UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

An investigation of the movement of British Columbia softwood lumber to United States markets Crowther, John William Ferguson 1964

Your browser doesn't seem to have a PDF viewer, please download the PDF to view this item.

Item Metadata

Download

Media
831-UBC_1964_A4_5 C7.pdf [ 10.25MB ]
Metadata
JSON: 831-1.0102429.json
JSON-LD: 831-1.0102429-ld.json
RDF/XML (Pretty): 831-1.0102429-rdf.xml
RDF/JSON: 831-1.0102429-rdf.json
Turtle: 831-1.0102429-turtle.txt
N-Triples: 831-1.0102429-rdf-ntriples.txt
Original Record: 831-1.0102429-source.json
Full Text
831-1.0102429-fulltext.txt
Citation
831-1.0102429.ris

Full Text

AN INVESTIGATION OF THE MOVEMENT OF BRITISH COLUMBIA SOFTWOOD LUMBER TO UNITED STATES MARKETS by JOHN WILLIAM FERGUSON CROWTHER B.Com., The University of Br i t ish Columbia, 1957 A Thesis Submitted in Part ia l Fulfi l lment of the Requirements for the Degree of MASTER OF BUSINESS ADMINISTRATION in the Faculty of Commerce and Business Administration We accept this thesis as conforming to the required standard. THE UNIVERSITY OF BRITISH COLUMBIA May, 1964 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of Bri t i sh Columbia, I agree that the Library shall make i t freely available for reference and study. I further agree that per-mission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives,, It is understood that copying or publi-cation of this thesis for financial gain shall not be allowed without my written permission. Department O f ( I n m m o r f P a n H B i i c i T i B q q ^ i t i i n i g t r a t i n n The University of Bri t i sh Columbia, Vancouver 8, Canada. D a t e ?6th Marnh IQfid  ABSTRACT This paper reports upon an i n v e s t i g a t i o n conducted in to the movement of softwood lumber from B r i t i s h Columbia to the United States during the years 1955 to 1962. The p r i n c i p a l method used i n the course of the study was an examination of the b r i e f s and statements submitted to the United States T a r i f f Commission during hearings he ld i n Washington, D . C , i n October 1962. In order to keep the m a t e r i a l w i t h i n the context of current events, some space was devoted to a b r i e f summary of per t inent p o l i t i c a l and economic OGCurances i n both the United States and Canada during the l a s t part of 1962 and the f i r s t h a l f of 1963. Thereaf ter s i x chapters are devoted to comparisons between fores ts and e x t r a c t i o n , convers ion , and d i s t r i b u t i o n costs i n the P a c i f i c Northwest of the United States and i n the province of B r i t i s h Columbia. B a s i c a l l y the same type of fores t i s found i n these two reg ions , but the u t i l i z a t i o n and development of the areas have been d i f f e r e n t , as have been the competit ive fac tors which have a r i s e n i n the areas . Many of the per t inent data have been put in to tabular form for easy re ference . The penultimate chapter summarizes the b r i e f s and statements sub-mitted by the in teres ted United States lumber dea lers , sh ippers , and producers , and by the C o u n c i l of Fores t Industr ies of B r i t i s h Columbia, which represented the B r i t i s h Columbia lumber men, at the United States T a r i f f Commission hear ings . The conclusions reached as a r e s u l t of t h i s i n v e s t i g a t i o n were (1) there i s a shortage of domestic softwood lumber i n the United States which can best be f i l l e d by B r i t i s h Columbia lumber imports , (2) B r i t i s h Columbia lumber producers have an advantage over P a c i f i c Northwest producers with regard to stumpage cos t s , (3) B r i t i s h Columbia lumber producers have no advantage over P a c i f i c Northwest producers with regard to conversion cos t s , (4) D i s t r i b u t i o n costs greatly favour British Columbia lumber producers with regard to water-borne lumber, and slightly favour American Pacific Northwest lumber producers with regard to railborne shipments, (5) the exclusion of the Pacific Northwest lumber producers from the Puerto Rican lumber market illustrates the impact of the Jones Act restrictions on the United States lumber industry, (6) in addi-tion to the cost advantages which the British Columbia producers have in the United States Atlantic Coast market, they enjoy intangible advantages which may be characterized as marketing techniques which have created good w i l l for Canadian producers in the American markets, and (7) United States softwood lumber producers in the Pacific Northwest could improve their competitive position in the Domestic market by internal reforms, although they were unable to have imposed on their behalf prohibitive t a r i f f s or quotas. Finally, several suggestions as to possible areas for internal reform are put forward. TABLE OF CONTENTS CHAPTER PAGE I. INTRODUCTION 1 The Problem 1 Limitations of This Investigation 1 Definitions of Terms Used 3 Sources of Material 4 Methodology and Organization 6 Problems Encountered . . . 6 II. THE CONTEMPORANEOUS ECONOMIC AND POLITICAL SITUATION IN THE UNITED STATES 8 Introduction 8 American Foreign Trade Policy 10 The American Lumbermen's Economic Survival Committee 14 III. THE CONTEMPORANEOUS POLITICAL AND ECONOMIC SITUATION IN CANADA . . 16 The Po l i t i ca l and Economic Situation in General 16 Canadian Trade Policy 19 The Devaluation of the Canadian Dollar 21 The Effects of Devaluation 24 The Federal Budget of June 1963 29 Summary of the Canadian Position 36 IV. PRODUCTION AND CONSUMPTION PATTERS AND THE IMPORTATION OF CANADIAN SOFTWOOD IN THE UNITED STATES 37 Introduction 37 American Production and Consumption 38 •V CHAPTER PAGE Per Capita Consumption 41 Canadian and Br i t i sh Columbia Consumption 44 Br i t ish Columbia Exports 46 Summary of Chapter 49 V. TRENDS IN LUMBER USE IN THE UNITED STATES. 55 Introduction 55 Population 56 Distribution of Lumber Consumption . 58 Residential Non-Farm Construction 58 Summary of Trends in Home Construction 61 Estimates of Future Production and Consumption . 64 VI. LEGAL CONSIDERATIONS, PRICE CYCLES, AND STUMPAGE AS FACTORS IN THE SOFTWOOD LUMBER MARKET 69 The Market in General 69 Competition and the Law 71 Price Cycles in the United States 79 Br i t i sh Columbia Douglas F i r and Hemlock Price Patterns. 82 Stumpage in Br i t ish Columbia and the Pacif ic Northwest 86 VII. WAGE, LOADING, AND SHIP CHARTER COSTS FOR SOFTWOOD LUMBER 94 Wage Costs in Logging and Sawmilling 94 Loading Costs in General 98 Industrial Studies of Loading Costs 99 Loading Speed 102 The Charter Party 103 Longshoremen's Wage Rates 104 v i CHAPTER PAGE Charter Terms 107 Charter Rates and Conference Rates 109 VIII. TARIFFS AND DOLLAR EXCHANGE RATES AFFECTING THE SOFTWOOD LUMBER INDUSTRY 113 The Theory of Tar i f fs and Quotas in International Trade 113 United States Tar i f fs on Softwood Imports 118 Volume and Value of Lumber Imports into the United States. . . . 122 Exchange Rate of the Canadian Dollar 125 IX. RAIL SHIPPING COSTS AND PATTERNS, AND THE LOCAL MARKET 129 Rail Freight Rates for Lumber 129 Rai l Shipping Patterns 132 Trucking Costs 137 Domestic Consumption of Br i t ish Columbia Lumber 138 Rai l and Cargo Lumber Markets Compared 140 X. AN ANALYSIS OF THE MAIN BRIEFS SUBMITTED TO THE UNITED STATES TARIFF COMMISSION IN OCTOBER 1962 143 A General Survey of the Hearings 143 The Principal Arguments of the Pac i f ic Northwest Lumbermen . . . 146 Secondary Arguments by the Paci f ic Northwest Lumbermen 148 The Canadians' Reply 153 XI. SUMMARY AND CONCLUSIONS 160 P o l i t i c a l , Economic and Geographical Factors Discussed in this Thesis 160 Cost and Price Factors 161 v i i CHAPTER PAGE Supply and Demand Factors 162 Conclusions 164 Suggestions for Further Study 173 BIBLIOGRAPHY 174 APPENDIX A 182 APPENDIX B 188 APPENDIX C 190 LIST OF TABLES TABLE PAGE I. Canadian-American Trade and Canadian Gross National Product 1949-1962 23 II. Lumber Consumption and Production in the United States 1925-1962 39 III. Lumber Consumption Per Capita in Canada, the United States, and the United Kingdom 1948-1960 ; . . . . 43 IV. Lumber Production in Canada and Br i t ish Columbia 1925-1962 and Br i t i sh Columbia Lumber Shipments to the United States in Volume and as a Percentage of Br i t ish Columbia Production 1950-1962 45 V. Canadian Softwood Exports to the United States 1955-1962 48 VI. United Kingdom Imports of Lumber from Br i t ish Columbia and Per Capita Consumption of Imported Lumber 1955-1962 50 VII. Estimated and Actual Population of the United States 1960-1975 . . 57 VIII. Distribution of United States Lumber Consumption by Major End-Uses and as a Percentage of Total Consumption 1930-1975 59 IX. Private Non-Farm Housing Starts in the United States 1955-1962 . . 63 X. Estimated and Actual United States Production and Consumption of Softwood and Hardwood 1952-1975 65 XI. Estimated and Actual United States Lumber Imports 1952-1975. . . . 68 XII. Softwood Sawtimber: Weighted Average Annual. Prices of Stumpage in United States National Forests by Selected Species 1930-1961 88 ix TABLE PAGE XIII. Softwood Sawtimber: Average Annual Prices Bid for Stumpage in Br i t ish Columbia Crown Lands and United States National Forests in the Northwest by Selected Species and by Distr icts 1958-1961 92 XIV. Changes in Base Labour Rates: Douglas F i r Region and Br i t i sh Columbia Coast 1946-1962 . 96 XV. Negotiated Wages and Fringe Benefits: Br i t ish Columbia and Douglas F i r Region Logging and Sawmill Employees 1962 97 XVI. Basic Hourly Wage Rates for Longshoremen in Br i t i sh Columbia and the United States West Coast 1955-1962 105 XVII. United States Conference Rates from Paci f ic Coast Ports and Charter Rates from Br i t ish Columbia Ports for Waterborne Lumber Shipments to United States North At lant ic Ports in United States Currency 1950-1962 110 XVIII. Current Duty on Important Species and Percentage of Species Cut in the Interior and on the Coast of Br i t ish Columbia 1962 121 XIX. Volume of Dutiable Imports of Softwood Into the United States by Major Species 1955-1961 123 XX. Average Annual Value of Douglas F i r and Spruce Imported Into the United States and Wholesale Prices of United States Douglas F i r 1950-1961 124 XXI. Average Price Obtained in Br i t ish Columbia Export Trade for A l l Sp-ecies of Softwood per Thousand Board Feet (Free Along Side) 1955-1962 126 X TABLE PAGE XXII. Rate of Exchange: United States Dollars per Canadian Dollar 1952-1962 . . 128 XXIII. Railway Estimated Weights for Western Softwood Species 130 XXIV. Railway Freight Rates for Lumber from Paci f ic Northwest and Southern Br i t ish Columbia to Selected Destinations 1963 130 XXV. Distribution of Lumber Shipments from Br i t ish Columbia to Principal Markets as a Percentage of Total Shipments from Br i t ish Columbia 1955-1962 139 XXVI. Distribution of Lumber Shipments from Br i t ish Columbia to the United States by Transportation Method and Origin 1955-1962. . . 141 XXVII. Volume of Shipments from Br i t i sh Columbia to a l l Destinations 1955-1962 141 xi LIST OF FIGURES FIGURE PAGE I. Mil l ions of Board Feet Lumber Inventory in Br i t ish Columbia for Various Years 134 II. Mil l ions of Board Feet Lumber Production in Br i t ish Columbia for Various Years 135 III. Mi l l ions of Board Feet Lumber Shipments by Ra i l , Truck and Water, from Br i t ish Columbia Coast and Interior Averaged Through 1955 to 1962 136 CHAPTER I INTRODUCTION I. THE PROBLEM The subject investigated in this paper is the flow of lumber from the coastal and inter ior regions of Br i t i sh Columbia, Canada, to i ts pr incipal markets, part icular ly the United States, and the reasons for this movement of lumber. However, the flow of lumber cannot be considered in complete isolat ion from the po l i t i c a l and economic factors which are involved. In the f a l l of 1962 an action was in i t ia ted in Washington, D.C., by certain lumbermen in the United States for the protection of their industry from the alleged injury to the industry caused by the importation into the United States of lumber from Canada, and spec i f ica l ly from Br i t ish Columbia. The Canadians did not present a case of their own but confined themselves to c r i t i c i z ing the evidence presented by the Americans. The Canadian considerations surrounding the export of lumber were therefore not voiced. Some members of the Br i t i sh Columbia industry have stated than an investigation of the movement of Br i t i sh Columbia lumber into world markets, and into the United States in part icular , would be of interest to the industry. This paper has been written with this need in mind. II. LIMITATIONS OF THIS INVESTIGATION The investigation has not been carried back prior to 1955 in detai l except where necessary to show long term trends in the data used. Current figures cease at 1962, as those for 1963 are not yet available. Forecasts of the market and output of lumber have not been taken beyond 1975 because of the lack of re l iab le predictions about the future patterns of production and con-sumption in the United States. Hardwood lumber, i .e . that produced from deciduous trees, has not been considered in de ta i l , as the output of such lumber in Br i t i sh Columbia and the western United States is much smaller than the output of softwood lumber, i .e . that produced from coniferous evergreen trees. In Chapter VI details of the actual royalty rates applicable to Br i t i sh Columbia lumber have not been given:- nor have actual stumpage prices for different species. A plethora of detai l would, in the writer 's opinion, merely confuse the reader without contributing anything to the c la r i f i ca t ion of the overall p icture. Information on the Royalty and stumpage paid for timber can readily be obtained from the off ices of the Br i t ish Columbia Forest Service. Similarly, detailed freight rates for r a i l and truck transportation of lumber within North America have not been l i s ted in Chapter IX as such information is available from the off ices of the railways and truck l ines, and inclusion of long tables of freight rates in this paper would not serve any useful purpose. Some Br i t i sh Columbia firms have assisted the writer by supplying him with confidential information about their own organizations. In order to avoid v iolat ion of confidence this information has been presented in general form rather than in specif ic names and f igures. 3 Specific prices of the major species of lumber exported from Br i t ish Columbia have not been given, but general patterns have been used to indicate the price structure of the industry. A similar technique has been used for the forest areas of the United States. Details of size specif ications, species characterist ics, and end use patterns have not been given, as they would tend to confuse the overall p icture. III. DEFINITIONS OF TERMS USED The West. The entire area referred to in this paper as "the West" consists of the States of Arizona, Ca l i forn ia , Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming. The Pac i f ic Slope. The West, with the addition of Br i t i sh Columbia and the State of Alaska, is known as "the Paci f ic Slope". The Paci f ic Northwest. The area referred to as "the Pac i f ic Northwest" is that encompassed within the States of Washington, Oregon, Idaho, Montana, and the northern part of Ca l i forn ia . Forest. A forest is a stand of trees of actual or potential economic signif icance. Lumber. Lumber is the product made by sawing, dressing, and other primary conversion operations. Timber. Timber is the standing or unconverted raw material from which lumber and other forest products are made. Board Foot. One board foot is a piece of sawn lumber one foot wide, one foot long, and one inch thick. In practice a piece of lumber described as one board foot does not comply with these specif icat ions. One board foot of 4 dressed lumber w i l l be one foot long, but w i l l be between 3/8" and 1/4" under-size in width and thickness. Green lumber in the undressed form w i l l be over-size in width and thickness to allow for shrinkage during drying and for dressing of the piece. Lumber Measure. The usual measure of lumber in both the United States and Canada is one thousand board feet, written M f .b.m., or 1 M. One board foot is written as 1 f.b.m. ( i .e . one foot board measure). In the United Kingdom and some Commonwealth countries the Standard measure, 165 cubic feet, is used. One Standard equals 1980 board feet. Br i t i sh Columbia Timber Royalty. In Br i t ish Columbia lumbermen have to pay a certain sum direct to the Crown for the use of Crown land on which the timber they intend to harvest is grown. The amount of the Royalty is set by statute and depends on the status of the land involved. There are two basic categories of Royalty: one applies to land situated east of the Cascade Mountains and the other to land west of the Cascades. In the case of salvage operations, Royalty is reduced to 75 per cent of the statutory amount. Throughout this paper one b i l l i o n means one thousand mi l l ion (1,000,000,000] and not one mi l l ion mi l l ion (1,000,000,000,000) as in Europe. IV. SOURCES OF MATERIAL In addition to the other material shown in the attached bibliography most of the material used has come from either the Br i t i sh Columbia Council of Forest Industries and members of this representative organization or from the br ie fs , submissions, statements, and exhibits presented at the United States 5 Tar i f f Commission hearings held in Washington, D. C. A further source of material has been the book Western Forest Industry — An Economic Outlook, written by John A. Guthrie and George R. Armstrong, in which they examined the forest products industries of the Paci f ic Slope disregarding po l i t i c a l 1 boundaries. This book is the most recent authoritative one written on this subject, but as i t was published in 1961, and the data given in the book t' cover only the years up to and including 1959, i t needs to be supplemented by information for the years 1960-1962, F ina l ly , members of the Br i t i sh 2 Columbia industry have been interviewed to obtain confirmatory information. 1. (Baltimore, the John Hopkins Press, 1961). This book was written during the time of the build up of the present c r i s i s . 