. Japan has made it known it wants more liberalized trade of raw Canadian logs to its country. Should this occur, B.C. will likely witness the biggest impact because of current restrictions on the open export of raw logs.

This practice has helped to keep prices low in the province because of the local right-of-first-refusal approach that B.C. has taken. What’s also holding back trade in raw logs is the export ban from private land in the province. It is worthwhile to consider why these restrictions on raw log exports in B.C. were put in place in the first place.

Does it come down to . . . greed? British Columbians know better than anyone else that log fever comes a close second to gold fever. And given the bent of the average British Columbian toward environmentalism, it should come as no surprise that a liberalized market for raw logs would send a shiver throughout the province. TPP negotiators best beware or there will be protest camps situated right up and down the entire west coast. It’s hard to find anyone else in the world who values their environment more than B.C. residents.

What the situation demands is a more managed approach and fully fleshed out policy as it relates to the gradual development of raw log trade. Yes, private woodlot owners in B.C. should be allowed some export of raw logs, but should only be accompanied by a well-developed reforestation plan with strict quotas on how much can be harvested of which species per year. There should also be a much stronger effort by the federal government to develop afforestation programs to encourage more plantations, which also benefits the environment and could be used as a hedge against the temptation to clearcut purely for profit.

As the situation stands now, the pulp and paper sector is correct to support the TPP if it represents more liberalized trade in finished wood products. However, when it comes to liberalized access to raw logs, that is a different story entirely and deserves as much attention from the federal government as they are currently expending on support for the supply managed dairy industry.

Otherwise this issue of raw log exports might fall through the cracks if we are not careful, much to our regret.

About the author: Tony Kryzanowski writes a bout forestry, alternative energy, and natural sciences for a variety of national and international publications, and is headquartered in St. Albert, Alta.


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