[Congressional Record Volume 141, Number 132 (Tuesday, August 8, 1995)]
[Senate]
[Pages S11810-S11811]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       SUBSIDIZED CANADIAN LUMBER

  Mr. CRAIG. Mr. President, I have sat through 2 days of probably some 
of the most substantive debate on a key issue in this country that I 
have heard in years, listening to the debate of our colleague from 
Oregon, who has led the Republican side of welfare reform, and 
certainly the senior Senator from New York on the other side, both men 
of tremendous substance attempting to deal with a very important issue 
for our country. I have just listened to the Senator from West Virginia 
in a most sincere appeal for resolution of an issue that has gone 
beyond what I think most Americans ever intended it to be.
  In some way my comments this morning are a part of that because I am 
talking about a very real people issue in the West that has caused, by 
its presence and by our inability to act, people to go on welfare, to 
be subject to at least or to ask for assistance from their State to 
provide for food on their children's table. And so, if I could for just 
a few moments, I wish to reflect on an issue which is really very 
perplexing that I and others in this Chamber have attempted to deal 
with over the years that is now front and center again, at least in the 
timber-producing States of our Nation.
  Every week, I receive tragic appeals from unemployed forest workers 
struggling to feed and care for their children, many of them, as I have 
just mentioned, on the edge of welfare at this moment. A major reason 
for their struggle is that a rising flood of subsidized Canadian timber 
has captured nearly 39 percent of our domestic softwood lumber market 
in May of this year.
  This May figure is already an all-time record for foreign market's 
share of lumber in our country, and the industry anticipates that the 
figure in June will be equal to or will exceed that level. This flood 
of imports also has contributed to a 34-percent reduction in U.S. 
softwood prices since 1994. Last year alone, Canada sent to the United 
States nearly 16 billion board feet of lumber worth $5.8 billion. Tens 
of thousands of jobs and the economic livelihood of hundreds of 
communities throughout the public forested States of our Nation, 
primarily in the West, depend on a prompt and fair solution to this 
problem of Canadian subsidized timber.
  What is the cause of the problem? In Canada, where 92 percent of all 
timber is Government owned, Provincial programs allocate trees to 
producers under long-term agreements at a fraction of their fair market 
value. Producers in British Columbia, for example, paid on the average 
of $100 per thousand board feet of timber in 1994.
  That is in stark contrast to United States producers immediately 
across the border in the States of Washington and Idaho and down into 
Oregon paying $365 per thousand board feet of timber of the same type 
and the same quality--nearly 300 percent more than what was being paid 
in Canada. United States prices are substantially higher because in the 
United States, unlike Canada, trees from virtually all public and 
private forests are sold at fair market value through the competitive 
bid process.
  Coupled with that, there has also been--by Government edict, 
environmental laws, Endangered Species Act--a tremendous reduction in 
the allowable timber cut or the allowable sales quantity on our public 
forests. The result of this and the subsidies have resulted in mills 
shutting down and, of course, the competitive advantage that should be 
ours in our own market being dramatically lost to this flood of 
subsidized timber. All regions of the country have announced production 
curtailments, temporary shutdowns, and permanent closures of mills and 
related businesses. Small family-owned businesses have been devastated. 
If prompt action is not taken, the inequity will only get worse.
  The United States lumber industry is competitive but for Government 
curtailment of supply and Canadian subsidies. United States lumber 
production costs, excluding timber, are the same and in most instances 
lower than Canadian production costs. The United States output per 
employee is about the same as the Canadian industry. Canadian labor 
costs are higher and rising faster than labor costs in the United 
States.
  Canadians must adopt a fair market-based approach to timber pricing 
to begin to level the playing field that we are talking about. These 
pricing policies also have been criticized by Canadian groups, 
including Canada's maritime and small lumber producers. Criticism also 
comes from a previous British Columbia Forest Minister who said that 
Canadian timber pricing practices harm the Canadian economy and do not 
provide a good return from the industry.
  Over the past 10 years, United States lumber industries have 
repeatedly won duty determinations against Canadian subsidies before 
the United States Department of Commerce and the International Trade 
Commission. Why? Because it is obvious and well-known that Canada 
subsidizes its industry.
  In 1993, however, three Canadian members of the binational panel 
operating under chapter 19 of the United States-Canadian Free-Trade 
Agreement ruled that Canadian timber pricing practices are not 
subsidies under United States law. In response, the U.S. lumber 
industry filed a constitutional challenge to the panel's authority to 
arbitrate such disputes. This challenge was withdrawn when the industry 
was assured by United States Trade Representative Kantor that Canada 
would agree to consultations to address the timber pricing issue.
  There was also another reason why our trade ambassador entered in; he 
did not want the Canadian Free Trade Agreement and its problems and its 
loopholes exposed.
  When that agreement was passed in the mid-1980's, I voted against it, 
and in the Chamber of the House--I was then a Congressman--I argued 
that these loopholes did exist and that we had set ourselves up for the 
very scenario being played out today. If our Trade Ambassador wants to 
solve this problem and keep the free-trade agreement intact, then he 
ought to move on this issue.
  In spite of these consultations, I think legislation may be needed to 
resolve the problem that has surfaced with this binational panel or 
panels as a result of the free-trade agreement.
 Past panels have ignored the standard of review mandated by the 
agreement and United States law, and two Canadian members of one lumber 
panel failed to disclose serious conflicts of interest.