2. The writer has had interviews with representatives of several Br i t i sh Columbia organizations connected with the forest products industry. Among them are Mr. L. Reed, Economist and Stat is t ic ian, of the Council of Forest Industries of Br i t ish Columbia, Mr. C. J . A. Dalton, Manager, Overseas Sales Div is ion, of MacMillan, Bloedel and Powell River Company L td . , Mr. R. H. Edgett, General Sales Manager, and Mr. W, L. Wilson, Divisional Manager, American Div is ion, of Seaboard Lumber Sales Company L td . , Mr. J » N. Lucas, Office Manager, of Whonnock Lumber Company L td . , Mr. A. L. Jeffery, Supervisor, Labour Analysis and Research Div is ion, of the Shipping Federation of Br i t i sh Columbia, Mr. C. R. Widman, President, and Mr. P. Gregory, General Sales Manager, of Cooper-Widman L td . , and Mr. K. J . Bennett, Labour Relations Assistant, of Forest Industrial Relations Ltd. 6 V. METHODOLOGY AND ORGANIZATION To keep the problem within the context of current events two chapters have been devoted to outlining the po l i t i c a l and economic circumstances pre-valent in both the United States and Canada in the f a l l of 1962 when the United States Tar i f f Commission hearings took place in Washington, D. C . , and those which were created by the General Election held in Canada in Apr i l of 1963. Against this background, tables have been compiled showing production and consumption trends and cost and price patterns in the United States and Canada for the period under discussion. The data isolated have been analysed and the conclusions drawn from them have been used to paint a detailed picture of the movement of Br i t i sh Columbia lumber to the United States. While no personal predictions as to the future have been made, forecasts made some years ago have been examined to see how accurate they are proving to be. Because of the wide use made of the evidence presented at the Washington Tar i f f Commission hearings, a section has been devoted to an analysis and summary of the briefs and statements made before the Commissioners. The last chapter consists of a summary of the findings of the previous chapters and an enumeration of the conclusions to be drawn from the research as a whole. VI. PROBLEMS ENCOUNTERED During the research conducted for this thesis i t was recognized that there was a large degree of emotional feel ing between the Canadian and 7 American lumbermen involved. An attempt has been made to eliminate or reduce the emotional content of their evidence. Some of the information desired was unavailable because i t was considered confidential by the sources of the infor-mation. Discrepancies between figures published by different authoritative sources about the same aspects of the matter investigated were encountered, and hence inconsistencies appear in some of the data presented. The best available information has been used, and every effort has been made to obtain a confirmatory source, but in some instances this has not been possible. The largest problem encountered in the research for this paper was that of the ava i lab i l i t y of detailed information. Examples of areas in which a great amount of pertinent information is available are the r a i l freight rate schedules, details of trade union wage agreements, and exact lumber spec i f i -cations. Details for these and other similar items are necessary in the daily operation of the lumber industry, but would confuse the overall situation i f described at length in this paper. CHAPTER II THE CONTEMPORANEOUS ECONOMIC AND POLITICAL SITUATION IN THE UNITED STATES I. INTRODUCTION Within the last year or two a good deal has been heard about the posit ion of the United States softwood lumber industry. There have been long art ic les in the newspapers''' and even a book written on the subject in 2 the context of the current s i tuat ion. The United States Tar i f f Commission 3 has held hearings in Washington, D. C. and has made i t s findings known. Confl icts of interest between the Br i t i sh Columbia and Paci f ic Northwest lumbermen are not new. The c r i s i s which was brought to a head at the 1962 United States Tar i f f Commission hearings was not the f i r s t , nor is the one which was ar is ing towards the end of 1963 l ike ly to be the l as t . The contention in most instances has been that the act iv i t ies of the lumbermen on one side of the Canadian-American border have imperilled those on the other side. It is impossible to consider the lumber trade of Canada without taking into account that of Canada's largest trading partner, the United States, but i t is also important to eliminate from the debates which have raged from time 1. The Province, (Vancouver, B.C.), February 15, 1963, p. 14. 2. Guthrie and Armstrong, pj>. c i t . 3. United States Tar i f f Commission, Softwood Lumber (Report to the  President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b) of the  Trade Expansion Act of 1962), TC Publication 79, (Washington, D. C , Govern-ment Printing Off ice , February 1963). Hereinafter referred to as TC Publication 79. to time those parts of the debates which can be attributed solely to the current p o l i t i c a l bel iefs and prejudices. The current softwood lumber industry d is -cussion has i t s share of biassed viewpoints. In the 1962 hearings there were po l i t i c a l factors which played an important part in the discussion of the matter. Canada and the United States are geographic neighbours. The industries in the northern United States and those on the Canadian side of the area along the international boundary are often working with the same basic resource and are either competing with each other in a common market or supplying goods to their own part icular market. The expression "one forest under two f laga" is encountered in dis-4 cussions of the forest resources of the Pac i f ic Slope. Certainly there have been differences in the development of the resources and most certainly there w i l l be differences in the future in the u t i l i za t ion of resources by Canada and 5 the United States. However, i t is impossible to examine the resources of one country without taking into consideration those immediately across the international boundary. 4. John Furman, "Statement for the U.S. Tar i f f Commission, Washington, D. C , by the President of Furman Lumber In., Boston, Massachusetts." 5. For example, Br i t i sh Columbia pioneered sustained y ie ld forestry practices, and there are more veneer mil ls in the Paci f ic Northwest than in Br i t i sh Columbia, demonstrating an emphasis on this type of forest u t i l i za t ion in the West which is not found in Br i t ish Columbia in the same magnitude. Guthrie and Armstrong, op. c i t . , p. 131. 10 II. AMERICAN FOREIGN TRADE POLICY The importance of the Canadian-American boundary as far as natural resources are concerned has become progressi>d.y less as the United States foreign trade policy has changed from one of economic iso lat ion, and has become pro-gressively more l ibera l since the early 1930's. The aim of present legis lat ion for foreign trade is to permit the President of the United States to reduce s t i l l further the restr ict ions to trade which s t i l l exist between the United States and such countries as Canada* This idea of re lat ive ly free trade is not new in the world, but i t is impossible to equate the situation in 1963 with that which was envisaged by early proponents of free trade. From about 1870 t i l l the mid-1930's the United States economy was pro-tected from overseas competition through ta r i f f s and quotas. This protection enabled the United States protected industries to grow and prosper without the fear of competition from similar industries abroad. Benefits appeared in the form of favourable balances of trade and payments. The favourable balance of trade showed that, in the long run, the volume of goods exported from the United States was greater than the volume of goods imported into the country. Closely a l l i ed with the volumes of goods are the payments for them, but the expenditures made by the government and private organizations for foreign goods and services must be deducted from the income of the United States. Even after this calcu-lat ion, the United States maintained a favourable balance of payments posi t ion, i .e . , the income from exports was greater than the expenditure on a l l imports and other forms of foreign payments made by the United States. The changes which have taken place in the international trade scene since the 1920's have 11 made i t necessary for some countries to abandon their old ideas about trade protection and to adopt other methods of competition to keep their economies sound. It was in l ine with these changes that President Kennedy proposed that the old Reciprocal Trade Agreements should not be renewed when they expired in mid-1962, and that a tota l ly new piece of legis lat ion be enacted which would permit the President to make sweeping ta r i f f changes for whole categories of 6 goods en masse. The Trade Expansion Act of 1962 was signed into law on October 11th, 1962.^ It was the f i r s t fresh approach to trade since 1934. The President of the United States said he thought there must be a change in the United States* foreign trade pol icy. He said in his message to Congress accompanying the proposed Trade Expansion Act of 1962 that competition would improve American economic health and that a l ibera l trade policy would benefit ef f ic ient expanding industries. Further points he made were that imports give consumers a wide choice of products at competitive prices and 8 that economic isolat ion and po l i t i c a l leadership are incompatible. The old Reciprocal Trade Agreements had been renewed eleven times since 1934, during which time the foreign trade of the United States had grown from 9 $2 b i l l i o n to over $20 b i l l i o n per annum. In addition to this growth in trade there had been several other signif icant changes in world trade patterns. 6. Ronald Steel (ed.), United States Foreign Trade Pol icy, Vol . XXXIV No. 5 of The Reference Shelf, (New York, The H. W. Wilson Company, 1962) p. 31. 7. TC Publication 79, p. 3. 8. Steel, loc . c i t . 9. Ib id . , pp. 34-39. 10. Ib id . , p. 31. 12 These, in br ie f , were the growth of the European Common Market, increased pressure on the United States balance of payments position (there was a con-tinued net drain on the gold and foreign currency reserves of the United States during 1962), and the increased pressure being exerted by the Soviet Union and her a l l i e s in a l l parts of the world. The Trade Expansion Act of 1962 was designed to stimulate United States exports and to enable the United States to compete more effectively in foreign markets. One of the main methods by which these aims were to be achieved was the lowering of ta r i f f s on whole groups of goods. It is this particular point which is pertinent to the present paper, as the American Paci f ic Northwest lumbermen applied for an increase, not a lowering, of the t a r i f f . The Act increased the total foreign trade possible for United States firms and also allowed foreign firms to compete in the United States against domestic industries. International trade is not uni latera l , and any steps taken by a government to increase i ts own foreign trade or sales with another country provoke an inflow of goods from outside the country. Although the Act is aimed primarily at the European Common Market, i t affects Canada too. Canada depends on the United States for many of i ts imports, and the United States must reciprocate this trade with Canada and other countries i f an overal l acceptable balance of trade and payments is to be maintained. The Trade Expansion Act of 1962 does not alter the tradit ional American "most favoured nation" concept, which has been a cornerstone of United States international trade practice for years. This pr inciple is that the arrangements made with one nation or group of nations, such as the European Common Market, w i l l be applied to a l l nations with which the United States trades, and w i l l not 13 be only a b i la tera l agreement between the United States and one other nation concerning a particular good or group of goods. This is obviously of very great interest to the softwood lumber producers of Br i t ish Columbia, for , i f concessions were made to, say, the Scandanavian countries regarding forest products exports from their countries to the United States, then the same terms would apply to Canada and any other countries that wanted to participate in the trade. The United States is the wealthiest trading area in the modern world and may continue to be so at least unt i l the European Common Market reaches maturity. Therefore i t is of obvious importance for other trading nations to get as favourable terms of trade with her as they can. The Trade Expansion Act of 1962 did not entirely abandon the economic concept of protection for industries at the so-called "per i l-point" . It allows an industry or group of firms to pet i t ion the United States government for aid when they feel that they are being endangered by outside factors over which they have no control . This argument runs against the doctrine of comparative advantage, and in the opinion of a prominent American economist, Paul Samuelson., any industry which reaches a point where i t s existence is threatened by foreign competition deserves to be imperi l led. Although this elimination is ruthless on those suffering from factors outside their control , i t w i l l benefit the economy as a whole and prevent the wasting of national resources.* 1 11. Paul A. Samuelson, Economics An Introductory Analysis, (New York, McGraw-Hill Book Company Inc., 1958), p. 679. 14 III. THE LUMBERMEN'S ECONOMIC SURVIVAL COMMITTEE The Trade Expansion Act of 1962 has some safeguards in i t to protect the indigenous American producers from any injury which would be disadvantageous to the economy as a whole. The new Act , however, does not attempt to revert to absolute protectionism which some of the earl ier and even some current pro-ponents of the United States trade pol icy seem to favour. It is in the l ight of the protective clauses in the new Act and similar clauses which appeared in the Reciprocal Trade Acts that an organization known as the Lumbermen's Economic Survival Committee arose in the Paci f ic Northwest and f i l ed a brief with the United States Tar i f f Commission asking for protection from the injury or threat of injury created by the importation of softwood lumber from Canada, and more spec i f ica l ly from Br i t i sh Columbia. The softwood producers in this one region of the country were most vocal in their complaints, but appear to have received little support from the other softwood producing areas of the United States. They have also fa i led to receive the support from the other segments of the lumber industry which they had no doubt expected when they in i t iated their 12 action, which began under the authority of Section 7 of the Trade Agreements Extension Act of 1951 as amended, and was concluded under section 301(b) of 13 the Trade Expansion Act of 1962 (76 Stat 885). There would appear to be some 12. The action in i t iated by the United States lumbermen is one commonly known as an "escape-clause" action, i . e . , one whereby the provisions of a piece of legis lat ion may be set aside under a certain set of circumstances. Cf . Herbert H. Fierst and Mitchell J . Cooper, Brief of the Council of Forest  Industries of Br i t i sh Columbia before the United States Tar i f f Commission  Investigation No. 7-116 Softwood Lumber, (Washington, D.C., Press of Byron S» Adams, November 1962) p. 5, and TC Publication 79, p. 13. 13, TC Publication 79, p. 1. disagreement between the American industries involved as to the wisdom of the action which was sought by the Lumbermen's Economic Survival Committee. For example, i t was one of the contentions voiced in the hearings before the Tar i f f Commission that any restr ic t ion imposed on the importation of softwood lumber from Canada would be to the detriment of the industry and the consumer. One of the most common predictions was that higher prices would occur in the United States for both domestic and imported lumber i f the supply of Canadian lumber 14 imports were stopped or restr icted by ta r i f f s and quotas on Canadian imports. The main parties to the discussions held in Washington in 1962 in connection with the softwood lumber industry were the lumber manufacturers of the Paci f ic Northwest, those of Br i t i sh Columbia, and the consumer-distributor representatives on the Eastern Seaboard of the United States. However, a l l lumber producers are affected by the decision of the United States Tar i f f Commission. The plywood and pulp and paper industries, though a v i t a l part of the forest products industry, are not direct ly involved in their own r ight . Nevertheless, whatever affects the rest of the forest products industry is bound to affect plywood and pulp and paper production. 14. F ierst and Cooper, op. c i t . , p. 47. CHAPTER III THE CONTEMPORANEOUS POLITICAL AND ECONOMIC SITUATION IN CANADA I. THE POLITICAL AND ECONOMIC SITUATION IN GENERAL The previous chapter showed some of the things which were occuring in the United States during the period 1962-1963, but l i t t l e has yet been said about events in Canada. During the time the disagreement was coming to a head in 1961-1962, the Conservative government then in power was anxious about i ts own future. The anxieties were jus t i f i ed by the results of the general election which took place in Canada in A p r i l , 1963, two months after the United States Tar i f f Commission findings were published, when the Liberals gained enough seats to form the new government. The Governments of Canada and of the Province of Br i t i sh Columbia did not intervene in the discussions on the softwood lumber industry in Washington. Although the Br i t ish Columbia industry was le f t to conduct the matter as i t saw f i t , there was l ia ison between the industr ial representatives and the Federal and Provincial Governments at the time. Lumber and other forest products are one of the largest components of 1 Canada's trade in terms of both value and volume. Any a r t i f i c i a l l y created barriers established against the export of Canadian lumber and forest products 1. For the years 1959-1961, Br i t ish Columbia net value of production has been in excess of $600 mi l l ion , roughly the same as the overall trade def ic i t of Canada. A l l but a few mi l l ion board feet of the B. C. production is shipped out of the province, and about one-half of the shipments are to the United States* Br i t i sh Columbia Lumber Manufacturers Association, Annual Report. 