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Canadian Timber Industry Hurt by U.S. Housing Bust

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Canadian Timber Industry Hurt by U.S. Housing Bust

Economy

Canadian Timber Industry Hurt by U.S. Housing Bust

Canadian Timber Industry Hurt by U.S. Housing Bust

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The Canadian soft-wood lumber industry is in freefall. Sawmills are closing or switching to partial schedules, and unions are screaming for government aid to the affected communities. The reason? The American housing bust. But Canadian timber workers are angry at the U.S. for other reasons, too.

MICHELE NORRIS, host:

The housing bust is creating travel beyond the borders of the United States. The Canadian lumber industry is struggling because fewer homes are being built in the states. Recently, thousands of Canadian loggers and sawmill workers have been laid off.

And as NPR's Martin Kaste reports, many of them blame what they consider an unfair trading relationship with the U.S.

(Soundbite of sawmill)

MARTIN KASTE: This is one of the sawmills that's still running on Vancouver Island, Western Forest Products (unintelligible) mill. Dan Gabrielson(ph) walks us through a hemlock tree's journey from trunk to two-by-four.

Mr. DAN GABRIELSON: It goes through the planer and then it comes through the trim saw. That's what you're hearing in the background there.

(Soundbite of saw)

KASTE: But this mill is running well below capacity, and Gabrielson says every mill worker in British Columbia has to wonder if his job is safe.

Mr. GABRIELSON: There are so many mills going down, like the next door mill has gone down, and whether they are going back is unknown. Power Mack(ph), the pulp mill, it's gone down now, and (unintelligible) there's another 550 jobs gone. You know, the forest industry built this island, and you're just - we're just watching it go away.

KASTE: The Canadian lumber industry can't seem to catch a break lately. First, a pine beetle infestation killed something like 30 million acres of forest in Northern British Columbia, glutting the market with salvage trees. Then came the American housing bust. Add to that the weak American dollar, and exports have slowed to a crawl. But none of these factors aggravate Canadians nearly as much as something called the Softwood Lumber Agreement.

Mr. ELLIOT FELDMAN (Lawyer): The worst deal Canada ever made.

KASTE: That's actually the title of the book that American lawyer Elliot Feldman is writing about a trade deal Canada made with the U.S. in 2006. It was the settlement of a trade dispute that had dragged on for years. Feldman worked on the Canadian side. The Americans had accused the Canadians of dumping subsidized lumber on the American market. The Canadians said their wood was just more competitive. Every time the Canadians won a round in court, the Americans just kept on fighting. Finally, the Canadians agreed to end the matter by slapping an export tax on their own lumber.

Mr. FELDMAN: So the Canadian industry is now crippled. They pay a 15 percent premium on their exports, so they can't compete in this market. There's been a huge surge of third country imports into the U.S., displacing the Canadian industry. Our long-time reliable resource for building our houses is now being displaced by wood from Russia and Germany and Chile and elsewhere.

KASTE: Still, the Canadian timber companies are not about to challenge the 2006 deal. Duncan Kerr, an executive with Western Forest Products, cast his eyes heavenwards at the very suggestion that Canada should have kept on fighting the U.S.

Mr. DUNCAN KERR (Western Forest Products): Protracted legal battles really don't benefit anybody other than the lawyers.

KASTE: Instead of hiring back the lawyers, he says, Canadian companies are trying to figure out how to get through the current crisis.

Mr. KERR: We think there has been a bit of a perfect storm. I that's not an unreasonable kind of view. But the thing about storms is they'll end.

KASTE: One survival method is to export whole logs to the United States. Some Canadian companies have even bought saw mills in the U.S. where they can cut up the Canadian logs in non-union American mills. It's somewhat similar to the migration of American factories to Mexico, and it infuriates Canadian unions. All over Vancouver Island, highway signs have been plastered with stickers reading: Ban whole log exports.

(Soundbite of a machine)

KASTE: Back at the salt air mill, Dan Gabrielson grumbles about the logs that are floating in nearby bays.

Mr. GABRIELSON: I don't know where they'll go. They'll just be barged down to the States. If they're going down to the States, they'll just put them in a big boom and tow them down.

KASTE: It's not something he likes to see.

Mr. GABRIELSON: I don't think one log should leave Canada to go to the States to be processed.

KASTE: Gabrielson is not one of those who thinks the timber industry here will die off. He's confident the mortgage crisis will pass and Americans will start building houses again. The question is, will he and his neighbors be the one cutting the Canadian trees into boards, or will that job go to cheaper labor south of the border?

Martin Kaste, NPR News.

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