{"id":10369,"date":"2025-03-26T16:26:35","date_gmt":"2025-03-26T16:26:35","guid":{"rendered":"https:\/\/www.rbc.com\/en\/?post_type=rbc_tl&p=10369\/"},"modified":"2025-05-29T16:28:42","modified_gmt":"2025-05-29T16:28:42","slug":"turning-the-tables-how-canada-can-shake-off-the-u-s-softwood-lumber-dispute-and-grow-the-sector","status":"publish","type":"rbc_tl","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/the-trade-hub\/turning-the-tables-how-canada-can-shake-off-the-u-s-softwood-lumber-dispute-and-grow-the-sector\/","title":{"rendered":"Turning the Tables:\u00a0How Canada can shake off the U.S. softwood lumber dispute and grow the sector"},"content":{"rendered":"\n
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Canada\u2019s intractable softwood lumber dispute with the U.S. has long cast a shadow over the country\u2019s promising forestry sector. However, reimagining its potential, building a value-added industry, and seeking new markets could be the playbook that Canada can replicate across the wider economy as more American tariffs come our way.<\/p>\n\n\n\n

Forestry products account for 7.5% of Canada\u2019s total exports, punching above their weight as they only comprise 1.2% of the country\u2019s GDP, or $33.4 billion. Crucially, the industry employs more than 200,000 workers across the country.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

These numbers could climb higher if Canada can resolve several other challenges that have been weighing down the industry, including wildfires in British Columbia and Alberta, pests, and increased regulations, that have all contributed to dozens of Canadian mill closures and thousands of job losses over the past few decades.<\/p>\n\n\n\n

Here are three ways Canada can look beyond the softwood lumber tariff dispute with the U.S. and build up the forestry sector.<\/p>\n\n\n\n

1. Capitalize on the e-commerce boom<\/h3>\n\n\n\n

The Covid-driven shift to e-commerce using paper-based packaging, and rising demand for single-use products is here to stay, despite the recent climate policy whiplash. That includes global efforts to cut emissions and introduce more sustainable, renewable materials, in packaging, energy production, and construction.<\/p>\n\n\n\n

That\u2019s an advantage for Canada, which is home to almost 10% of the world\u2019s forested area, and sound public management that has limited deforestation to around 1% since 1990.<\/p>\n\n\n\n

2. Look beyond lumber<\/h3>\n\n\n\n

For all the attention it attracts, softwood lumber represents less than a third of Canada\u2019s total forestry product exports.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Aside from logging, forestry comprises two other major subsectors: pulp and paper manufacturing, and higher-value solid wood product manufacturing, which includes millwork and structural wood panels.<\/p>\n\n\n\n

The right policies and industry initiatives can help Canada tap the US$788 billion global wood products market, which is expected to nearly double in value by 2033. Indeed, the \u201cfinished wood products\u201d category is seen as the sector\u2019s fastest growing segment.<\/p>\n\n\n\n

Sustainable and renewable materials in the construction of furniture, housing, and infrastructure are in high demand as the world grapples with resource depletion, even as emerging markets\u2019 populations and infrastructure needs rise.<\/p>\n\n\n\n

The sustainable economy is also booming as the industry seeks alternatives to fossil fuels and plastics. Wood fibre-based products, including bioplastics and biofuels, such as wood pellets, are seen as increasingly viable alternatives. The wood bioproducts market was valued at US$281 billion in 2022 and is expected to nearly double in the next decade amid a major consumer shift towards sustainability.<\/p>\n\n\n\n

3. Global housing shortage could be a catalyst<\/h3>\n\n\n\n

Canada\u2019s housing crisis and infrastructure needs are an opportunity to stimulate domestic demand and aid the energy transition through policy levers. Replacing concrete and steel in construction\u2014wherever possible\u2014with products such as mass timber could reduce global CO2<\/sup> emissions by 14-31%<\/a> \u2013 something that\u2019s increasingly recognized by Canadian policymakers.<\/p>\n\n\n\n