1962, (Vancouver, Clarke and Stuart, 1963), Tables 1 and 3. (Lithographed, no pagination.) 17 would have a deleterious effect on Canada's balance of payments posit ion. In fact there was an adverse balance of payments in Canada . in . 1962, and this necessitated serious action by the Canadian Government. Among the pr incipal steps taken was the devaluation in May, 1962, of the Canadian dol lar , and as the pressure on i t had not been eliminated six months later , further action was taken consisting of the imposition of new and increased ta r i f f s and duties on certain imports. The restr ict ions were never intended to be permanent, and have since been removed. The tar i f f s and duties were imposed in the f a l l of 1962, at the time that Canadian lumbermen were defending a case in Washington against the imposition of ta r i f f s and/or quotas on Canadian lumber imports. The gravity of the situation in Canada probably had some bearing on the attitude of the United States government in not imposing 2 reciprocal ta r i f f s on Canadian exports to the United States. Whatever the reasons were, the United States Tar i f f Commission decided not to recommend to the President that ta r i f f s or quotas be imposed on Canadian imports of lumber. It was the finding of the Commission that Canadian softwood was not "being imported in such increased quantities as to cause or threaten to cause serious 3 injury to the domestic industry producing the l ike a r t i c l e . " 2. A detailed discussion of ta r i f f s and quotas may be found in Chapter VIII of this paper. The dist inct ion between a t a r i f f and a quota is that a t a r i f f is a monetary cost restr ic t ion confronting the sel ler of a good, and may be paid partly out of reduced prof i ts for the sel ler and partly out of increased prices for the buyer. A quota is a volume restr ic t ion on the good involved, specifying the total volume which may be imported or exported. A quota may be combined with a t a r i f f . 3. TC Publication 79, p. 4. 18 In Apr i l 1963 there was a federal election in Canada in which the Conservative Government was replaced by a minority Liberal Government. The f u l l trade policy of the new government has not been in effect long enough for i t to be clearly ident i f ied and codif ied. However, one of the planks in the Liberal platform was a promise to avoid anti-Americanism. If this feeling is carried to a logical conclusion in connection with the lumber industry i t w i l l mean that nothing w i l l be done under o f f i c i a l trade pol icy which w i l l be det r i -mental to the best interests of Canadian lumbermen. Canadian trade policy w i l l continue to safeguard trade with the United Stated. There were statements made before the United States Tar i f f Commission to the effect that there was a considerable amount of assistance given to the softwood lumber industry in Canada by both the provincial and federal govern-4 ments. This al legation was refuted by the Canadian representatives at the hearings. There are apparently no grounds for any claim by the United States softwood producers that Canadian imports resulted from trade agreements negotiated between the United States Federal Government and the Canadian Government.^ Whether or not there w i l l be any trade agreements reached between the current federal governments in Canada and the United States is something which cannot be foreseen at present. Tf and when the European Common Market and the European Free Trade Area are completely merged into one unit, i t might 4. Fierst and Cooper, op. c i t . , p. 50. 5. Ibid. See also TC Publication 79, p. 4. 19 be possible for the northern European nations to compete effectively in the United States softwood market. If this were to happen i t would probably be because of the continued trend of the United States and Canadian softwood industries to change over from the production of lumber to the production of other forest products such as plywood and pulp and paper, as was forecast 6 would happen in the Stanford Research Institute Report. II. CANADIAN TRADE POLICY The d i f f i cu l t y in trying to compare the Canadian and American foreign trade pol ic ies at the present time arises from the basic difference between the two countries in the emphasis which is placed on the different economic factors in them. Canada's economy rests basical ly on the exploitation of natural resources, while the United States' economy is balanced between agricultural and manufacturing industries. The United States, as a developed economy, is forging an essential ly expansionist trade pol icy from po l i t i c a l necessity and as a matter of domestic need. In Canada the government has not been in power long enough for i ts foreign trade pol ic ies to become known. The former Conservative government was anxious to get Canada in a posit ion where she would be able to compete with other world producers in the United States and in world markets, but placed special emphasis on the Commonwealth. If Br i t ian had joined the Common Market, as was thought l ike ly at the time, the old system 6. Stanford Research Institute, America's Demand for Wood, A report prepared for Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford, Ca l i forn ia , Stanford Research Institute, 1954), p. 76. 20 of Imperial preferences as applied to Commonwealth countries such as Canada would probably have been dropped or modified, not so much because of action on the part of the United Kingdom Government as because of pressure from other members of the European Common Market. Canada, with her high wage rates, unless balanced by increased eff ic iency, would have been forced to withdraw her general trade from the United Kingdom and other Common Market countries and look elsewhere for business. The logical market for Canadian trade would have been, and i s , the United States. The United States is not the only market available to Canadian exporters but i t is a natural one and is the largest and most conveniently located. It was thought during the United Kingdom's Common Market negotiations that such countries as Canada and the United States could continue to have trade with Europe, but that the trade would not be direct ly between the countries. Trade would be through third party countries. Lumber and other forest products would have been included in the triangular trade but there are l imits as to the type and volume of products which can be traded this way. 21 III. THE DEVALUATION OF THE CANADIAN DOLLAR Canadian trade with countries other than the United States showed a 7 favourable or acceptable balance of payments and trade in 1962. This state-ment could not be made of Canadian-American trade. In May 1962, when the Canadian government devalued the dol lar , there was a def ic i t of about $700 mil l ion in the balance of trade with the United States. In October an anonymous paper was read into the transcript of the Washington Tar i f f Commission hearings by the Canadian representatives on the matter of the Canadian dollar devaluation for the purpose of c lar i fy ing some of the statements made and g refuting other points which had been raised by the United States producers. 7. The balance of current account payments with countries other than the United States was favourable during 1962 in every quarter, as reported in a Canadian Government publication. Government of Canada, Dominion Bureau of S tat is t ics , National Account and Balance of Payments Division, "Quarterly Estimate of the Canadian Balance of International Payments", (Ottawa, Queen's Pr inter, June, 1963), p. 5. The def ic i t with the United States was heaviest in the f i r s t half of the year, when i t amounted to $768 m i l l ion . The def ic i t for the last half of the year, after devaluation and other measures had been implemented to protect the Canadian economy, amounted to $348 m i l l ion . There was a favourable balance with the United Kingdom amounting to $213 mi l l ion . The amount of the quarterly balance increased throughout the year to reach i ts maximum in the last quarter. The balance with a l l other nations fluctuated from favourable to unfavourable. There was an overall favourable balance with them at the end of the year of $55 mi l l ion . 8. Anonymous paper, "Devaluation of the Canadian D o l l a r p . 1. The paper is included as Appendix A. 22 According to the paper, i t was purely coincidental that the Canadian Government decided that i t was necessary to take the drastic economic step of devaluation at the time that i t did when there was concern being expressed on the part of some interested United States producers about the volumes of Canadian softwood imports into the United States. The devaluation was instituted by the Canadian Government in an attempt to counteract the pressure which was being exerted on the dollar by the excess of Canadian imports from the United States, which had reached such a state that there were intolerable economic consequences in Canada. The action taken by the government was successful in that the large adverse balance in the Canadian-American current account was prevented from growing. At that time the balance of trade and payments account of Canada with other trading nations was in a generally favourable posit ion. In May 1962, pursuant to an arrangement with the International Monetary Fund, Canada pegged i ts dollar at US$0.92% (+ 1%). The pegging of the rate at that level was designed to accomplish several purposes. Among the more important of them were the curtailment of imports and the general expansion of exports. Inasmuch as lumber is a leading Canadian export and the United States is the major foreign market for i t , the currency of depreciation effectively promoted the expansion of lumber exports to the United States.g Table I, page 23, gives the amount of Canada's def ic i t in trading with the United States and also Canada's Gross National Product for the same period to demonstrate the importance of the role that American trade plays in the Canadian economy. The current account balance of trade between Canada and the United States is larger than the balance with a l l other countries, with whom Canada trades, combined. 9. TC Publication 79, p. 18. TABLE I CANADIAN-AMERICAN TRADE AND CANADIAN GROSS NATIONAL PRODUCT 1949-1962 (IN MILLIONS OF DOLLARS) Year GNP of Canada US Exports to Canada US Imports from Canada Canadian Trade Defic i t Defic i t as a % of GNP 1962 40,401* 4,343 3,608 735 1.8 1961 36,844 3,864 3,107 757 2.2 1960 35,928 3,707 2,092 1,615 2.8 1959 34,784 3,743 3,042 701 2.0 1958 32,894 3,483 2,684 754 2.4 1957 31,909 3,935 2,907 1,028 3.1 1956 30,585 4,053 2,894 1,141 3.2 1949 16,343 1,928 1,512 416 2.5 Source: John F. Kennedy, Economic Report of the President Transmitted to  the Congress January, 1962, (Washington, Government Printing Off ice , 1962), p. 298. Government of Canada, Dominion Bureau of S tat is t ics , Canada Year  Book, 1962, (Ottawa, Queen's Printer, 1963), p. 1064. , National Accounts, Income and Expenditure 1962, (4th Quarter and Preliminary Annual), (Ottawa, Queen's Printer, 1963), p. 25. , Trade of Canada: Exports by Countries 1961, (Ottawa, Queen's Pr inter, 1962), Vol . 18, No. 4, p. 147. , Trade of Canada: Commodities Imported from Each Country Twelve Months Ended December 1961, (Ottawa, Queen's Printer, 1962), Vol . 19, No. 4, p. 208. *preliminary figure 24 Some of the American lumber producers went so f a r as to say that the Canadian Government had d e l i b e r a t e l y devalued the d o l l a r j u s t to a s s i s t the lumber i n d u s t r y . This i s obvious ly f a l l a c i o u s , as the government must th ink of the welfare of the economy as a whole, and not j u s t one p a r t i c u l a r i n d u s t r y . Th i s i s not to say that i f Canada thought i t necessary to do so i t would not take some a c t i o n which would be d i r e c t l y and s o l e l y b e n e f i c i a l to one i n d u s t r y , such as the lumber i n d u s t r y , but that such was not the case i n t h i s ins tance . Lumber exports represent only a part of the t o t a l Canadian economy, and although they are very important on a p r o v i n c i a l b a s i s , they are not near ly so important on a n a t i o n a l b a s i s . IV. THE EFFECTS OF DEVALUATION The devaluat ion of the d o l l a r p a r t l y accounted for increased p r o f i t s 10 which fores t products i n d u s t r i e s experienced during the past year , but the other s ide of the co in has not yet been f u l l y seen. There are f i n a n c i a l disadvantages which the fores t products i n d u s t r i e s and others are going to experience i n both the short and long run as a r e s u l t of deva luat ion . In the short run there was an increase i n the cost of char ter ing fore ign vesse l s to carry lumber not only to the United States but to other markets as w e l l . Most of the charters are i n terms of e i ther United States d o l l a r s or Pounds S t e r l i n g . This increased cost of the charters was not 10. M a c M i l l a n , B l o e d e l , and Powell R i v e r Company L i m i t e d , "Annual Report 1962." 25 passed on to the United States buyers but did have to be taken into account in the costs of the exporters involved. The policy of Canadian shippers in the past has been to take the rough with the smooth and not to change prices every time the charter market changes.** The resulting s tab i l i ty of Canadian prices has been appreciated by the Eastern United States importers. In the long run, there could be a severe effect on a l l those Canadian industries dependent on imported capital equipment. The cost of equipment needed either for expansion or for replacement of existing equipment could be considerably higher than i t would have been without the devaluation. However, the situation may change, and the extra costs may not ar ise . Only time w i l l answer the question at present puzzling the producers and others who need capital equipment. This problem faced by the Canadians w i l l no doubt have occurred to American and other suppliers of equipment, and they w i l l have real ized that replacement equipment may not be ordered as early as they had expected. The available f igures, however, do not support this thesis directly as the value of capital investment in Br i t ish Columbia lumber and forest products rose from about $140 mi l l ion in 1961 to a record high of about $160 12 mi l l ion in 1962. 11. "Statement of W, J . D r i s co l l , Blanchard Lumber Co., Walpole, Massachusetts," p. 3. (Presented to the United States Tar i f f Commission October 10th, 1962.) 12. Government of Br i t ish Columbia, Bureau of Economics and Sta t is t i cs , Department of Industrial Development, Trade and Commerce, Summary of Business  Act iv i ty in Br i t ish Columbia 1962, Vol . XIV, (Victoria, B. C , Queen's Pr inter, 1963), p. 4. 26 As most of the Canadian lumber trade originates in Br i t ish Columbia, i t is on the effects of devaluation in the province that emphasis must be placed. Throughout the dollar c r i s i s and the Tar i f f Commission hearings the provincial government, unlike the Canadian Federal Government, fe l t secure in i ts tenure of o f f i ce . The provincial government, i f i t had been cal led upon to do so, could have assisted the Br i t i sh Columbia lumbermen in the discussion with the United States Tar i f f Commission. As i t transpired, the only action requested of the Government was that of allowing the Provincial Chief Working Plans Officer of the Department of Forestry to go to Washington to test i fy . Br i t ish Columbia has supplied a majority of the Canadian lumber production since about 1926, and i ts overall share of the total production has been 13 increasing ever since then. That Br i t i sh Columbia as a po l i t i c a l part of Canada has a surplus in trade with the United States in terms of softwood lumber does not mean that Br i t ish Columbia has an overall surplus with the United States in either v i s ib le or inv is ib le trade accounts, nor that Canada as a whole has a surplus. To try to compartmentalize international trade either on a product or a regional basis would result in very misleading figures. One of the direct effects of the pegging of the Canadian dollar was that of increasing the return to exporters without the stigma of increased pr ices. One of the indirect effects was the poss ib i l i t y of increased stumpage rates. Royalty was unaffected, but stumpage can be altered by changes in the return to lumbermen. Stumpage applies direct ly to timber, not lumber. 13. B.C.L.M.A., Annual Report 1962, Table 4. 27 In the contract between the Br i t i sh Columbia Forest Service, as agent for the Crown, and the lumber producers for the purchase of logs, there is a 14 "s l id ing scale" clause which allows for changes in stumpage rates when log prices fluctuate.'''"' The clause operates as follows: When the Average Market Value of logs. . . ( r ises ) not less than 15 per cent from the Average Market Value which formed the basis on which the existing rates were established, the new stumpage rate shal l be f ive fourths (5/4) of the basic rat io times the new Average Market Va lue. . . . When the Average Market Va lue. . . ( fa l l s ) not less than 15 per cent from the Average Market Value which formed the basis on which the existing rates were established the new stumpage rate shal l be three quarters (3/4) of the basic ratio times the new Average Market Va lue. . . . Devaluation made i t possible for lumber-exporting producers to increase the amount they bid for their timber supplies, but they would not automatically increase their bids merely because their returns from foreign sales had increased. Purely domestic operations did not enjoy the increased return. S t r i c t l y export operations enjoyed a maximum increase in returns. The domestic supply mil ls would not increase their timber bids except when forced to do so by competition from exporting mi l lers . Hence the average market value, although i t might not increase by the f u l l eight per cent of devaluation, would nevertheless tend to r i s e . Thus producers found themselves in a posit ion where their raw materials cost (in the form of stumpage) might increase not through any action or lack of action on their part, but through the action of the Federal Government. This does not smack of protectionism, at least on the 14. Anonymous paper, "Devaluation of the Canadian Dol lar , " p. 4. 