Ottawa may change softwood pact ruleshttps://www.canada.com/nationalpost/financialpost/story.html?id=9f5a251b-996d-4038-a540-28a9da462c00
Paul Vieira, Financial Post
Published: Friday, August 04, 2006
OTTAWA - Ottawa may try to proceed with passage of the Canada-U.S. softwood deal without near-unanimous support of industry players as envisaged under the pact, government sources suggest.
"We need a clear majority of the industry in order to proceed but no individual firm, nor a minority of the industry, will hold this up," said a senior government official, on condition of anonymity.
The official, however, did not define what would be considered a "clear" majority. Nevertheless, this is the first indication that the Conservative government may try to change elements of the deal to secure its passage.
As currently written, the deal goes into effect only with the support of 95% of lumber companies who are owed duties. They must also agree to drop litigation against Washington.
The International Trade Minister, David Emerson, has dodged questions this week about whether the deal could fall apart based on one company's dissent. "It's a hypothetical [question] and we'll cross that bridge when we get to it," he told reporters. However, at the same media conference, Mr. Emerson said the Conservative government needed 95% industry approval for the deal to proceed.
Leaning toward a "clear majority" would mark another change of tactics for Ottawa.
Previously, Mr. Emerson had said the deal would go to Parliament for a vote with or without industry support. But this week, the Minister said it would not proceed to Parliament unless lumber companies were on board.
The deal's supporters and critics agree the July 1 agreement is close to collapse because there is insufficient industry backing. Among the red flags raised by industry: a termination clause that can be exercised after 23 months; $500-million of the duties collected by Washington would end up with the U.S. lumber coalition; the way value-added lumber exports would be taxed at the border; and so-called "running rules" that critics say take away from the trade certainty the agreement is supposed to provide.
The softwood deal envisages the return of $4-billion, or 80%, of duties collected on Canadian exports, and would see Ottawa slap on its own taxes on lumber sales.
Sources within the lumber industry say they have been baffled by "mixed messages" coming from Ottawa. According to one insider, Canada's Ambassador in the United States, Michael Wilson, has called industry executives to find out what elements of the pact are of concern at the same time as Mr. Emerson and the Prime Minister were saying negotiations with the United States were finished.
Mr. Emerson has scheduled an Aug. 9 meeting in Toronto with lumber chief executives to save the deal.
It is understood the CEOs are holding discussions of their own about trying to whittle down their list of concerns to three or four items that Ottawa could address.
"But can they get the list small enough and is it in an environment where changes can get done?" asked Paul Quinn, a Vancouver-based forest products analyst with Salman Partners.
Only one company, Domtar Inc., has said publicly it would vote against the deal, as is now. But analysts say companies could be under pressure from shareholders to accept the deal because $4-billion would be injected into company coffers. This may be particularly true of Eastern-based companies, whose balance sheets are loaded with debt.
pvieira@nationalpost.com
© National Post 2006