Post on 24-Dec-2015
International Context 2Certification and Softwood
Agenda
Global Context - overviewInternational
Environmental Agreements
Trade flowsCertification Softwood Lumber Dispute
October 7, 2014 2
Trade-Related Vulernabilities
3. green market pressures– Boycotts– purchasing policies– certification
• How should purchasers evaluate claims by environmental groups?
October 7, 2014 3
Certification -- Overview
• Definition– independent actor attests that products meets agreed
standards– non-governmental– voluntary
• change in governance: privatization of forest policy• political conflicts within and between certification
organizations
October 7, 2014 4
Evolution
• Phase I: environmental efforts to improve forest management in the wake of failure to get international convention
• Phase II: strategic response from industry and government
• Phase III: conflict and competition among systems
October 7, 2014 5
Forest Stewardship Council
• 1993• environmental organizations - WWF• principles and criteria• regional processes• certification permitted without regional
standards• accrediting certifiers (e.g. Smartwood, SGS)
October 7, 2014 6
FSC in BC• Started in 1996• acrimonious process• 2005 – FSC International
gives BC standard accreditation
• Tembec -- TFL 14 near Cranbrook– only “industrial” company to
become certified– Bought by Canfor in 2011
October 7, 2014 8
October 7, 2014 9
Canadian Standards Association• CSA: non-governmental standard setting
body– set by negotiations by firms in industry
• forest industry coalition funded CSA to develop standards
• Coordinated with Canadian Council of Forest Ministers
• Performance standards developed at local level through multistakeholder process
• detailed procedural requirements• first forests certified May 1999
Sustainable Forestry Initiative (SFI)
• American Forest & Paper Association (AF&PA) in October 1994
• Must be certified to be a member of association
• Now provides third party, and a label
• Performance standards originally much less “demanding” than FSC
– Some tightening over time
October 7, 2014 10
Commitments in Canada
• Forest Products Association of Canada• January 2002 - announces that all members
must be 3rd party certified by 2006– one of FSC, CSA, SFI
• As of Dec 2006, “FPAC members had essentially achieved their goal”
October 7, 2014 11
Canadian Certification by Standard
October 7, 2014 12
Canadian Certification – Global Perspective
October 7, 2014 13
Certification in BCby program, year-end 2013
October 7, 2014 14
CSA FSC SFI0
5
10
15
20
25
30
Area Certified (million ha)
15
October 7, 2014 16
Source for what label means: http://www.fsccanada.org/docs/fsccertification_chainofcustody_explained.pdf
The Future
• Consolidation inevitable? • Scenario I - unilateral victory• Scenario II - compromise
– Mutual recognition• Scenario III: continued competition and
confusion• Current: evidence of some convergence toward
FSC, but FSC insists on persistent distinction
October 7, 2014 17
October 7, 2014 18
ForestEthics campaign attacking the credibility of SFI
Certification – Major Unknown
• How much it influences forest management above and beyond government policy
October 7, 2014 19
Reminder – Themes from groups
• Environmentalists have effectively used market-oriented strategies to increase their power
Canfor, Submission to the Province of British Columbia Legislative Assembly Special Committee on Timber Supply
New Themes
• Changes in international markets and technology have undercut BC’s comparative advantage
• A combination of globally valued resources and reliance on trade makes BC highly vulnerable to international influences
• Certification has increased the influence of private standard-setting organizations but there is little evidence of on-the-ground impacts
October 7, 2014 21
The Softwood Lumber Dispute
agenda
• Evolution of softwood lumber dispute
• Underlying causes• BC reforms to avoid
– Forest Revitalization Plan
• 2006 agreement• Current status• themes
Modern History of Dispute• Lumber I: early 80s - increased US countervailing duty
pressures• Lumber II: 1986 – MOU - export tax• Lumber III: 1992 US countervailing duties (6.5%)• 1994 - Canadian victory in binational panel
– US changes law to undermine basis for ruling• 1996-2001 – softwood lumber agreement
– Certain amount tax free – Substantial export fees above that level
• Lumber IV: – April 2002 – US DOC final determinations: 27.2% duties– Canada won every major case – October 2006 – new Softwood Lumber Agreement
October 10, 2013 24
US arguments
• Stumpage system - prices timber at less than market value
• Cut controls – flood market at low point of cycle