15. A copy of the pertinent portion of the contract form appears as Appendix B of this paper. 16. See Appendix B. 28 part of the Provincial Government, and hence there are no grounds here for supposing that the Canadian Government had devalued merely to promote one industry. Stumpage and Royalty cost is borne by nearly a l l of the lumber producers whether they be large or small. Only about 5 per cent^ of the provincial forest land by area is privately controlled. Royalty on land given by Crown grants between 1887 and 1949 is fixed by statute, and is not subject to Crown adjustments. The Stumpage and Royalty b i l l faced by the lumber producers is not 19 the only one which w i l l have shown an increase because of devaluation. It has already been mentioned that a l l equipment bought outside Canada w i l l cost more after devaluation. It is extremely d i f f i cu l t to determine exactly what the extra costs w i l l be, as some foreign suppliers, for example those facing Eastern Canadian competition, may decide that they w i l l not raise their pr ices, but w i l l instead have special rates for Br i t ish Columbia so as to retain their Canadian customers, even though i t be at a lower price and p ro f i t . Furthermore, the Trade Unions w i l l certainly not forget to take the increased costs due to devaluation into account when they next negotiate new wage agreements, not only in the lumber industry but in a l l spheres of Canadian industry and commerce. 17. Dr. B. Gr i f f i ths , "Br i t ish Columbia Continuous Inventory Tables," compiled from annual reports of the Br i t i sh Columbia Forest Service, (mimeographed] 18. The Forest Club, Forestry Handbook for Br i t ish Columbia, (University of Br i t ish Columbia, Vancouver, 1953), pp. 224-225. 19. "Devaluation of the Canadian Dol lar , " p. 5. 29 One other minor factor which should not be ignored is that any increase in p ro f i t s , should there be one, would be subject to income tax, and the tax b i l l of a firm would increase. V. THE FEDERAL BUDGET OF JUNE 1963 The Canadian Federal Budget brought down in June 1963 was the f i r s t major action of the Liberal government which indicated some of the lines along which the government was thinking. Some of the actions of the former Conserva-20 tives government, such as the devaluation of the Canadian dol lar , were not altered. It must therefore be assumed that the new government concurred with the action taken. On the other hand, the emergency protective tar i f f s imposed by the former government were removed, as there was some doubt on the part of 21 the government about the legal i ty of the t a r i f f s . whether or not the general theme of Finance Minister Walter Gordon's 1963 budget w i l l be either accepted or effective remains to be seen. In the debates which followed the budget speech, some of the Finance Minister 's proposals were modified, others were completely eliminated, and some were lef t unchanged. 20. The budget was based on the assumption that there would be a f ive per cent increase in the Gross National Product of Canada and that about one third of the increase could be attributed to the devaluation of the Canadian dol lar . Government of Canada, House of Commons Debates, O f f i c i a l Report; Thursday June 13, 1963, Vol . CVIII, No. 21, 1st Session of 26th Parliament, (Ottawa, Queen's Pr inter, 1963), p. 1002. 21. Ib id . , p. 1005. 30 The Minister stated that there had been an annual average def ic i t in the Canadian international balance of payments account of $1.2 b i l l i o n for the 22 past six years. Some of this def ic i t resulted from a $2 b i l l i on excess of imports over exports in the consumer and capital goods sections of the national 23 accounts during the previous year (1962). Also there had been an excess of $4.2 b i l l i o n in the payments of interest and dividends to non-residents over 24 the amount received by residents for their investment abroad. There had been no change in the h is tor ica l def ic i t in trade between the United States and Canada, but in spite of the Canadian-American trade def ic i t there had been a 25 small overall surplus in Canadian international trade account for the year. It was against the background of the overall trade surplus but a def ic i t in Canadian-American trade that the budget was introduced in the House of Commons. The United States-Canadian trade de f i c i t , when combined with the non-resident control of Canadian manufacturing industries (57 per cent non-resident control of the companies), petroleum and natural gas industries (75 per cent non-resident controlled), and mining and smelting industries (61 per cent non-26 resident controlled), indicated to the Liberal government that something should be done to allow Canada and Canadians to gain control of their domestic 22. Ib id. , p. 997. 23. Ib id. , p. 998. 24. Ib id . , p. 998. 25. Ib id . , p. 999. 26. Ib id. , p. 1000. 31 industries and resources. Some of the proposals contained in the budget speech were therefore aimed at capturing the non-resident controlled assets of the country. Among the measures proposed was that of a 30 per cent tax paid by Canadian residents on the sale of Canadian assets to non-residents through the recognized Canadian stock exchanges when such asset sales were in excess of $50,000 per day per vendor. The amount of the tax payable by the vendor was 27 to be based on the actual sales price of the assets. A further measure proposed to encourage greater Canadian control of assets was that the withholding tax due from Canadian firms paying dividends 28 and interest to non-residents be increased over a two-year period. The delay was intended to allow Canadian firms an opportunity to change their voting control so that they had at least one quarter of their shares owned by residents, especially i f they were not classed as a Canadian resident-controlled company(defined as a company in which 51 per cent of the voting shares are 29 controlled by Canadian residents). To persuade such companies as did not have even one quarter of their control in Canadian hands to increase their proportion of Canadian ownership a 5 per cent tax, in addition to the already existing 15 per cent withholding tax, was imposed on dividends paid to non-30 residents. Furthermore, accelerated depreciation allowances on new machinery 27. Ib id. , p. 1006. 28. Ib id. , p. 1006. 29. Ib id . , p. 1009. 30. Ib id. , p. 1006. 32 and equipment purchased were offered to firms meeting the 25 per cent Canadian 31 resident control qual i f icat ions. Mr. Gordon recognized that the restr ic t ion of corporate ownership to Canadian residents would have some adverse effects on the economy as a whole, and stated that i t was because of the ava i lab i l i ty of foreign capital that Canada had been able to achieve a standard of l i v ing higher than that which 32 could otherwise be expected in a country such as Canada. However, i t was hoped that the budget proposals would remedy the two problems of Canadian 33 ownership of Canadian resources and unemployment in the country. Unemployment in Canada as a whole, and part icular ly in some seriously distressed areas of the country, could not be ignored, and i t was hoped that some of the proposals in the budget would al lev iate the hardship found in the distressed areas and reduce seasonal unemployment in some industries. The solution of these two problems would have beneficial effects on the entire economy, but would require 34 greater use of domestic resources and social capi ta l . In the lumber industry in Canada and in Br i t ish Columbia in particular there is both foreign ownership of part of the industry and seasonal unemploy-ment. Hence, many of the measures proposed in the budget were of great interest to the lumber producers of the province. One proposed measure had a 31. Ib id. , p. 1004. 3 2 « Ib id. , p. 1000. 33. Ib id . , p. ,999. 3 4 - Ib id . , pp. 998-999. 33 greater potential impact on the Br i t ish Columbia industry than on the lumber industries of other provinces. The Federal government had previously not applied the provisions of the Excise Tax Act to building materials and pro-duction machinery and equipment. The new Minister of Finance decided that the exemption for goods fa l l ing into these categories should be removed, and that the appropriate 11 per cent federal tax be applied to them as a revenue-producing operation. The tax was to apply to a l l such new machinery and equipment and building material not employed in the f ishing and agricultural industries of the country. This application was expected to raise about $170 mi l l ion in the f i r s t year and about $360 mi l l ion in the second year of i ts 35 operation. It w i l l be seen below that the f u l l amount of the tax was not imposed in the f i r s t year as a result of amendments proposed and passed by the House during the budget debate. Changes in the National Housing Act provisions for mortgages to homebuilders and buyers were made to permit the government to increase i ts revenue from the excise tax without damaging the economy of the country. It was proposed to increase the amount of individual mortgages available from 95 per cent of $12,000 to the same percentage of $13,000. In addition there would be an increase in the total amount of funds available for mortgage loans from $14,900,000 to $15,600,000, and the interest charged on the loans would be reduced from 6% per cent to 6% per cent per annum. It was hoped that the 35. Ib id. , p. 1007. 36. Ib id . , p. 1007. 34 overall effect would be to increase the government revenue without discouraging 37 house construction and ownership. The gradual imposition of the tax, as is discussed below, may reduce the pressure on the building material industries to increase their exports. If the lumber industry is to increase i ts export ac t i v i t i es , i t is most l ike ly that the extra sales effort w i l l be directed toward the United States market. The budget dealt with many other f inancial factors in the economy, but not a l l of them were applicable to the movement of lumber. One that was pertinent, however, was that government subsidies would be given to Canadian 38 railways in order to keep freight rates at the 1958 leve l . If such sub-sidies were discontinued, the resulting r ise in r a i l freight rates would put Br i t ish Columbia producers dealing in the r a i l market at a disadvantage compared to American producers. The Budget or ig inal ly contained a proposal by which the Canadian Government would impose an 11 per cent tax on building materials and equipment. This proposal caused such an uproar in the House of Commons and the nation as a whole that i t was modified. As of now, a 4 per cent tax w i l l be applied immediately, i t w i l l r i se to 8 per cent on Apr i l 1, 1964, and w i l l reach the f u l l 11 per cent on January 1, 1965. The Federal Government, unt i l this was proposed, did not tax building materials, including lumber, but the Provincial Government of Br i t ish Columbia did. The Provincial 5 per cent Social and Municipal Aid tax applies to a l l such materials bought by ordinary 37. Ib id . , p. 1007. 38. Ib id. , p. 1002. 35 consumers. To cushion the effect of the tax for prospective home owners, i t was proposed also that a $500 bonus be paid to house builders i f the hous es were bui l t during the winter months. (Unemployment in the residential con-struction industry is highest during the winter months.) The bonus w i l l not cover the cost of additional tax when the f u l l amount of the 11 per cent is imposed except in cheap small houses. The Federal tax is applicable at the wholesale level while the Provincial tax is applied at r e t a i l . The effect to the consumer w i l l be that the prices w i l l be increased by more than the 4 per cent of the tax in the f i r s t stage and more than the 11 per cent of the tax in the f ina l stage, since the Provincial tax is collected at 5 per cent of the r e ta i l cost including the cost of other taxes already paid. The changes which have been made in the amount of the tax may have the effect of temporarily increasing the construction of residential and other buildings in order to avoid the f u l l 11 per cent tax. When the f u l l amount does become payable i t w i l l seriously affect the construc-tion industry and hence the lumber industry. It w i l l force the lumber producers to look for new markets to replace their former domestic markets, and w i l l probably lead to increased efforts to se l l lumber in the United States. It would appear, therefore, in the l ight of the Budget, that the trend of thinking by the new government is that Canada should come f i r s t , but that her strategic relationship with the United States must not be endangered. New markets for her own surplus goods and the excess of her productive capacity over her own needs must be found and developed, but sales to tradit ional 36 Canadian markets such as the United States and the United Kingdom must not be allowed to regress. In other words, no new start l ing developments need be expected. VI. SUMMARY OF THE CANADIAN POSITION From an economic point of view Canada must be classed as one of the under-developed economies of the world. It is so c lass i f ied mainly because of the Canadian economy's large dependence on the sale of primary products from i ts lands, forests, and seas, which are exchanged for the manufactured goods from other countries, pr inc ipal ly the United States, the United Kingdom, Germany, and Japan. It is therefore a part of the general Canadian trade plan not only to increase her own production of secondary goods, but to keep as many as possible of i ts tradit ional markets for the primary goods, such as lumber In the meantime, unt i l more industries are established in Canada, there is a a very large dependence by Canadians on imported manufactured goods. Some of the goods are imported in the form of parts and assembled in Canada while others are made in their entirety in a foreign country. Much of the productive capital equipment needed by the country to exploit i ts natural resources comes from the United States and Europe. The forest products industries are dependent to a large extent on imported capital as well as capital equipment, and w i l l therefore be affected by any foreign ownership penalty taxation. CHAPTER IV LUMBER PRODUCTION AND CONSUMPTION PATTERNS, AND THE IMPORTATION OF CANADIAN SOFTWOOD IN THE UNITED STATES I. INTRODUCTION It is only natural that a domestic industry in a country should become concerned about either an increased actual volume of competitive material being imported into the country or an increased proportion of the total con-sumption of a product being supplied by foreign organizations. The dispute between the United States and the Canadian lumber industries is not quite as straightforward as i t might seem at f i r s t glance. Much of the softwood industry in Canada and part icular ly western Canada is partly owned by American interests. Because of complications in ownership and because geographically the timber of the Pac i f ic Slope grows in one large forest, i t is essential to treat the softwood industry of North America as a single entity rather than two which are separated by an international boundary. However, such a treatment of the forest, taking absolutely no account of the existence of the international boundary, is po l i t i c a l l y unreal ist ic , and while the fact that goods are being moved from one sovereign nation to another may seem to be ignored, i t must never be altogether overlooked. The f i r s t thing that has to be determined is what the lumber production and consumption patterns are for the United States as a whole, and similar ly what the pertinent lumber production and consumption patterns are for Br i t i sh 38 Columbia and Canada as a whole. Separate figures for the hardwood industry 1 w i l l not be extracted except where they c la r i f y the overall picture. There is competition between the hardwood and softwood industries in some end-use forms. Figures for selected years both pre-World War II and post-war have been collected from available material and some additional figures have been given for the past few years where they have been obtainable. The reason for the selection of pre- and post-war years is that they show that trends of consumption and production have been discernible for a number of years, and 2 have not arisen only recently. Fluctuations in consumption and production are discussed in section II following. II. AMERICAN PRODUCTION AND CONSUMPTION Table II, page 39, which gives figures from a pre-war year (1925) to the present, demonstrates several interesting things. In the period up to the start of World War II, the United States was more than self-suff ic ient in her lumber needs. There were no doubt some imports of lumber, exotic woods used 1. Total hardwood production in Canada ranged from 373.5 mi l l ion board feet in 1955 to 425.8 mi l l ion board feet in 1962. Total hardwood production in the United States ranged from 7968 mi l l ion board feet to 5960 mi l l ion board feet during the same period. The amount of hardwood produced in each case is small in comparison with the total softwood production of from 7179 mi l l ion board feet to 8788 mi l l ion board feet in Canada and from 25,883 mi l l ion board feet to 30,661 mi l l ion board feet in the United States. Government of Canada, Dominion Bureau of S ta t is t i cs , "Production, Shipments, and Stocks on Hand of  Sawmills East of the Rockies," (Ottawa, Queen's Printer, 1955-1962). 