Governments in France, Germany, Denmark and Australia have either mandated the use of wood or mass timber products in new construction, or have placed stricter requirements on the lifetime environmental impact of buildings\u2014which in effect, requires the use of more responsibly sourced and potentially recyclable materials.<\/p>\n\n\n\n

Canada\u2019s Green Construction through Wood (GCWood) Program encourages the use of innovative wood-based building materials in construction. However, the program is currently oversubscribed and overwhelmed. Expanding the scope and availability of these types of policy-driven incentives can open new possibilities to meet the challenges associated with sustainable growth and help in resolving the country\u2019s affordable housing crisis.<\/p>\n\n\n\n

Support firms as they transition and seek new markets<\/h2>\n\n\n\n

Canada\u2019s forestry sector\u2014like many others\u2014is woefully over-exposed to the U.S. market, with nearly 70% of forest products, including lumber, headed south of the border.<\/p>\n\n\n\n

But the sector has struggled to grow its market share in emerging markets beyond China. That\u2019s an opportunity missed as the markets in Asia Pacific and Africa saw massive expansion over the past two decades. Even Canada\u2019s forestry exports to the European Union have declined during this time. Ottawa\u2019s renewed focus on forging trade ties with non-U.S. markets should include forestry as part of the discussions.<\/p>\n\n\n\n

Executing all the three strategies mentioned above would also require government support as forestry is immensely capital intensive. In 2020 alone, the Canadian forestry industry spent a total of $5.3 billion on capital expenditures and repairs. Canadian pulp and paper mill operations will need financial help transitioning and retooling to meet the needs of the future economy. Sawmills are also directly impacted by U.S. tariffs and could benefit from liquidity support as they eye new export markets and product lines.<\/p>\n\n\n\n

Increased adoption of data and analytics and improving communications and 5G infrastructure in rural and remote areas would also help the sector leverage the cutting-edge technologies available in other countries.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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Stumped: How the U.S.-Canada softwood lumber trade tiff began<\/h2>\n\n\n\n

The U.S.-Canada softwood lumber dispute dates back to 1982, making it one of the longest and unyielding in the two partners\u2019 trade history. The trade tiff has also transcended political party and presidents alike in the U.S., with the Joe Biden administration raising tariffs on Canadian softwood lumber to 14.54% from 8.05% as recently as last fall; the Donald Trump administration is pledging to raise them this year to 55%, according to a B.C. official<\/a>.<\/p>\n\n\n\n

Consisting of species such as fir, spruce, and pine, high quality Canadian softwood lumber is in global demand\u2014with 67% of total production exported in 2020. It is most sought after in the U.S., which sources around 80% of its imports from Canada.<\/p>\n\n\n\n

But over the decades, Washington officials have alleged that American producers are harmed by Canadian subsidies. Canada\u2019s forests are almost entirely publicly owned and managed\u201494% are on public land\u2014while U.S. forests are mostly private. In Canada, prices charged for harvesting logs\u2014called \u201cstumpage fees\u201d\u2014are set by provincial governments.<\/p>\n\n\n\n

Stumpage fees are meant to reflect the market price in contrast to the U.S. where pricing is set by the private market. U.S. lumber producers claim the stumpage fee system amounts to a government subsidy as it keeps the cost of production artificially low. This misunderstanding has repeatedly triggered countervailing and anti-dumping duties on imports.<\/p>\n\n\n\n

Since 1982, there have been four official Softwood Lumber Agreements and multiple rounds of negotiations through NAFTA and the World Trade Organization to reduce or eliminate tariffs and resolve the dispute. Despite these attempts, including multiple rulings in Canada\u2019s favour, the issue persists. During this time Canadian industry has paid billions in additional costs exporting to the States; between 2017\u20132021 alone the U.S. collected approximately $5.6 billion in duties.<\/p>\n<\/div>\n<\/section>\n\n\n\n

Ajay Nandalall<\/strong> is a Toronto-based research consultant, with a background in public policy and international banking.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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