 Evolution of softwood lumber dispute  Underlying causes  BC reforms to avoid  Forest Revitalization Plan  2006 agreement  themes

 Lumber I: early 80s - increased US countervailing duty pressures  Lumber II: 1986 – MOU - export tax  Lumber III: 1992 US countervailing duties (6.5%)  Canadian victory in binational panel  US changes law to undermine basis for ruling  – softwood lumber agreement  Certain amount tax free  Substantial export fees above that level  Lumber IV:  April 2002 – US DOC final determinations: 27.2% duties  Canada won every major case  October 2006 – new Softwood Lumber Agreement October 10,

 Stumpage system - prices timber at less than market value  Cut controls – flood market at low point of cycle  Log exports – increase supply of domestic logs, depressing price  Direct grants/loans October 10,

 How US trade pressures influenced BC forest policy  Market-based pricing  Tenure takeback  Economic deregulation

6  Stumpage is the price paid by a licensed forest company for a publicly-owned tree

October 10, 2013FRST 4157  Comparative Value Pricing (>90%)  Product prices – logging costs, adjusted to account for gov target revenue  auction-based market pricing (<10%)  small business sales

8 Agenda 2

9  institute market-based pricing  eliminate below-cost sales  eliminate “blending” of blocks with significantly different stumpage values to reduce “cross-subsidies”  award new timber rights competitively, by awarding them to the highest bidder  allow Forest Licences and Tree Farm Licences to be subdivided  reduce restrictions on the transfer of tenures, including eliminating the 5% AAC takeback  eliminate “cut control” requirements that require a minimum amount of timber be harvested regardless of market conditions  eliminate utilization requirements;  eliminate appurtenancy provisions that tie harvesting rights to requirements to process the timber in company-owned mills Agenda 2

October 10, 2013FRST  Takeback and Redistribtion  20% taken back from long term replaceable licences  first 200K m 3 exempt  10% to auctions  10% redistributed to  First Nations (8%)  Woodlots  Community Forests  Compensation: $200 million

October 10, 2013FRST  Changes in economic regulations  allow subdivision and transfer without penalty  eliminate appurtenancy  eliminate minimum cut control requirements

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 7 year term, with option to renew for 2  end to litigation, US pledges to dismiss new actions  Canada to receive $4 billion  US receives $1 billion  $500 million to US companies  $450 million to “meritorious initiatives”  $50 million to create a “North American Lumber Council” October 10,

October 10, Price per thousand board feet Option A –Export Charge (%) Option B – Export Charge plus Volume Restraint** Over US$ US$ % + regional share of 34% of U.S. Consumption US$ % + regional share of 32% of U.S. Consumption US$315 or under 15 5% + regional share of 30% of U.S. Consumption

 International Forces: Contribute to crisis, constrain reform  environmental agreements  world market trends ▪ push prices down  green markets - certification, boycotts ▪ push costs up, threaten demand  US trade pressures ▪ push costs up ▪ Force difficult policy reforms ▪ major challenge to sovereignty October 10,

 US trade pressures have pushed costs up and constrained BC’s policy sovereignty.  BC’s market-oriented forest policy reforms were strongly influenced by trade pressures by the United States