2. Different sources of information have been used. Although a l l sources show the same general picture, no two of them give exactly the same figure for any specif ic item. 39 TABLE II LUMBER CONSUMPTION AND PRODUCTION IN THE UNITED STATES 1925-1962 (IN BILLIONS OF BOARD FEET) Consumption Production Difference Year Softwoods Total West Other Total (Surplus)/ Hard & Soft Regions Def ic i t 1962 30.8 37.4 18.0 14.0 32.0 4.6 1961 29.5 37.0 17.7 14.1 31.8 5.2 1960 29.0 37.5 18.2 14.7 32.9 4.6 1959 33.5 39.9 20.0 17.0 37.0 2.9 1958 30.3 36.1 17.8 15.2 33.0 3.1 1957 29.6 37.3 18.8 15.8 34.6 2.7 1956 32.2 39.9 20.5 17.7 38.2 1.7 1955 32.3 40.3 20.7 16.7 37.4 2.9 1950 33.5 40.7 18.6 19.4 38.0 2.7 1945 24.0 30.6 12.1 16.0 28.1 2.5 1940 26.2 34.3 13.2 18.0 31.2 3.1 1935 16.1 23.3 9.1 13.8 22.9 0.4 1930 21.5 28.2 12.2 17.2 29.4 (1.2) 1925 32.1 40.0 15.3 25.7 41.0 (1.0) Source: Guthrie, John A. and G. R. Armstrong, Western Forest Industry -- An Economic Outlook, (Baltimore, The John Hopkins Press, 1961), pp. 309-310. B r i t i sh Columbia Lumber Manufacturers Association, Annual Report, 1962, Table 6. United States Bureau of the Census, S ta t is t i ca l Abstract of the United  States, (Washington, Government Printing Off ice, 1961), p. 691. Ward and Paul Inc., O f f i c i a l Report of Proceedings Before the United  States Tar i f f Commission in the Matter of Hearings on Softwood Lumber Investiga- tion 7-116, (Washington, D . C , Ward and Paul Inc., 1962), opposite p. 28. The Council of Forest Industries of Br i t i sh Columbia. 40 for decorative purposes, et cetera, but there was a net exportable balance available in the country. For the past twenty years, however, gross consump-3 tion has exceeded gross production. A movement of the centre of the lumber producing region towards the west is shown by the increasing proportion of the total volume of lumber supplied by the west, and the correspondingly decreasing proportion supplied by a l l the other lumber producing regions of the country. The west's produc-tion has slowly climbed from about 9.1 b i l l i o n board feet in 1935 to 20 b i l l i o n 4 board feet in 1959. In 1959 the west produced about two-thirds of a l l the softwood lumber produced in the United States. This r i se was probably accompanied by a small decline in the volume output of the other producing areas. The decline in the other regions, however, was one which had been taking place over a number of years and which was only temporarily delayed by the short run boom conditions of 1959. The share that accrued to western producers continued to r i se even while the general production level was not as high as in the boom year to a point where the west has about 10/13ths of the total output in 1960. 3. G. R. Armstrong, The Evolution of the Sof twood Lumber Indus try in  the West, (Baldwinsville, New York, 1962), graphs pp. 2 and 5. (mimeographed) 4. The 1959 figure is somewhat misleading as i t was stated by some of the lumber producers who appeared at the Washington Tar i f f Commission hearings that 1955 and 1959 were both peak years, and that in some areas and f ie lds the 1959 boom was the best that the industry had ever had. United States Bureau of the Census, S ta t i s t i ca l Abstract of the United States, (Washington, D.C., Government Printing Off ice, 1961), pp. 497, 690-693, and 812. See also Fierst and Cooper, op . c i t . , p. 11. 41 The west has stayed at about this proportion of the market for the last two years and may continue to hold only about this share, as there are other factors at work on the demand for lumber which w i l l retard i ts growth rate. An example is the growth of other wood and non-wood competitive materials which are replacing lumber in some of i ts tradit ional uses. There may be periodic s l ight increases in the output from time to time but they w i l l not be as large as they were in the past. There are huge untapped forest resources in northern Br i t i sh Columbia and Alaska which w i l l ensure that that area retains the l ion 's share of the lumber and forest products industry in the western part of North America, but there may be a long term gradual decline in the importance of the 5 Pac i f ic Northwest as a lumber producing region. III. PER CAPITA CONSUMPTION A useful aspect of consumption trends can be obtained from data on the per capita consumption of softwood lumber in the United States. Exact figures for something of this nature are not readily available for isolated species or 5. Warren G. Magnuson, Transport Requirements for the Growth of  Northwest North America -- A Letter from the Chairman, Alaska International  Rai l and Highway Commission, Transmitting the Final Report of the Alaska  International Rai l and Highway Commission, Pursuant to Public Law 884, 84th  Congress, (Washington, D . C , Government Printing Off ice, May, 1961), Vol . I, p. D-2. Although Alaska is outside the general scope of this paper, i t must be noted that the vast resources of this State, when they are developed, w i l l be available to the consumers of the United States and Canada. The trans-portation of these resources is the main subject of this detailed report to Congress. The dominant species of softwood in Alaska is spruce, but there is some hemlock in the State. Spruce and hemlock can both be used for pulpwood or conversion to lumber. The large logs w i l l probably be converted to lumber while the small ones are used as pulp wood. 42 even such a general c lass i f icat ion as softwood lumber as a whole, since i ts use is so widespread as to make the compilation of the necessary s ta t is t i cs d i f f i cu l t and costly. However, some approximations can be made, and these may be indica-t ive of broad trends. The output s ta t i s t i cs of domestic producers can be obtained, as can the figures for the imports and exports of the United States, and these give a general picture of the per capita consumption of lumber, but there are always qualif ications to any conclusion drawn aris ing from indirect imports, e.g. packaging, re-export of lumber, re-import of exported material, re-use of old lumber, and multiple use of new lumber. Temporary of f ice huts used on logging operations and shuttering used in construction work are two 6 cases where lumber may be used several times. In spite of the shortcomings of lumber-use s ta t i s t i cs they are one form of data which is indicative of the demand for lumber, and are therefore widely used. Table III, page 43, shows a start l ing decline in the per capita lumber consumption of Canada and the United States in the past f i f teen years. This decline can best be explained in terms of increased use of other wood and non-7 wood materials where i t has been customary to use lumber, owing to 6. The homogeneity of lumber and consumer apathy as to the origin of lumber used compound the d i f f i cu l t y of obtaining accurate data on lumber con-sumption. To the general publ ic , lumber is lumber. It can be used several times, i ts shape and size can be readily changed. There are some exotic species which have become associated in the mind of the public with certain end uses, but in North America softwood lumber is too common for the consumer to bother with distinctions of or ig in . Because of lumber's durabil ity and u t i l i t y i t may be transferred through several users and uses before i t is either used for some permanent construction or f ina l l y destroyed. 7. F ierst and Cooper, op_. c i t . , p. 38. 43 technological advance. This decline is in spite of large forest resources 8 available for conversion to lumber. TABLE 111 LUMBER CONSUMPTION PER CAPITA IN CANADA, THE UNITED STATES, AND THE UNITED KINGDOM 1948-1960 (IN BOARD FEET) Year Canada United States United Kingdom 1960 190 190 61 1954 224 197 66 1948 257 194 44 Source: Seaboard Lumber Sales Company Limited, Vancouver, B. C. In the case of the United Kingdom, with i ts limited forest lands and almost complete reliance on imported lumber, the figures show some stab i l i ty in lumber consumption habits. United Kingdom builders prefer to use such materials as brick for residential and commercial construction. Lumber is used only when there is a dist inct economic or aesthetic advantage in doing so. The United Kingdom, furthermore, has a large re-export trade in other manufactured goods, and the lumber used for shipping purposes cannot be counted as per capita consumption since the United Kingdom residents do not use the lumber for themselves but merely as a source or raw material for their exports industries. 8. TC Publication 79, p. 63. 44 Therefore, although the United Kingdom has a highly developed economy i ts per capita consumption of lumber is only one-third that of the United States and Canada. IV. CANADIAN AND BRITISH COLUMBIA PRODUCTION It is apparent from Table IV, page 45, that the expansion of lumber production has taken place at a faster rate in Br i t i sh Columbia than elsewhere in Canada. It was stated earl ier in this paper that Br i t i sh Columbia had taken the lead in Canadian production in 1926. However, the lead was not firmly established unt i l after World War II, when the province was able to forge ahead, and i t has not looked back since. In the years immediately pre-ceeding the War, the lead which Br i t i sh Columbia held was slim and variable. The figures for the coast and inter ior regions of the province also show some interesting developments. The figures are available for only some of the more recent years, but they show the increasing importance of the interior 9 region as a lumber-producing centre in the country. It has actually taken the lead in the production of f i r and spruce, as well as in i ts specia l t ies, balsam 10 and pine. The coast has also been r i s ing steadily in i ts volume of output, though i t s relat ive share of total production has been f a l l i ng . In the long run i t w i l l show a gradual but definite decline in volume as the more accessible timber lands are temporarily cut out. The reduction of accessible coast forest "9. Dr. B. Gr i f f i ths , "Total Annual Cut in Br i t i sh Columbia by Major Species and Distr ibut ion," compiled from annual reports of the Br i t i sh Columbia Forest Service. 10. B.C.L.M.A., Annual Report 1962, Table 5. 45 TABLE IV LUMBER PRODUCTION IN CANADA AND BRITISH COLUMBIA 1925-1962 AND BRITISH COLUMBIA LUMBER SHIPMENTS TO THE UNITED STATES IN VOLUME AND AS A PERCENTAGE OF BRITISH COLUMBIA PRODUCTION 1950-1962 (IN BILLIONS OF BOARD FEET) Year Production Canada Br i t i sh Columbia Coast Interior Total B.C. Shipments to Coast Interior Vol . % Vol . % the U.S. Total Vol . 7. 1962 8.8 3.1 3.2 6.3 1.8 29 1.6 25 3.4 54 1961 7.8 3.0 2.7 5.6 1.3 24 0.9 17 2.2 41 1960 8.0 2.9 2.5 5.3 1.2 23 1959 7.6 2.3 2.6 4.9 1.0 20 1958 7.2 2.6 2.3 4.9 1.0 21 1.0 21 2.1 44 1957 7.1 2.4 2.1 4.4 0.8 19 0.8 19 1.7 39 1956 7.7 2.5 2.3 4.7 0.9 19 0.8 17 1.8 36 1955 7.9 2.8 2.2 4.9 0.9 19 0.9 19 1.9 39 1950 6.6 2.5 1.0 3.5 1.2 34 0.2 6 1.5 40 1945 4.5 2.0 1940 4.6 2.3 1935 3.0 1.6 1930 4.0 1.9 1925 3.9 1.7 Source: Br i t i sh Columbia Lumber Manufacturers Association, Annual Report 1962, Tables 1, 3 and 4. Council of Forest Industries of Br i t i sh Columbia Guthrie, John A . , and G. R. Armstrong, Western Forest Industry -- An  Economic Outlook, (Baltimore, The John Hopkins Press, 1961), pp. 70-71. MacMillan, Bloedel and Powell River Company Limited. 46 resources w i l l force the lumber industry to move to new areas of operation. This migration of mil ls and centres of operation is not peculiar to Br i t i sh Columbia as i t has also taken place from the coastal regions of the United States to the interiors of the seaboard states and to interior states. The Chief Working Flans Officer of the Forest Department of Br i t i sh Columbia, Mr. H. M.Pogue, said in Washington that the province as a whole is very near the maximum allowable annual cut for the area under sustained y ie ld forestry. Only when new forests are considered accessible and new sustained y ie ld units are 11 established w i l l the volume of production be increased. V. BRITISH COLUMBIA EXPORTS Table IV, page 45, shows the increased volume of lumber which is being shipped to the United States from Br i t ish Columbia. More w i l l be said about the forecasts of the demand for wood in the United States in Chapter V, but i t should be pointed out here that the increased volume of lumber exported to the United States is greater than the amount which i t was predicted would have to be imported into the United States by the early 1960's. The present volume of exports from Br i t i sh Columbia alone is about what i t was expected that the United States would have to import from a l l sources in net terms, i .e. imports minus exports of lumber. Because of the inabi l i ty of the United States lumber producers to meet the aggregate demand for lumber in the United States, i t is logical to expect 11. Mr. H. M. Pogue, "Statementto the United States Tar i f f Commission," p. 2. 47 the American buyers to turn to the nearest producer of suitable material. Canada is not only conveniently located near the United States but also i t produces the species of softwood with which the American consumer is famil iar . The forests in Br i t ish Columbia are almost the same as those in the Pacif ic Northwest. The major difference is that po l i t i c a l l y they are Canadian and not American. The prominent posit ion which Western United States producers have 12 achieved for their own lumber has been a further factor in predisposing American buyers to turn to Canadian producers for their needs. If the main producing region of the United States had been the Southern Pine Region, for example, then the Br i t i sh Columbia producers would have had the problem of persuading American buyers to use species with which they were unfamiliar. The Br i t i sh Columbia lumbermen, although they have not isolated themselves from world markets for their output, have concentrated their sales efforts in the United States. The readily accessible American market is there, and the Br i t ish Columbia men have not fa i led to make the most of their opportunities. During the period 1955 to 1962, Canadian softwood exports accounted for nearly a l l of the United States softwood imports, with only a few mi l l ion 13 board feet coming into the United States from other sources. Canadian exports are largely made up of those from Br i t i sh Columbia, and Table V, page 48, shows that Br i t ish Columbia is supplying an increasing volume of lumber to the United States. The Canadian volume is also increasing. 12. Cf. Table II supra. 13. The other pr incipal sources of supply to the United States are Mexico, Honduras, B raz i l , and Nicaragua. TC Publication 79, p. 88. 48 TABLE V CANADIAN SOFTWOOD EXPORTS TO THE UNITED STATES 1955-1962 (IN BILLIONS OF BOARD FEET) Year 1962 1961 1960 1959 1958 1957 1956 1955 B. C. Exports 3.4 2.2 2.0 1.9 2.1 1.7 1.8 1.9 Rest of Canada 1.1 1.7 1.6 1.8 1.0 0.9 1.3 1.4 Total 4.5 3.9 3.6 3.7 3.1 2.6 3.1 3.3 Source: Table IV, supra. Council of Forest Industries of Br i t i sh Columbia. Government of Canada, Dominion Bureau of S ta t is t i cs , Production, Shipments, and Stocks on Hand of Sawmills in Br i t i sh Columbia, (Ottawa, Queen's Pr inter, 1959-1960), passim. Sperry, Lea, The U.S. Softwood Lumber Situation in a Canadian-American Perspective, Sponsored by the National Planning Association (U.S.A.) and the Private Planning Association of Canada, (n.p. 1962), Table I-l, p. 3. 49 Br i t i sh Columbia's total volume of exports has risen from 4.9 b i l l i on 14 board feet in 1955 to 6.0 b i l l i on board feet in 1962. Exports to the United States during the same period have increased from 1.9 b i l l i on to about 2% b i l l i on board feet. Table VI, page 50, shows that exports to the United Kingdom have decreased from 0.6 b i l l i o n board feet to 0.4 b i l l i o n board feet in this period. These figures indicate that a decreased proportion of Br i t i sh Columbia's lumber exports has been going to the United Kingdom and an increased proportion has been going to the United States. The 30 per cent decrease in exports to the United Kingdom amounted to only 0.2 b i l l i o n board feet, while the 30 per cent increase in exports to the United States amounted to 0.6 b i l l i o n board feet, or as much as the United Kingdom imported from Br i t i sh Columbia in 1955. Br i t i sh Columbia continues to hold about ten per cent of the United Kingdom import market. VI. SUMMARY OF CHAPTER The Canadian-American lumber trade situation is complicated by the proximity of the timber resources of the two countries. There are differences between the forests of the Paci f ic Northwest and Br i t ish Columbia, but they are technical differences. The forests, to the layman, are predominantly softwood, and the output from either side of the border is of the same material. The United States has a larger population and uses a larger absolute volume of timber than Canada. The producers in the Paci f ic Northwest have steadily exploited their forests, but the figures show that when the overall picture is 14. Cf . Table IV, supra. 50 TABLE VI UNITED KINGDOM IMPORTS OF LUMBER FROM BRITISH COLUMBIA (IN BILLIONS OF BOARD FEET) AND PER CAPITA CONSUMPTION OF IMPORTED LUMBER 1955-1962 (IN BOARD FEET) Year 1962 1961 1960 1959 1958 1957 1956 1955 UK Imports from BC 0.4 0.4 0.5 0.3 0.3 0.4 0.3 0.6 Total UK Imports 3.4 3.3 3.7 3.0 2.7 3.0 2.9 3.7 Consumption of BC Lumber 8.3 8.0 10.0 5.1 6.5 7.5 6.3 11.9 Consumption of Imported Lumber 44.7 52.7 70.6 54.1 52.3 59.1 56.6 73.1 Source: Br i t i sh Columbia Lumber Manufacturers Association, Annual Report 1962, Table 1. "Approximate Stat ist ics Exports and Imports of Sawn and Planed Softwoods", (Wm. Brandts (Timber) Limited, 36 Fenchurch Street, London E.C. 3, May 1962). Her Majesty's Stationery Off ice, Central S ta t is t i ca l Off ice, "Monthly Digest of S ta t i s t i cs , " No. 214, October 1963, (London, Her Majesty's Stationery Off ice , 1963), Table 9, p. 10. Her Majesty's Stationery Off ice, Board of Trade, "Accounts relating to Trade and Navigation of the United Kingdom for Each Month," (London, Her Majesty's Stationery Off ice) , December 1956, pp. 51-52, and December 1962, pp. 49-50. 