  Because these rulings by nonelected, non-United States panelists are 
binding under the United States-Canadian Free-Trade Agreement, and now 
under the North American Free-Trade Agreement, serious constitutional 
and procedural issues arise. Reform is needed to assure that future 
panels do not and cannot ignore U.S. law in order to protect unfair 
trade practices.
  So where are we today, Mr. President?
  The U.S. softwood lumber industry is in no condition to endure 
unrestrained, subsidized imports during an extended period of 
negotiations. Nonetheless, the first meeting of the United States-
Canadian lumber consultations that 

[[Page S 11811]]
occurred on May 24 and 25 was inconclusive. The second meeting on July 
11 and 12 produced an acknowledgement, finally, of a glimmer that says, 
yes, there is a problem, and suggested there were prospects for 
eventual solutions, but without sufficient urgency, in my opinion, to 
curtail the massive loss of U.S. industry and jobs that is now going on 
in this country.
  More than 10 years ago I organized congressional opposition to this 
persistent, recurring problem. And I say this morning to the Canadians, 
down the road from this Capitol, turn up the volume on your television 
set if you are watching C-SPAN2 at this moment, because in the Canadian 
Embassy you are about to begin to work once again, because we are going 
to put you to work, as this country speaks out for its forest products 
industry and the men and women who work for it. We will no longer allow 
this loophole to exist in the United States-Canadian Free-Trade 
Agreement.
  I have sent letters to the administration urging a quick and 
permanent solution to this problem. And I must say at this moment, 
Ambassador Kantor, your lip service does not answer very well the 
concerns of the men and women in Idaho and across the Pacific Northwest 
that are losing their jobs.
  A third United States-Canadian lumber consultation panel is to meet 
in September. This meeting must accelerate and complete efforts to 
produce a concrete framework for permanently reforming Canadian pricing 
schemes in order to eliminate the subsidies provided to the Canadian 
producers.
  So in conclusion, Mr. President, I hope this problem will be resolved 
quickly, jointly between the United States and Canada in their 
negotiations. Frankly, I would prefer if that were to happen. But if it 
does not happen, this is one Senator who will rally other Senators and 
Members of the other body to resolve this problem legislatively like we 
had to do in the late 1970's. And to our Trade Ambassador, Ambassador 
Kantor, go to Canada in September and work to resolve the issue. Lip 
service no longer serves well the unemployed men and women of the 
forest products industry.
  I yield the floor.
  The PRESIDING OFFICER. The Senator's time has expired.

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