• Log exports – increase supply of domestic logs, depressing price
• Direct grants/loans
October 10, 2013 25
BC Policy Reforms
• How US trade pressures influenced BC forest policy - 2003– Market-based pricing– Tenure takeback– Economic deregulation
Stumpage Defined
• Stumpage is the price paid by a licensed forest company for a publicly-owned tree
27
BC’s Stumpage System (until 2004)
• Comparative Value Pricing (>90%)– Product prices – logging costs,
adjusted to account for gov target revenue
• auction-based market pricing (<10%)– small business sales
October 10, 2013 FRST 415 28
BC policy reforms announced as response to US softwood lumber challenge
29
Agenda 2
BC Proposal in Softwood Lumber Dispute
• institute market-based pricing• eliminate below-cost sales • eliminate “blending” of blocks with significantly different stumpage
values to reduce “cross-subsidies”• award new timber rights competitively, by awarding them to the
highest bidder• allow Forest Licences and Tree Farm Licences to be subdivided• reduce restrictions on the transfer of tenures, including eliminating the
5% AAC takeback• eliminate “cut control” requirements that require a minimum amount
of timber be harvested regardless of market conditions• eliminate utilization requirements;• eliminate appurtenancy provisions that tie harvesting rights to
requirements to process the timber in company-owned mills
30
Agenda 2
Decision: Forest Revitalization Plan
Forest Revitalization Plan“biggest change in 50 years”
• Takeback and Redistribtion• 20% taken back from long term
replaceable licences– first 200K m3 exempt
• 10% to auctions• 10% redistributed to
– First Nations (8%)– Woodlots– Community Forests
• Compensation: $200 million
October 10, 2013 FRST 415 32
Forest Revitalization Plan“biggest change in 50 years”
• Changes in economic regulations– allow subdivision and transfer without penalty– eliminate appurtenancy– eliminate minimum cut control requirements
October 10, 2013 FRST 415 33
Canada-US Softwood Lumber Agreement of 2006• 7 year term, with option to renew for 2• end to litigation, US pledges to dismiss new actions• Canada to receive $4 billion• US receives $1 billion
– $500 million to US companies– $450 million to “meritorious initiatives”– $50 million to create a “North American Lumber Council”
• 2012: agreed to extend it to October 2015
October 10, 2013 35
Softwood Lumber Agreement of 2006 – managed trade
October 10, 2013 36
Price per thousand board feet
Option A –Export Charge (%)
Option B – Export Charge plus Volume Restraint**
Over US$355 0 0
US$336-355 52.5% + regional share of 34% of U.S. Consumption
US$316-335 103% + regional share of 32% of U.S. Consumption
US$315 or under 155% + regional share of 30% of U.S. Consumption
Lumber prices – 2001-14
http://cfs.nrcan.gc.ca/selective-cuttings/43
http://www.nrcan.gc.ca/forests/industry/13309#softwood
Month Reference Price(US$/MBF)
BCcoast(%)
BCinterior(%)
AB(%)
SK(%)
MB(%)
ON Footnote1
(%)QC Footnote1
(%)
December US$387 0 0 0 0 0 0.1 2.6
November US$380 0 0 0 0 0 0.1 2.6
October US$353 5 5 5 2.5 2.5 2.6 5.1
September US$353 5 5 5 2.5 2.5 2.6 5.1
August US$326 10 10 10 3 3 3.1 5.6
July US$356 0 0 0 0 0 0.1 2.6
June US$407 0 0 0 0 0 0.1 2.6
May US$443 0 0 0 0 0 0.1 2.6
April US$416 0 0 0 0 0 0.1 2.6
March US$395 0 0 0 0 0 0.1 2.6
February US$385 0 0 0 0 0 0.1 2.6
January US$357 0 0 0 0 0 0.1 2.6
2013 Export Charge Rates
Softwood lumber dispute: bottom line
• Since 1982, US trade actions against Canada have had a major impact on the BC forest industry and BC forest policy
• Given the structure of the current deal, because of relatively high lumber prices, at present there are no taxes of BC lumber exports
International Context: Summary
• International Forces: Contribute to crisis, constrain reform– environmental agreements– world market trends
• push prices down– green markets - certification, boycotts
• push costs up, threaten demand– US trade pressures
• push costs up• Force difficult policy reforms• major challenge to sovereignty
October 10, 2013 40
Themes
• US trade pressures have pushed costs up and constrained BC’s policy sovereignty.
• BC’s market-oriented forest policy reforms were strongly influenced by trade pressures by the United States
Thursday
• Tutorial 1: Overview and Problem Definition
• Watch video or read 2 pager BEFORE CLASS
• Tasks for Problem Definition Tutorial (in class):– What are your organization’s core interests? You might find it
very useful to examine their mission statement if there is one– Define the policy problem from your group’s perspective. By
12:10, be prepared to present a one to two sentence problem definition to the class.