51 considered there is a shortage of supply from the United States producers to f i l l the domestic demand. Part of the shortage is al leviated by imports from Canada, and in this context Br i t i sh Columbia is a major supplier. The entire West Coast of North America is faced with the problem of deciding upon the most eff ic ient method of forest u t i l i za t ion to give the maximum return to the forest products industry. As the coastal forests are cut out, mil ls have moved to the inter ior areas of the Paci f ic Slope. Because of the migration of the sawmills from areas which are cut out or are now used for the supply of raw material to other forest products industries, the Pac i f ic Slope has maintained i ts lead in the production of softwoods. The exploitation of Alaska in the future may ensure the continuance of the lead in the west, but the u t i l i za t ion pattern of the Alaskan resources is as yet undecided. Some of the resources may be converted into lumber, but their use in pulp production appears l ike ly as the species grown in Alaska are more suitable for pulping than for sawmill conversion except where large logs are available. Large logs, however, are not the common rule in Alaska. The compilation of per capita data is necessary to discover whether or not a country is able to supply i ts lumber needs from i ts own resources. Accurate data are d i f f i cu l t to obtain, but the estimates available show that the United States and Canada had the same per capita consumption in 1960 while 15 the United Kingdom used only about one third as much lumber per person. 15. Cf. Table III, supra. 52 The differences in population between Canada and the United States make a very large difference in the absolute volume of lumber needed in the two countries. The general trade patterns of the United States, Canada, and the United Kingdom have an influence on the lumber consumption. The United Kingdom has a large export trade, a small preference for lumber use in bui lding, and small timber resources of her own. Canada has a large lumber industry, a small population, and an exportable surplus of lumber. The United States has a large lumber consumption and a preference for lumber in buildings, and needs imported lumber to meet her own domestic demand. The production of lumber in Br i t i sh Columbia is a major industry. The production of lumber in the coastal region is decreasing in importance, but at the same time the importance of that in the interior region of the province is increasing. The reduction of the accessible volume of timber in the coastal region has forced the part ia l migration-of the industry to the inter ior . The province as a whole has about reached i ts maximum economic output of lumber, and unt i l further developments make the exploitation of presently uneconomic 16 forests possible, there is not much increase in output expected. The Br i t i sh Columbia producers have taken advantage of the fact that they have been able to supply their American customers with familiar species of lumber. There are only limited parts of the world from which softwoods can be imported. Canada is one of them. United States buyers have taken advantage of their nearness to Canada to make the most of their foreign purchases from Canada. 16. H. M. Pogue, "Statement to the United States Tar i f f Commission," p. 2. 53 The evidence presented at the Washington hearings indicates that the United States softwood lumber industry is not as economically healthy as i t might be. The injury allegedly caused by the western Canadian lumber industry appears to be a domestic problem since the United States, according to the f igures, is unable to produce suff ic ient softwood for i ts own needs. There are softwood resources in the country, but their conversion to lumber is apparently not at a suf f ic ient ly high rate to supply the domestic markets. United States forest products organizations have changed from the production of lumber to the production of other forest products. Br i t ish Columbia lumbermen, although they do produce other forest products, have continued to produce lumber, and have an exportable surplus of this particular forest product. The figures in Tables IV and V on pages 45 and 48, show that Canada has been increasing the volume of i ts lumber sold in the United States but they also show that production of softwood in the United States has been f a l l i n g . The production decline coupled with the upward consumption trends are not the only causes of increased imports into the United States from Canada. Other factors which have contributed to the d i f f i cu l t i es encountered by American lumber producers are: increased stumpage costs, fluctuating pr ices, transporta-t ion problems, less consumer-orientated sales techniques than those used by the 17 major Br i t i sh Columbia sales organizations, and consumer preference changes for substitute materials such as plywood or for some Canadian lumber because 17. Interview of the writer with Mr. R. H. Edgett, General Sales Manager of Seaboard Lumber Sales Company Ltd. 54 18 i ts appearance is better than that of the American lumber. Furthermore, B r i t i sh Columbia has been increasing i ts efforts to se l l to the United States because of the i n f l ex ib i l i t y of the market in the United Kingdom and the European Common Market due to the d i f f i cu l t y of increasing the per capita consumption in those countries and the competition for that market from 19 Scandinavia and Russia. 18. Fierst and Cooper, op. c i t . , pp. 48-49. 19. Mr. R. H. Edgett, General Sales Manager of Seaboard Lumber Sales Company Limited, stated to the writer that i f the per capita consumption of softwood lumber of the European Continent (the European Common Market and the European Free Trade Area combined) were to be raised to the same level as found in North America, there would be insuff ic ient softwood lumber in the world to meet the demand in Europe alone. CHAPTER V TRENDS IN LUMBER USE IN THE UNITED STATES I. INTRODUCTION The current and recent past s ta t i s t i cs for lumber consumption and production have been examined in the previous chapter. Some attention w i l l now be given to the present consumption patterns and future demand for lumber. The Weyerhaeuser Timber Company of Tacoma, Washington, was aware of the need to determine future demand patterns. In the summer of 1953 this integrated lumber company asked the Stanford Research Institute, an independent non-profit corporation a f f i l i a t ed with Stanford University in Cal i forn ia , to study and report on the probable demand for a l l forest products through 1975 and the 1 volume of wood that would need to be delivered to the mil ls to meet the demand. The survey was completed and a report submitted to the sponsor, who decided to make a summary of the report available to the publ ic . This summary was published as a pamphlet entit led America's Demand for Wood 1929-1975. The period covered by the survey is not long enough to cover even one forest generation of some of the more important species such as Douglas F i r , Hemlock, Balsam, and western Red Cedar, as a l l of these species require about 2 100 years to reach maturity under normal forest conditions. (Recently ideas 1. Stanford Research Institute, America's Demand for Wood 1929-1975, A report prepared for Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford, Ca l i forn ia , Stanford Research Institute, 1954), p. 6. 2. The s i te conditions under which the particular timber is grown w i l l determine the number of years needed for a forest stand to reach maturity. 56 have been put forward whereby i t is hoped that open grown second growth merchantable timber trees may be ready for harvesting in about 40 years, but even this is a long time ahead for forecasting purposes because of the many variables which ar ise to invalidate predictions.) The period covered in the report did include several major economic phenomena from an h is tor ica l point of view, such as the depression of the 1930's, and World War II and i ts aftermath. The Stanford Report was not limited to the production and consumption of lumber alone, but covered a l l forest products, as i t was reporting to an integrated lumber f i rm. The authors did not expect their predictions to prove to be 100 per cent accurate as, of course, no one has yet discovered an i n f a l l i b l e method of forecasting long range changes in supply and demand. II. POPULATION Since the population of a country has a direct bearing on the number of dwelling units needed in the country, and since there is a very great pro-portion of the total lumber production of both the United States and Canada used in the construction of homes, population stat is t ics are essential for any estimate of the lumber industry's prospects. The Stanford Research Institute assumed that the population of the United States would be far less than revised estimates show i t to be. Table VII, on page 57, shows that actual population of the United States for 1960 and 1962 as compared with the estimated population from the report. 57 TABLE VII ESTIMATED AND ACTUAL POPULATION OF THE UNITED STATES 1960-1975 (IN MILLIONS) Year 1960 1962 1965 1970 1975 Actual 181 186 Estimated 176 187 199 212 Source: Stanford Research Institute, America's Demand for Wood 1929-1975, A report prepared for the Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford, Ca l i forn ia , Stanford Research Institute, 1954), p. 12. United States Bureau of the Census, S ta t i s t i ca l Abstract of  the United States, (Washington, Government Printing Off ice, 1963), p. 5. The increase of 5 mi l l ion between 1960 and 1962 is far greater than Stanford thought i t would be, and the cumulative effect of even this one unusual increase is apt to throw out the other estimates. It is possible that the United States population may be closer to 250 mi l l ion by 1975 than to the 200 mi l l ion which was expected in 1952. An increased population means that there w i l l be more manpower avai lable, even with a decline in the work week and in the use of direct labour, and that there w i l l be a greater demand for a l l items in the economy. Because of the underestimation of population, then, many of the estimates in the report w i l l be on the conservative side, providing there is no reversal of the present trend. The increase in population of the United 58 States constitutes a good reason to expect that there w i l l be an increased demand for home building material in excess of that predicted, even though the volume of lumber used per housing unit w i l l f a l l owing to the use of com-pet i t ive materials. III. DISTRIBUTION OF LUMBER CONSUMPTION Table VIII, page 59, presents figures which were gathered by the Stanford Research Institute to show the proportion of total lumber consumed which fa l l s into each of the major end-use categories. In the early years they were able to use actual data, and from these they made estimates of what would be the case in the future. The estimates made by Stanford show a stable trend in the uses of lumber. There are a few minor changes in the proportion of total output which w i l l be used in the different end-use c lass i f i cat ions , but although the physical volume w i l l change depending on the output, there are no large percentage changes forecast up t i l l 1975. The percentage figures taken by themselves would give a false impression as the volume of timber produced in 1975 may be the same as i t is now or may have fa l len as more competition is fe l t from other materials such as aluminum, glass, s tee l , plywood, soft- and hard-board, concrete, or synthetic shingles. IV. RESIDENTIAL AND NON-FARM CONSTRUCTION The Stanford Research Institute devoted a large section of the summary to lumber per se, indicating their bel ief that lumber would continue in 59 TABLE VIII DISTRIBUTION OF UNITED STATES LUMBER CONSUMPTION BY MAJOR END-USES AND AS A PERCENTAGE OF TOTAL CONSUMPTION 1930-1975 (IN BILLIONS OF BOARD FEET) Year Construction Shipping Manufactured Products Total Vol . 7. Vol . 7. Vol . 7. Vol . 7. 1975 31.6 70.9 7.3 16.3 5.7 12.8 44.6 100 1970 30.4 70.6 7.1 16.6 5.5 12.8 43.1 100 1965 29.4 70.9 6.8 16.5 5.2 12.6 41.4 100 1960 29.1 71.5 6.6 16.2 5.0 12.3 40.7 100 1953 29.9 72.5 6.3 15.4 5.0 12.1 41.3 100 1950 32.1 75.1 6.0 14.0 4.6 10.9 42.8 100 1940 27.9 76.4 5.5 15.1 3.1 8.5 36.5 100 1930 20.3 70.9 5.1 17.8 3.2 11.3 28.7 100 Source: Stanford Research Institute, America's Demand for Wood 1929-1975, A report prepared for the Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford Ca l i forn ia , Stanford Research Institute, 1954), p. 50. 9f 60 importance in the future in spite of competition from other wood and non-wood materials. The Institute estimated that 73 per cent of the total lumber con-3 sumption in the United States in 1953 was used in the construction industry. The largest demand for lumber is in the residential non-farm construction industry. The farm-building programme is expected to remain stable at about 85,000 units per annum. The non-farm single dwelling units may show a slower 4 increase than expected because of the emphasis, unforeseen in the report, on multiple dwelling units. Moreover, the volume of lumber used per house has fa l len because of a decrease in the size of houses in terms of area,"* because of changes in construction methods used during the past 40 years, and because of the development of more and more wood and non-wood materials which compete with lumber in house construction. The construction industry uses most of the lumber produced now, but construction patterns and requirements are changing since the trend is away from the individual single dwelling unit and towards multiple dwelling units. Multiple dwelling units use less lumber and more of alternate materials for each family than do conventional housing units. Stanford Research Institute's predictions were based on the assumption that the then existing pattern of residential con-struction would continue. 3. Stanford, op. c i t . , p. 29. 4. Ibid. 5. Ib id . , pp. 31-32. The National Association of Home Builders in Washington, D.C., thinks that the tradit ional type of house w i l l not continue to be popular and the multiple-dwelling units w i l l dominate the construction industry. They state that the recent (1960-1962) decline in the production of single family homes has had a major direct and adverse impact upon domestic lumber production in 6 some areas of the United States. They expect that there w i l l be a major upsurge in the number of homes constructed before the end of the 1960's which would assist the lumber industry providing the costs of lumber have not increased 7 unduly in the meantime. Multiple dwelling units increased from six per cent of total private housing starts in 1955 to 28 per cent of total housing starts in 8 1962. Some types of multiple family units are bui l t in a pattern very similar to the single family unit, but others do not use as much lumber as the industry would l ike to see employed, and use metallic cladding and window and door frames instead of lumber. V. SUMMARY OF TRENDS IN HOME CONSTRUCTION Stanford Research Institute showed in i ts report that there was a decline in the area of the typical American home from the 1920's, when houses covered about 1320 square feet, to the 1950*s, when the average area was 980 6. National Association of Homebuilders, "Statement of the National Association of Homebuilders of the United States," submitted to the United States Tar i f f Commission, November 6, 1962, p. 3. Hereinafter referred to as N.A.H.B. 7. Higher costs would encourage the substitution of other materials for lumber. Op. c i t . , p. 1. 8. Cf . Table IX, in f ra . 62 square feet, but i t was expected that there would be an increase in the area 9 to about 1000 square feet by 1975. At the same time there has been a decrease in the actual amount of lumber used per dwelling unit . The changes have arisen from architectural changes, which have accounted for about ten thousand board feet per dwelling, and inroads made by competing materials, which have also 10 accounted for about ten thousand board feet per dwelling. Table IX, page 63, shows that there is a close relationship between the so-called ttboom" periods for the lumber industry in the United States and the number of housing starts recorded in the country. Both 1955 and 1959 show an unusual number of housing starts in the United States. There does not seem to be any gradual decline from a good year to those following a boom, but a sudden drop in the number of housing starts . Apart from the boom years there is no . regular pattern discernible in the housing starts data. There has been a marked decline in the number of one-family dwelling units in the period from 1955 to 1962. The figure in 1962 is only 68 per cent of what i t was in 1955. In the case of two-family and multiple-family units, the trend has been in the opposite direct ion. In the two-family units the 1955 figures are only 80 per cent of the 1962 figures, and in the multiple units they are 24 per cent of the 1962 f igures. It is apparent that there is a large amount of concrete and other non-wood materials used in the multiple-family units currently bui l t in the urban and peri-urban area. The use of non-wood materials in home construction concerned the National Association of Home 10. Stanford, op. c i t . , pp. 33-34. 63 TABLE IX PRIVATE NON-FARM HOUSING STARTS IN THE UNITED STATES 1955-1962 (IN THOUSANDS OF UNITS) Year Total Starts 1 Family Units 2 Family Units Multi-Family Units 1962 1390 960 45 385 1961 1276 938 44 294 1960 1230 972 44 214 1959 1495 1212 56 227 1958 1287 1064 43 180 1957 1132 969 36 127 1956 1268 1147 34 87 1955 1536 1408 36 92 Source: National Association of Homebuilders of the United States, "Statement of the National Association of Homebuilders of the United States," submitted to the United States Tar i f f Commission, November 6, 1962, Attachment C. 64 Builders, and they mentioned the fact in the brief to the Tar i f f Commission. They also stated that any increase in the price of lumber tended to encourage the introduction of competitive materials,** and that "the expected and intended 12 result of import restr ict ions (would) be a r ise in 1 inner (sic) pr i ces . " The Stanford Research Institute found that in the 1950's there was less lumber used in foundations, f loors , exterior and inter ior walls than was the case in the pre-World War II era. The largest decrease in the volume of lumber used has been in the foundations, and the smallest in roofs. Windows and other m i l l work items have largely been superseded by metal. The roof is now the most important component of the dwelling unit in terms of lumber used because synthetic shingles, which are replacing wooden shingles, need a so l id 13 lumber support underneath. The pressure on the housing industry caused by the population increase unforeseen in the report may offset the trends to materials other than lumber which is resulting from the increasing proportion of multiple-dwelling units being bu i l t . Other factors which affect the housing industry are government pol icy on credit ava i l ab i l i t y , taxation, and urban and suburban resettlement. VI. ESTIMATES OF FUTURE PRODUCTION AND CONSUMPTION The Stanford Research Institute made some estimates of the future lumber consumption and production in the United States. Table X, page 65, shows that 11. N.A.H.B., op. c i t . , p. 10. 