Agricultural Trade Policy
INTRODUCTION Over the past four hundred years or so, timber has helped to fuel the economy of the UnitedStates of America. Billions of dollars change hands every year on timber alone just from the UnitedStates’s producers and their counterpart retailers. In the 1970’s the United States was second on thelist of the largest lumber producing countries in the world trailing only Russia ( by a few billion boardfeet per year).
We were the powerhouse when it came to timber production, and we continued to be wellinto the 1980’s. During the 1980’s the industry began to take on a new shape with one of our closest neighbors,Canada, discovering it had a vast supply of a natural resource which was quite marketable.Canada soon took advantage of this, and by the late 1980’s exceeded the United States output ( per boardfeet) by a few million board feet (World Book Encyclopedia @1985). With Canada so close in proximity, more and more of their found it’s way into the United States. We are not saying that Canada was not a major player in themarket before, it had just begun to maximize it’s potential in the American market. This is also themost significant part of history in regards to the North American Free Trade Agreement (NAFTA).
The emergence of Canada was due in part to the increasing number of United States regulations onthe timber industry. Clearcutting was a process of cutting down every tree in the area without leavingthe unsalvageable trees. This production process caused a spark of interest in several U.S.organizations. Clearcutting had raised the eyebrow’s of the proponents of the endangered species actbecause clearcutting was leading to the extinction of the spotted owl, a species whose home was in thenorthwest region of the country (Newsweek April ’95), home to many clearcutters.Also the Environmental Protection Act (EPA) was putting increased pressure on policy makers to dosomething about the poor foresight of these lumber companies ( In regards to the exhaustion ofresources). With the costs of lumber production going up in the United States, Canada was growing inpopularity with United States retailers and wholesalers.
The controversy over Canada and America, and who takes after whom has been around for many years. Canada and America are puzzles, two countries that are home to millions of people, living in relative comfort and health. We both have become nations through the help of each other and other nations. Yet, Canada has its own identity as a delightful complexity of cultures and customs, government and ...
CANADIAN TIMBER INDUSTRY
Lower labor costs and a lower standard of living, compared with the United States helped to keepthe price of timber production down in Canada. This was not the only thing the Canadians have going forthem though, apparently the Canadian government subsidizes stumping charges from timber producers. Withthe Canadian government helping the Canadian producers, it drives prices down even further. This is notgreat news if you harvest timber in the United States, but it seems to work out pretty well for theCanadians (rumor has it that they weren’t complaining about their position in the market).
All of this said, we can now venture into the different sides of NAFTA, it’s shortcomings, andhow it may have opened doors to new markets.
Before NAFTA had came into the mix, there was always the annoying aspect of quotas, a certainamount of lumber that could be imported into the United States. With the forthcoming of NAFTA people atthe head of most of the large lumber companies in the United States believed that this new agreementwould slighten these quotas, maybe even do away with them completely. Unfortunately for the U.S. sidewas that with NAFTA the quotas became more rigid. Many in the industry were not expecting this agreementand it turned out to be a worse situation for the Americans. Before, when stock was low or lumber was in high demand companies used to be able to get theirhands on it. Now with the introduction of strict quotas companies are forced to wait until the beginningof the next quarter ( Lumber is bought quarterly).
Country ProfileCountryFormal Name: United Mexican States (Estados Unidos Mexicans).Short Form: Mexico.Term for Citizen(s): Mexican(s). Capital: Mexico City (called Mééxico or Ciudad de Mééxico in country).Date of Independence: September 16, 1810 (from Spain).National Holidays: May 5, commemorating the victory over the French at the Battle of Puebla; September 16, Independence Day. ...
A lot of U.S. companies are not to happy about thisand want there to be no quotas at all. The United Forest and Paper Association continues to pushCongress to get the timber industry a better deal with Canada in this aspect.
TARIFFS Prior to the trade agreement, a significant amount of tariffs and taxes were placed on theexported lumber from Canada. These tariffs, applied to all lumber coming to us was just passed rightdown the line, with the United States’s retail lumber stores feeling the blow most heavily from a steadydrop in profit margins. NAFTA did erase these tariffs between countries, including Mexico, a move that was excellent forthe United States. Many spokesmen from retailers, wholesalers, the mills said they saw an immediateimpact. Noone would say how much, but even a few percentage points extra in profit margins in a billiondollar industry translates into a lot of money (Northeastern Lumber co.). Canada got left out in this part of the agreement, of course they didn’t want to see the revenuegenerated by their tariffs be wiped away. There was the saving grace in that they did hold a significantamount of control on the market with these strict quotas in place. Most believe that this is the solereason Canada backed off of the ‘no tariffs ‘ issue (Western Wood Products).
MEXICO’S ROLE Most of the people involved in the NAFTA agreement overlooked it’s implications on Mexico. Afterall not to many people were keen on selling to a market which was very volatile, not to mention quiteunderdeveloped. U.S. and Canada alike were both hesitant to plunge into an uncharted and unstableterritory. Mexico had never been seen as that appealing for that sole reason ( Georgia-Pacific Co.).
Afterall Mexico’s economy could crash and how would the millions of dollars in lumber be paid off that weresold to them? Mexico had a peculiar place in this market because it presently bought most of it’s timber fromSouth America. It had never looked to their neighbors from the north for a source of natural resources. Then came NAFTA, tearing down all kinds of trade barriers, encouraging trade amongst the threecountries, and at the same time cancelling the tariffs imposed on all imported goods to Mexico.According to many sources Mexico made out real well in the deal. With no tariffs prices of timberdropped, and the quota factor was of no real significance to them. After all if they were in need oftimber and had already fulfilled their quota for the quarter, they could always look to the SouthAmerican timber-producing companies. Soon, after NAFTA was in effect, and after the Mexican economy stabilized, this onceunderdeveloped land with a volatile economy seemed a little more appealing (Mac-Millan Bloedell).Corporate leaders are starting to reconsider Mexico as a source of newfound revenue.
The article ‘From fields of power to fields of sweat: the dual process of constructing temporary migrant labor in Mexico and Canada’ by Leigh Binford is a 2009 publication in the Third World Quarterly Journal, volume 30 issue number 3. In this article, Binford (2009) discusses the establishment of a contractual form of labor between Mexico and Canada where forces from both the supplier and the ...
The Northamerican continents’ supply of timber should probably have no direct effect, unlessMexico’s construction activity takes off. This is not a far-fetched thought in the least; theincreasing number of companies changing location in search of more lenient environmental laws grows everyday, the Mexican people will be likely to relocate along the border ( the most probable location forU.S. companies), and in turn demand new construction to serve their shelter needs. This could lead to anincreased exhaustion of timber, however that might not be so considering that the growth rate is nearly30% higher than the consumption rate. Canada needs to implement a full-scale tree-replacement legislation, to ensure their prosperityin the future. Canadians also want the quotas to remain in place, in regards to the environment, thiswill keep logging and timber production to it’s lowest feasible rate.
NAFTA appears to be a little bit of positive and a little bit of negative for both sides.However most of the companies in this particular industry find NAFTA to be an overall win-win idea,something they consider rare in today’s world of unmatched opinions. In essence, if the legislation is respected, Mexico should benefit, along with the United States,not too mention Canada who appears to hold the edge in this dispute.