New Brunswick

Higgs willing to change forestry plan to end U.S. tariffs

Premier Blaine Higgs has signalled he’s open to changing New Brunswick’s forest policies ahead of a trip to Washington later this month, where he hopes to bend the ears of key U.S. policy-makers.

High tariffs charged on New Brunswick's softwood exports to the U.S. can't continue, says Higgs

Premier Blaine Higgs said he's open to changing New Brunswick’s forest policies if needed. (Sean Kilpatrick/Canadian Press)

Premier Blaine Higgs has signalled he's open to changing New Brunswick's forest policies ahead of a trip to Washington later this month, where he hopes to bend the ears of key U.S. policy-makers.

The Progressive Conservative premier will use a trip to the National Governors' Association meetings to advance his goal of restoring the province's traditional exemption from softwood lumber duties.

"If we don't have a fair marketplace, we will fix it," Higgs told reporters this week.

He says he's even willing to meet with the powerful coalition of U.S. lumber companies that is responsible for the punishing tariffs.

"I'll meet with anybody and talk to anybody about anything," he said. "This is an issue that is very significant to us."

Waiting for review

The government is awaiting a review that will examine whether two reports by two New Brunswick auditors general, in 2008 and 2015, were correct in their criticisms of provincial forestry policy.

Higgs will travel to Washington, where he hopes to advance his goal of restoring the province’s traditional exemption from softwood lumber duties.
Those reports were used by the American industry as ammunition in their push to take away the province's tariff exemption.

Higgs says if the review finds that the audits' conclusions were justified, he'll change policy accordingly.

"I want to know what we need to do to make this right," he said. "So if it comes back and says 'this is an issue,' we will deal with it."

And if that means changes to the previous Progressive Conservative government's 2014 forestry plan — with its long-term, legally binding contracts with major forest companies — Higgs says he'll be willing to go there, too.

He said the high tariffs now charged on New Brunswick softwood exports to the U.S.— 20.8 percent for most companies, and 9.9 percent for J.D. Irving Ltd.— can't continue.

'We must fix it'

"The justification to do something differently is pretty, pretty strong," he said. "We have the situation over here that's not working, and if we find a way to fix it, we must fix it."

The government is awaiting a review of reports by two New Brunswick auditors general, in 2008 and 2015, that will assess whether they were correct in their criticisms of provincial forestry policy. (Glen Kugelstadt/CBC)
In 2017, Washington imposed new duties on Canadian lumber. Atlantic Canada had been exempt from those measures in the past because softwood was deemed to be not subsidized at a high level.

But New Brunswick lost that exemption after the U.S. lumber coalition argued that wood from provincial Crown land, which it considers subsidized, was becoming a larger share of the provincial market.

The coalition also predicted that the 2014 PC forestry plan would result in "an even higher share" of New Brunswick wood from Crown land in the future.

The U.S. Commerce Department said in its 2017 ruling that "private woodlot owners accounted for a much smaller share of the New Brunswick stumpage market than the government," and that amounted to a distortion of the market.

Tariffs challenged

The federal government has challenged the new tariffs under both the North American Free Trade Agreement and the World Trade Organization.

New Brunswick producers are now in the midst of two different reviews of the U.S. findings and the tariff levels.  

The 2017 finding by the Department of Commerce pointed to the 2008 audit by Auditor General Mike Ferguson, which found the New Brunswick market was "not truly an open market" because the small number of mills dominating the market suppressed the prices paid to private woodlots.

Ferguson's successor, Kim MacPherson, found in a 2015 audit that the province wasn't properly monitoring the share of Crown wood relative to private wood in the market — the "proportional supply" requirement that she said had not been respected since 2002.

No distortion in the market

MacPherson's most recent report last month said 13 of her 19 recommendations on forestry have been implemented.

Mike Legere, executive director of Forest NB, said the auditors generals' reports are inaccurate. (Rachel Cave/CBC)
Mike Legere, the executive director of the industry group Forest NB, has called the audits inaccurate.

"If there's irrefutable evidence of distortion of the market, it has to be corrected," he said. "[But] we're quite confident there isn't distortion in the market."

Legere said his organization estimates the tariffs have cost provincial mills $130 million since 2017.

He said most mills were able to weather the higher cost of exporting to the U.S. "fairly well" in 2018 because lumber prices were high, peaking in June.

Mills face uncertainty

But some of them came close to closing before Christmas as prices dropped. A recent bottoming-out of prices is all that saved those mills from shutting down, he said.

"It's a very nervous, uncertain time to be operating a sawmill in New Brunswick," he said. "We're really at the mercy of elements that are beyond our control."

Most mills in the province have been able to weather the higher cost of exporting to the U.S. 'fairly well' in 2018 because lumber prices were high, Legere said. (Sean Kilpatrick/Canadian Press)
Legere said he wasn't sure whether a meeting between Higgs and the U.S. industry coalition would yield any results.

"I'm sure Mr. Higgs wants the coalition to be aware the iron is still hot in the fire. I'm not sure what new information he could bring them."

Higgs said he will also meet with former U.S. ambassador to Canada David Wilkins, an influential former Republican politician hired by the previous Liberal government to lobby the Trump administration and members of Congress.

Wilkins has been earning $40,000 a month, a figure the Gallant Liberals justified by pointing to the meetings he was able to arrange with key power brokers in Washington.

In Opposition, the PCs said it was a large expense with few results. Higgs said he'll meet with Wilkins to decide whether to keep him on retainer.

"I want to see what the plan is: what's been accomplished, what's the goal, and what is he doing right now?" he said.

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