12. Ib id . , p. 2. 13. Stanford, op. c i t . , p. 36. 65 TABLE X ESTIMATED AND ACTUAL UNITED STATES PRODUCTION AND CONSUMPTION OF SOFTWOOD AND HARDWOOD (1952-1975) (IN BILLIONS OF BOARD FEET) Year 1952 U.S. Consumption Estimated 40.7 Actual 39.6 U.S. Production Softwoods Estimated 30.5 Actual 30.2 Hardwoods Estimated 7.9 Actual 7.2 Total Estimated 38.4 Actual 37.5 1960 1962 1965 1970 1975 40.7 41.4 43.1 44.6 37.5 37.4 30.8 31.8 32.1 32.4 26.7 26.4 8.1 8.2 8.4 8.6 6.3 6.4 38.9 40.0 40.5 41.0 32.9 32.9 Source: Br i t i sh Columbia Lumber Manufacturers Association, Annual Report, 1962, Table 6. Council of Forest Industries of Br i t ish Columbia. Stanford Research Institute. America's Demand for Wood 1929-1975, A report prepared for the Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford, Ca l i forn ia , Stanford Research Institute, 1954), p. 50. United States Bureau of the Census, S ta t i s t i ca l Abstract of the United  States, (Washington, Government Printing Off ice , 1961). p> 691. 66 the Inst itute 's estimates were optimistic in the l ight of what has happened since the report was published. The estimates have not been achieved either in production or in consumption in the United States. They overestimated both what lumber would be used and what lumber would be produced in the United States as a whole. The prediction that production would be less than consumption has proved correct. Stanford Research Institute was under the impression that lumber production would continue to r ise in the United States as a whole, albeit slowly, whereas the expectations now are that the downward trend w i l l continue. This does not mean that the volume of logging operations is decreasing but that other forest products are taking an increasing portion of the output of the forests, and that production of plywood, pulp, paper, and such materials w i l l continue to grow in importance. Of these products, plywood especially competes direct ly with lumber in the construction industry. Because of the inroads made by other wood and non-wood materials in the construction industry i t can be expected that the volume of lumber required in the United States w i l l not show the same increases which i t has experienced in the past. There w i l l be increases in the volume of lumber used, but they w i l l not be proportionate to the demands indicated by the growth in the popula-t ion. The directing of the forest output into other industries or into large integrated units of the lumber industry w i l l mean that Br i t i sh Columbia producers w i l l be able to supply an increasing proportion of the American consumer market with lumber. Stanford Research Institute also made some estimates as to the future net imports of lumber into the United States. They did not think that the United States would at any time in the period covered by the report be self suff ic ient in the production of lumber. They did not state: what they thought the gross imports of lumber would be nor what exports would be. Table XI, page 68, contrasts their estimates of net imports with the actual figures quoted at the Tar i f f Commission hearings. Once again the Institute estimates are on the conservative side. The shipments from Br i t i sh Columbia alone now equal the net imports of lumber i t was estimated the United States would need in 1975. There is a remarkable s tab i l i t y in the volume of exports from the United States, which range around 0.6 b i l l i on board feet per annum. 68 TABLE XI ESTIMATED AND ACTUAL UNITED STATES LUMBER IMPORTS 1952-1975) (IN BILLIONS OF BOARD FEET) Year Imports Exports Net Imports Estimated Net Imports* Imports from Br i t i sh Columbia 1952 2.3 0.6 1.7 1.8 1.2 1960 3.6 0.7 2.9 1.0 2.2 1962 4.5 0.6 4.0 3.4 1965 0.4 1970 1.4 1975 2.2 Source: Br i t i sh Columbia Lumber Manufacturers Association, Annual Report 1962, Table 5. Council of Forest Industries of Br i t i sh Columbia. MacMillan, Bloedel and Powell River Company Limited. Stanford Research Institute, America's Demand for Wood 1929-1975, A report prepared for the Weyerhaeuser Timber Company, Tacoma, Washington, (Stanford, Ca l i forn ia , Stanford Research Institute, 1954), p. 50. Ward and Paul, Inc., O f f i c i a l Report of Proceedings Before the United  States Tar i f f Commission in the Matter of Hearings on Softwood Lumber  Investigation 7-116, (Washington, D.C., Ward and Paul Inc., 1962), p. 22A. * Estimated Imports figures are for a l l species, while the others are for softwood only. However, hardwoods form a very small proportion of the overall f igures. CHAPTER VI LEGAL CONSIDERATIONS, PRICE CYCLES, AND STUMPAGE AS FACTORS IN THE SOFTWOOD LUMBER MARKET I. THE MARKET IN GENERAL Lumber prices cannot be ignored nor can the reasoning behind the pr ic ing pol ic ies of the major North American lumber producers be overlooked in assessing the North American lumber market. If, for example, the pric ing pol ic ies of the Br i t i sh Columbia exporters had been such that their export prices were considerably higher than United States lumber producers' prices for the same specif icat ions, then the United States lumber sel lers would have had a dist inct price advantage over their Br i t i sh Columbia competitors. As i t i s , however, Br i t ish Columbia prices are almost the same as the American pr ices. Br i t i sh Columbia lumber exporters have adopted a policy of price s tab i l i t y which has not been followed by the United States se l l e rs . The s imi lar i ty of Canadian and American prices for lumber of the same specifications ensures any consumer preference for Canadian lumber w i l l be due not to price but other considerations. Although there is a very great number of lumber producers in the United States, the market is not one of pure competition. One reason is that there are large differences in size of production units. Some range upwards from 50 mi l l ion board feet per annum in productive capacity, while others are in the low thousands of board feet. For example, in the west in 1961 there were 61 mi l ls producing more than 50 mi l l ion board feet a year each. These mi l ls accounted 70 for 28 per cent of the output of the industry but were only 2.9 per cent of the total number of mil ls in the west. The smallest class of m i l l s , those producing less than one mi l l ion board feet per annum, numbered 905, 43 per cent of the to ta l , and produced 477 mi l l ion board feet, 2.5 per cent of the output. 1 There were at that time 33,191 mil ls in the United States. The many small mi l ls have very l i t t l e effect on the price of lumber in the United States market, but the large mil ls do have an influence. This means that most mil ls are operating under conditions approaching pure competition, but the few large mi l ls in an o l igopol is t ic market s i tuat ion. The wide dispersement of the North American lumber industry means that different types of market conditions face different segments of the industry. 2 In Br i t i sh Columbia, where there are only four major lumber sales organizations and a large number of small independent firms operating in the r a i l and cargo markets, there is an o l igopol is t ic market confronting the foreign buyers, as they can f ind only a few sel lers in the export trade. In the Domestic market there may be isolated oligopolies or even monopolies, but in terms of B r i t i sh Columbia as a whole, there is a large number of mil ls competing for the available market. A similar situation of combined pure competition and oligo-1. TC Publication 79, p. 82. 2. MacMillan, Bloedel and Powell River Company Limited and Seaboard Lumber Sales Company Limited handle between 60 and 80 per cent of the cargo market, according to Mr. J . Baitersen, Assistant Sales Manager of the East As ia t ic Company (Canada) Limited. The East As iat ic Company (Canada) Limited, a subsidiary of the international firm, the East As iat ic Company, is the only other local firm handling a signif icant proportion of the cargo market. The fourth large f irm, Cooper-Widman Limited, specializes in the r a i l market. Two large American firms who have interests in Br i t i sh Columbia, Crown Zellerbach Limited and Rayonier Limited, s e l l their Br i t i sh Columbia output through Seaboard Lumber Sales Company Limited. 71 po l i s t i c market conditions prevails in the Pac i f ic Northwest as regards the cargo market and the local and r a i l markets. There are a few large integrated lumber organizations capable of dealing in the cargo market but there is a large number of small mil ls dealing in local markets. The consumers also are numerous, but in the At lant ic Coast market there are quite a few large groups of wholesalers who control a signif icant portion of the market. As well as the large groups of dealers there are many small independent dealers, but they must follow the market prices i f they are to make sales. In spite of the fact that a few large American mi l ls control much of the market, and a few large wholesalers do much of the buying, different regions 3 of the United States have their own dist inct cycles of pr ices. II. COMPETITION AND THE LAW Because of the character of the North American lumber market, a brief discussion of anti-trust laws in both the United States and Canada seems pertinent The following paragraphs are not intended as a complete guide to North American anti-trust legis lat ion but merely to show that competition within an industry is subject to legal intervention i f free competition as defined by the relevant laws in the two countries is impaired. The legal theory and laws of both the United States and Canada are for the most part of European or ig in , but the United States has created one aspect of the law of i ts own, which i t has tr ied to export to other parts of North America and to the whole of the western 3. Clark Row, "Seasons Set Pace for Act iv i ty in Lumber Business," The  Lumberman, (January, 1961), pp. 26-28. 4 world. Of the legis lat ion governing the operation of rest r ic t ive trade 72 practices that of the United States is the oldest. The American law can be stated in a few words, but the interpretation of i t is the decisive factor in determining i ts effectiveness. The creation of suitable case law is impor-tant in the interpretation of law, and in this case there is a large amount of material to be studied by those responsible for the guidance of corporations in the United States. Canadian legal experts occasionally use United States case law in this matter to help interpret their own law. This is because "the Combines Investigation Act of Canada is of closer s imi lar i ty to the United 5 States Statute law than any other." More w i l l be said later about the legal processes in Canada: at this point the main points of the United States statute law w i l l be stated as succinctly as possible. The substantive provisions of the antitrust laws are few and br ie f ; they are contained in seven sections taken from three statutes --the Sherman Act of 1890 and the Clayton Act and Federal Trade Commission Act of 1914. The two latter statutes have been amended in important ways by subsequent measures which w i l l be mentioned below. There are some other minor laws, dealing part icular ly with rest r ic t i ve practices in the importation of goods into the United States, but these are not essential to the story. The Sherman Act of 1890 contains two main prohibit ions: Section 1. "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States or with foreign nations, is hereby declared i l l e g a l . . . . " Section 2. "Every person who shal l monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of trade or commerce among the several States, or with foreign nations, shal l be deemed guilty of a misdemeanor...." 4. Action was taken in the United Kingdom after World War II to implement legis lat ion similar in intent to the North American legis lat ion for the govern-ing of competition. There are two acts, dated 1948 and 1953 respectively, both named "The Monopolies and Restrictive Practices Ac t . " 5. A.D. Neale, The Antitrust Laws of the United States of America — A Study of Competition Enforced by Law, (Cambridge, University Press, 1960), p. 1, footnote 1. 73 The Clayton Act of 1914 declares i l l ega l four specified types of rest r ic t i ve or monopolistic pract ice. They are in br ie f : (a) price-discrimination (section 2) (b) exclusive dealing and tying contracts (section 3) (c) acquisitions of competing companies (section 7) (d) interlocking directorates (section 8). A l l these sections are qual if ied by provisos (some more elaborately defined than others) to the general effect that the practice con-cerned becomes unlawful only when i ts "effect may be to substantially lessen competition or tend to create a monopoly." The section dealing with price-discrimination was revised in the Robinson-Fatman Act of 1936 and that dealing with acquisitions in the Celler-Kefauver Act of 1950., o The main points of the United States law are few, and most of them are stated in general terms. The Robinson-Fatman Act, however, attempts to be more speci f ic and creates d i f f i cu l t i es of i ts own in interpretation because of i t s 7 attempts at exactitude. In order to understand the operation of the anti-trust laws in the United States i t is necessary to appreciate a few main concepts involved in the implementation of the law. These can be summarized as follows. 1. The United States Department of Justice enforces the law. 2. Labour, public u t i l i t i e s , and wholly intra-state act iv i t ies are not 8 affected by the Sherman Act. "The outstanding example of...exemption concerns the practice of resale-price maintenance which manufacturers of branded goods 6. 7. 8. Neale, op. c i t . , pp. 2-3. Ib id . , p. 464. Neale, op. c i t . , p. 5. 74 9 are now spec i f ica l ly permitted by statute to enforce on their r e ta i l e r s , " 3. "Anti-trust is a federal policy and canapply only to the extent that federal authority w i l l carry. 4. The words "restraint of trade" and "substantial ly lessen" are the main keys to the statutes but are only defined by current legal interpretation, 11 and such interpretation rests with the courts. 5. The i l l ega l practices must be in specif ic terms to be effectively challenged. The i l l ega l i t y must be based on facts, not assumptions, theories, • « 1 2 or economic effects. The overal l change which took place in American law with the implementation of the Sherman Act and the other acts connected therewith has been a swing from a i : negative policy against anti-trust to a posit ive one of maintaining competition. Once the above ideas have been comprehended, the task remains of saying what the law means to the common firm whose actions may or may not, in the opinion of. i ts legal advisers, border on the i l l e g a l . Clear cut abuses of the pr inciple of competition are rare and are easily sett led. It is the borderline cases which are important. The old layman's argument that " i f he can do i t , so can 1" is a dangerous one to rely on in a borderline case, as the courts before 14 which the anti-trust cases come must decide each one on i ts own merits. 10. Ib id . . p. 10. 11. Ib id . , p. 16. 12. Ib id . , pp. 21-22. 13. Neale, op_ c i t . , pp. 29-30. 14. Ib id . , p. 31, and pp. 34-39. 75 Two legal attitudes are found to run through the commentaries on the United States anti-trust cases. These are the law of "reasonableness" and that of "per se" . The court must decide whether the actions of the parties are reasonably within the concept of competition and whether or not they spec i f i -ca l ly v iolate any of the basic tenets of the anti-trust laws. The second att i tude, that of per se, means that an action by i t s e l f , by i ts very nabure, may be against the law; e .g . , price-fixing agreements are i l l ega l per se. No defense based on reasonableness or ruinous competition or the economic effect of having or not having the agreement w i l l be accepted, nor w i l l the courts consider as mitigating evidence statements that the price-fixing was for 15 either maximum or minimum pr ices. Collusion, in the sense of a meeting of minds, must be avoided by competitors. "It may be taken as an established rule of anti-trust that a l l agreements between trade associations or groups at different levels of market...whereby the flow of supplies (or orders) from one of the groups is confined to members of the other are i l l ega l per se."*^ Similar ly, "agreements whereby members get special or favourable terms of trade, discounts or rebates f a l l under terms of the same ban," ( i .e., that of section 1 of the Sherman Act).*^ The comparable Canadian legis lat ion covering the operation of monopolies or other forms of restraint of trade is "An Act to Provide for the Investigation 15. Neale, op. c i t . , p. 42. 16. Ib id . , p. 67. 17. Ibid. 76 18 of Combines, Monopolies, Trusts and Mergers." In this act, monopolies are defined as follows. (In this Act) "monopoly" means a situation where one or more persons either substantially or completely control throughout Canada or any area thereof the class or species of business in which they are en-gaged and have operated such business or are l ike ly to operate i t to the detriment or against the interest of the publ ic, whether consumers, producers, or others, but a situation shal l not be deemed a monopoly within the meaning of this paragraph by reason only of the exercise of any right or enjoyment of any interest derived under the Patent Act, or any other act of the Parliament of Canada;^ The Act provides that any one who is gui lty of infringement of the Act is l iable to a f ine and/or imprisonment of up to two years (Sec. 32). The two leading firms in the Br i t i sh Columbia lumber and forest products industry, MacMillan, and Bloedel Co. Ltd. and the Powell River Co. L td . , were investigated at the time they planned to merge in 1959. In 1959 section 2 of the Act read: A combine is defined as a combination having relat ion to any commodity which may be subject to trade or commerce of two or more persons by way of actual or tacit contract, agreement, or arrangement having or designed to have the effect of: (1) l imit ing f a c i l i t i e s for trans-porting, producing, manufacturing, supplying, storing or dealing (in the goods involved)...