Softwood lumber: what's a tree worth anyway?

The softwood lumber dispute is back, and Canadian industry and government are worried about the impact.

The dispute reaches back decades, and the sticking point is whether the Canadian lumber industry is subsidized by the government.

While the dispute has serious consequences for Canada, here at The 180, we're pretty sure many people find the story boring, complicated, and inaccessible. The debates that takes place at WTO hearings and NAFTA panels are long on legal interpretation, and economic jargon, and attempts to quantify what a subsidy is.

So, we thought it would help to reduce the conflict, avoid the legal hearings, and focus on three simple human questions that help explain some of the issues. (You can hear a delightful audio exploration of these questions by clicking the "play" button attached to this post.)

Question 1: What's a tree worth?

This is the biggie. American lumber industry lobbyists, and the U.S. Department of Commerce, hereafter referred to as "The Americans," believe Canadian trees are too cheap. Most of Canada's forests are owned by the government, and they mostly have a set fee they charge for the right to chop down a tree. For example, you can see the B.C. government's latest fees here.

Most of America's forests are owned privately, by individuals like farmers, and by corporations or indigenous groups. In the U.S., if you have a couple of acres with a good portion of trees, you're a forest owner. So the prices for someone's private trees aren't set by the government, but by the workings of the market. 

The Americans believe the provincial governments set their prices too low - that if it were a free market in Canada, the prices would be much higher. That we're basically giving away those trees, so it's kind of like taxpayers are just handing cash over to Canadian lumber companies. Canadian lumber companies sell a lot of lumber in the United States, so American companies feel its unfair to compete with subsidized lumber.

Question 2: How big is a tree?

This is one of the stranger parts of the dispute, and it doesn't get a lot of airtime. Part of the dispute between American lumber companies and Canadian ones, is over the best way to measure a tree. Or more specifically, a log.

If you want to prove, beyond all doubt, that Canada's trees are cheaper than the U.S.'s, you need to compare prices and amounts. Canada measures harvested trees in cubic metres. The U.S. measures them, mostly, in board-feet. 

How many board-feet or cubic metres are in a tree? That is a very complicated question. When lumber companies talk about board-feet, they mean usable wood cut out of a log. And when you cut up a log, you end up with weird round parts, and you lose a bunch to sawdust. And there are three different accepted mathematical ways of calculating how much wood you get out of a log when you cut it up.

Americans believe there's lots of wood in a Canadian tree, Canadians argue there's a little less wood in a Canadian tree. And that matters, because if you use one method of measuring a log, it looks like Canada's trees are really, really cheap compared to America's. If you use another method, they can look somewhat similar.

If you feel like it, you can read this highly technical Canadian report submitted to the WTO on the curious difficulties of measuring a log.

Question 3: Where is a tree valuable?

On the simple face of it, it's easy to claim that the sticker price for harvesting a tree is cheaper in Canada than in the United States.

But despite coming to various agreements over export taxes and duties, the argument from the Canadian side is that comparing the price of a log in the United States to the price of a log in Canada is comparing apples to oranges. 

The argument is that there's more to a market than price - that because a sawmill in Virginia isn't going to buy the rights to cut down a tree near Prince George, there's no such thing as a North America-wide market for log harvests. That simple price comparisons don't reflect the fact that there are innate differences in the United States and Canada. For example, Canada has like, a zillion trees. The U.S. has fewer trees. The U.S. has lots and lots of people. Canada has fewer.

A similar argument on the Canadian side: in Canada, the government sets aside logging areas that are way out in the bush and are costly to get to, so therefore can't charge as much. In the U.S, a farmer near a highway can sell his trees to a mill down the road. The mill has to pay less to pick it up, so the farmer can charge more.

All of these questions and factors and claims go into those top-level debates at the WTO and NAFTA panels over whether Canada's lumber industry is subsidized - which helps explain why we're still fighting over softwood lumber.