Today’s announcement of an $867 million support package from Ottawa for the softwood sector comes just one month after the U.S. imposed countervailing duties, averaging 20 per cent, on Canadian softwood lumber shipped into the U.S.
The quick response from the federal government comes even before the full extent of the impact of U.S. duties on the Canadian softwood sector is known; later this month, the U.S. is expected to slap on additional anti-dumping duties. Funding for the initiatives announced today are spread over two to four years, allowing the government time to adjust funding levels as necessary if the dispute drags on.
Federal support for the softwood sector in response to U.S. trade action is something we’ve seen before. Last time the U.S. imposed duties, in 2002, Ottawa spent about $346 million on various measures. This included support for affected workers and communities, research and development, and funding for marketing campaigns in new markets and the U.S.
Three things stand out in the latest federal package: loan guarantees for softwood exporters, support for affected workers, and funding for market diversification.
1) Loan guarantees
The biggest chunk of money in the package ($605 million) will be allocated to federal loans and loan guarantees, something we haven’t seen in previous federal packages. There is some danger this could be perceived by the U.S. as a government subsidy. But because the loans will be administered through financial institutions (the Business Development Bank and Export Development Canada), on a commercial basis, the U.S. will have a hard time making the subsidy argument.
2) Affected workers
As the trade war over softwood drags on, there are likely to be some jobs losses. The Conference Board of Canada projects that if the U.S. duties are in place over the next two years, about 2,200 jobs will be lost. While part of this figure accounts for jobs that are not created, we know from experience that U.S. duties can also cause direct job losses through sawmill closures or reduced operations.
The package provides funding over the next four years to extend the existing Work-Sharing program. The program supplements the income of EI-eligible workers who are working temporarily reduced hours; affected workers in the softwood sector will now be eligible for double the amount of work-sharing benefits (76 weeks, up from 38 weeks).
Labour Market Development Agreements with the provinces will be amended to help forest sector workers make the switch to new sectors, and there is also funding for indigenous forestry communities.
So far, layoffs directly related to the U.S. softwood duties have only been reported in Quebec.
3) Market diversification
Of the measures in today’s package, support for finding and growing new markets for Canada’s softwood lumber will have the longest-term benefit. The U.S. is still the number one customer for Canadian softwood exports from every province – and in some cases, nearly the only customer. B.C., in particular, became less reliant on the U.S. in the last decade, with the growth of China as a strong second customer. Better than one or two good customers is five or six or 10 – the best scenario for Canada is to be a preferred supplier with high demand in multiple markets.
Today’s announcement includes $45 million over three years for Natural Resource Canada’s Expanding Market Opportunities Program (EMO). The EMO covers all wood products in both offshore and North American markets. The offshore component focuses on Europe, China, Japan, South Korea and India. While these are important markets to continue to grow, there are also regions with growing softwood lumber demand that Canada is not – but could be – a significant player. These include countries with booming furniture and packaging sectors, like Vietnam and Thailand. While the trade minister’s recent mission to Vietnam is a good start, the EMO should also be utilized to build knowledge about and gain market access for Canadian softwood lumber in this region.
– Naomi Christensen is senior policy analyst at the Canada West Foundation