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

3.  Lumber I: early 80s - increased US countervailing duty pressures  Lumber II: 1986 – MOU - export tax  Lumber III: 1992 US countervailing duties (6.5%)  1994 - Canadian victory in binational panel  US changes law to undermine basis for ruling  1996-2001 – 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, 2013 3

4.  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, 2013 4

5.  How US trade pressures influenced BC forest policy - 2003  Market-based pricing  Tenure takeback  Economic deregulation

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

7. 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. 8 Agenda 2

9. 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

11. October 10, 2013FRST 41511  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

12. October 10, 2013FRST 41512  Changes in economic regulations  allow subdivision and transfer without penalty  eliminate appurtenancy  eliminate minimum cut control requirements

13. 13

14.  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, 2013 14

15. October 10, 2013 15 Price per thousand board feet Option A –Export Charge (%) Option B – Export Charge plus Volume Restraint** Over US$355 00 US$336-3555 2.5% + regional share of 34% of U.S. Consumption US$316-33510 3% + regional share of 32% of U.S. Consumption US$315 or under 15 5% + regional share of 30% of U.S. Consumption

16. http://cfs.nrcan.gc.ca/selective-cuttings/43

17.  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, 2013 17

18.  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