(3) f ix ing a common price or re-sale p r i ce . . .o r a common cost of storage or transportation...(6) otherwise restraining or injuring trade or commerce which combination...has operated or is l ike ly to operate to the detriment or against the interest of the public whether consumers, producers, or o the rs .^ This section of the Act was repealed in 1960, and the new section 2 as quoted above was substituted for i t . A statement was made to the writer that as there 18. Richard Gosse, The Law on Competition in Canada, (The Carswell Company Limited, Toronto, 1962), Appendix I, p. 292. 19. Gosse, op. c i t . , p. 293. 20. Government of Canada, Revised Statutes of Canada 1952, (Ottawa, Queen's Pr inter, 1953), Cap. 314, Vol . V, p. 5677. 77 were only four major lumber se l l ing organizations for Br i t ish Columbia lumber, i t would be surprising i f there were any more than a few cents difference in the prices quoted by the companies. However, i t was stated there is no collusion between the companies which could be construed as price setting or any other 21 act iv i ty which could bring about a combines investigation. There were statements made at the Washington hearings that nearly a l l of the lumber shipped from Br i t i sh Columbia came from two organizations, and that this control not only of the Br i t ish Columbia lumber market but also of the United States market by a combine which would be i l l ega l in the United 22 States was good grounds for the imposition of a protective t a r i f f . Accusations of monopolistic practices in Br i t ish Columbia's lumber industry would be very hard to support in the l ight of Canadian law but might well be jus t i f i ed in the context of American statute and case law. In Br i t i sh Columbia's lumber industry there was an investigation conducted by the Director of Research in 1959 when 21. Interview with Mr. Peter Gregory, General Sales Manager of Cooper-Widman Limited. 22. The writer was advised that there is no collusion among the four largest lumber shippers in Br i t ish Columbia, namely MacMillan Bloedel and Powell River Company Limited, Seaboard Lumber Sales Limited, Cooper-Widman Limited, and the East As iat ic Company Limited, but that their prices tended to be within a few cents of each other for similar specif icat ions. The companies do act in competition with each other, but none of them wants to start a price war which would be of no benefit to any firm in the long run. Mr. Peter Gregory, General Sales Manager of Cooper-Widman, Mr. R. Edgett, General Sales Manager of Seaboard Lumber Sales Co. L td . , and Mr. C. J . Dalton, Manager of Overseas Sales Division of MacMillan Bloedel and Powell River Co. L td . , a l l made essentially the same comment to the writer when they were separately interviewed in connection with this paper. Cf. Ward and Paul Inc., O f f i c i a l Report of  Proceedings Before the United States Tar i f f Commission in the Matter of Hearings  on Softwood Lumber Investigation 7-116, (Washington, D.C., Ward and Paul Inc., 1962), p. 973. Hereinafter referred to as Transcript. 78 i t was proposed to merge the two largest local firms, MacMillan and Bloedel Co. Ltd. and the Powell River Company Ltd. Apparently the Directot of Research and the Commissioner of the Restrictive Trade Practices Commission did not f ind any points in the act iv i t ies of these two local giants jo int ly or singly which would lead them to prosecution after the proposed merger was carried out. The other major lumber se l l ing organization in Br i t ish Columbia, Seaboard Lumber Sales Co. L td . , does allow some latitude to member mil ls in quoting pr ices. Individual mil ls may make quotations for the supplying of lumber and may accept or reject prices offered to them by the customers through the central 23 sales organization. However, the small components of the large Br i t i sh Columbia lumber shippers are faced with a l imited choice when offers are made to them for their production. Unless they have private outlets for their pro-duction and are not dependent upon the orders reaching them from the sales organizations, they must accept the offers i f they are to survive. It therefore appears that the freedom to s e l l or not to se l l at an offered price is s t r i c t l y limited and exists more in theory than in practice. However, there are var ia -tions in what different mil lers consider to be a f a i r price for their lumber. 23. Mr. R. K i l l i c k , Clerk in the United Kingdom Sales Division of Seaboard Lumber Sales Co. L td . , stated in an interview that his organization set no fixed price for lumber, but made and received quotations. Mr. J . N. Lucas, Office Manager of Whonnock Lumber Company, a member mi l l of Seaboard, confirmed this and stated that his organization was free to accept or reject prices offered to i t for i ts lumber output. There are times, however, when a m i l l would accept any price offered for i ts lumber, and buyers in a buyers' market would probably be able to get lumber for a common price unt i l such time as the market changed to a se l le rs ' market. 79 Because of the competitive nature of the market in the softwood lumber industry, i t has been observed that there are discernible patterns in the price changes which occur over the course of each year in Br i t ish Columbia, just as in the regions of the United States. III. PRICE CYCLES IN THE UNITED STATES 24 A study was published in 1961 to show what patterns there were in the pr ices, orders, and stocks of the different lumber producing regions of the United States. It covered the major lumber producing regions, and was not limited to softwood species. In the west, however, the proportion of softwood to hardwood is four to one, so that the figures for the whole w i l l be comparable to those applying solely to softwoods. Some interesting patterns became apparent in the western region. There is no reason why similar patterns should not apply in Br i t i sh Columbia, as the distinctions between the forest on the Canadian side and the American side are very small unt i l technical forestry terms are used, when s i te classes, stand composition, and the l ike become signif icant . 25 The Southern Pine Region, which is generally outside the scope of this paper, tends to have more stable price patterns than do the other forest regions, as the poor conditions which prevai l during the northern winter are not fe l t in the South, but nonetheless they do have cycles. There are short 24. Clark Row, op. c i t . 25. The Southern Pine Region of the United States is situated in the southeast corner of continental North America. As i t s name suggests, most of the timber grown ih the area is from pinus species. The lumber output of the area is about the same or s l ight ly greater than the total softwood output of Br i t i sh Columbia. Traditional lumber markets for the area are Puerto Rico and the central and southern United States. Pine is extensively used in pulp pro-duction and much of the allowable cut is converted into pulp and paper products The Puerto Rican market, unt i l the l i f t i n g of the Jones Act restr ict ions on west coast lumber producers, was gradually being taken over by Br i t ish Columbia shippers 80 run cycles caused by such things as heavy rains which make logging and trans-portation d i f f i cu l t and the effect of national housing starts . As the popula-tion centre of the United States is in the northeast corner of the country, i t follows that construction work and housing starts w i l l be to a large extent influenced by conditions in the north. The prices for the western region species undergo a much greater annual cycle than do the prices for the Southern Pine region species. Unlike the southern region, the west cannot continue production throughout the winter months, and thus i t cannot assure i t se l f of adequate stocks of ready lumber when spring construction starts. Hence, as far as prices are concerned, there is a peak price in early spring following the marked decline of the winter months. Prices start to firm in late spring and summer. Ponderosa Pine, a species found in the inter ior states and the inter ior of Br i t i sh Columbia, has a cycle different from that of Southern Pine. It reaches i ts peak in May and June, Construction is the main use of this species, and i t s cycle is therefore an important one. Douglas f i r , and presumably i ts associated species, have yet another pattern. The peak prices are reached in the June-July-August period. It is interesting to note that the prices for the better grades of lumber, known in the trade as standard and better, tend to reach their peak before prices for the lower, or u t i l i t y , grade lumber. U t i l i t y 26 has but a single peak, which occurs in August, re lat ively late in the year. The production and shipment of United States Douglas F i r are strongly influenced 26. Row, op. c i t . , p. 27. 81 by the year end price declines as well as by the now almost tradit ional week-long Fourth of July holiday. There is one other influence which appears in the summer months but which is not regular by nature, and that is the effect of f i r e closures of the woods. In bad years the closure may extend over most of the summer months, but in wet summer years, the closure may be for the hottest part of the year only, i f at a l l . Some mil ls may even be able to keep going through forest closure periods but others, especially the small ones, w i l l be badly affected by the closure and may have to suspend operations for the duration of the hot weather. As is to be expected in an industry closely related to housing con-struction, the spring sees the mil ls in a position where in most cases they are unable to keep up with their orders on hand and where inventories are depleted. This posit ion is reversed as soon as the lumber needed for the pre-liminary construction work is on i t s way to the markets. By mid-summer the construction industry has bought the lumber i t wants and orders start to f a l l , 27 just as logging and mi l l ing act iv i t ies are reaching their peak. Because of the excess of supply over demand, prices tend to f a l l , and do not start to r i se again unt i l the upswing in early spring. The price patterns for western lumber species show much sharper seasonal variations than do the price cycles for southern lumber. 27. Table V in Appendix C shows the changes which take place in the inventories of lumber in Br i t ish Columbia. Figure 1, pagel39, has the same basic information on inventories for a few selected years and an average pattern for the years 1955 to 1962. This shows that maximum inventories are held in March of each year on the average, and that minimums occur in July/August of each year. 82 Buyers and organizations placing orders for lumber on western sawmills appear to operate either from habit or necessity, and endeavour to take advantage of the seasonal price cycles of which they are aware. At the same time pro-ducers are aware of the patterns and try to persuade buyers to place orders late in the year when prices are at their peak. Price patterns ensure that competition has the effect of making prices subject to the market and more or less out of the control of any one body. This consumer buying practice has given r ise to a situation where Douglas F i r orders climb rapidly during February and March to reach a high point in A p r i l . The low point for orders is in July and August — the time of the highest pr ices. Southern and Western Pine areas enjoy high order points in July and August. IV. BRITISH COLUMBIA DOUGLAS FIR AND HEMLOCK PRICE PATTERNS 28 According to one of the two major cargo shippers in Br i t ish Columbia, there is also a dist inct normal pattern for lumber prices in this province. F i r and Hemlock are the two major coast species which are handled by the Seaboard Lumber Sales Co. These two species constitute the bulk of Br i t i sh Columbia sales. Although there is a normal pattern for pr ices, 1963 has not followed the pattern. The irregular i ty started at the and of 1962 and has carried on into 1963. This new pattern may not continue into the future, and 28. An interview of the writer with Mr. Laird Wilson, American Division Manager of Seaboard Lumber Sales Company L td . , confirmed in an interview with Mr. J . N. Lucas, Office Manager of the Whonnock Lumber Company, Whonnock, B. C. 83 29 is therefore treated as an exception rather than the ru le . Because a.:peak was reached early in 1963, and producers are taking f u l l advantage of i t , other years wi l l have to be used for a guide. Usually there is a f a i r l y uniform price spread between the peaks and valleys in the prices in a pattern that has been fa i r l y continuously followed throughout most of the post-war years. The peak price is normally achieved in May, and prices gradually f a l l off to reach a low in October. This situation is u t i l ized by the Br i t ish Columbia shippers when they se l l as far forward as the United States buyers are wi l l ing to contract. The practice of forward se l l ing is one which the United States 30 buyers l ike and wish that the American produers would adopt. It has the advantage of giving constant prices to the buyers as well as enabling the pro-ducers to know what they w i l l get for their lumber when i t is produced0 As in the Pac i f ic Northwest, the peak of orders in the early part of the year means that orders are temporarily in excess of production. They gradually taper off so that end-of-year inventories are high once again. Shipments of lumber are not made immediately upon receipt of orders, and therefore there is a f a i r l y steady flow of lumber to the east for the f i r s t part of the year. 29. Information on price patterns of Br i t i sh Columbia sales was obtained in July of 1963, at which time the exceptional prices s t i l l pre-vai led for Br i t ish Columbia timber. 30. "Witness Michael, Manager, West Coast Door, Inc., Tacoma, Wash., said unrestricted flow of Canadian softwood lumber is necessary in the U.S. market because only short term (30 days) contracts are available from U.S. suppliers." Fierst and Cooper, op. c i t . , pp. 47-48. 84 The f i r e hazard is also a factor which applies in the case of Br i t i sh Columbia, but i t is not so serious a factor for the coastal producers as i t is for those in the high f i r e hazard areas of the inter ior . The existence of the Vancouver log market helps to even out the demand so that coastal area mi l l s , the largest in the province, are not often forced to close because of a shortage of logs. The trade union negotiations usually take place in June and July, and i t is during this period that some mil ls are closed because of str ike act ion. This may affect prices in the short run, but no pattern has been determined by i t , probably because of the forward se l l ing pol icy whereby buyers are assured of lumber at the old prices for their existing contracts with the shippers. Br i t i sh Columbia prices are based on sales of 60/20/20, i . e . , 60 per cent construction grade, 20 per cent standard, and 20 per cent u t i l i t y , but in practice the usual sale is one of 75/25, i . e . , 75 per cent construction and 25 per cent standard. The only generally acceptable variation on the standard-based price is that there may be only 17 per cent u t i l i t y and a larger per-centage of one or the other or both of the other two grades. This is deter-mined by the buyer and the nature of the contract placed through the sales organization of the m i l l . Most of the price variations which Br i t ish Columbia lumbermen encounter are caused by supply and demand forces outside the control of the individual mi l lers . Other costs which must be considered when prices are set are those incurred in moving the lumber from the mi l l to the customer. The lumber producers must absorb any change in the price for which the buyer contracted into their conversion, logging, and extraction costs and any prof i t margin included in the theoretical costing of their lumber. In the case of 85 Br i t i sh Columbia mil lers there are buffers available which protect the mil ler from the f u l l effect of any cost changes in his market. One such buffer is the difference between the actual freight paid on the lumber and the amount charged to the customer for freight. A large proportion of the price paid by the buyer is re lat ive ly fixed and beyond the control of the buyer or se l l e r . Among the constants are the charges for ocean freight and for insurance. The United States conference rate, which is the one quoted by Br i t i sh Columbia shippers regardless of the charter rates which may prevai l at the time, is US$36 per thousand board feet for rough green lumber, and US$27 for dressed lumber. Insurance is usually about $0.50 per thousand board feet, and moving the lumber from the mi l l to ship-loading f a c i l i t i e s in the ports of Vancouver or New Westminster is about $2.50 31 per thousand board feet. Thus, apart from anything else, these fixed costs amount to $30 to $39 per thousand board feet. The freight is usually paid in either United States dollars or pounds s ter l ing, depending on the terms of the charter. Under normal conditions i t has been found that the f . a . s . (free along side) prices have varied between lows of $45 per thousand board feet in October and highs of $57 per thousand board feet in May. In 1963 the prices between the seasonal low in October 1962 and May 1963, when many new contracts were made, had not declined as far as was usual but had stayed at between $50 and 31. Letter to the writer from Rayonier Canada (B.C.) Limited, 1111 West Georgia Street, Vancouver, dated June 7, 1963. 86 $54 per thousand board feet. Because of th is , sales organizations have been working hard to get as much lumber as possible sold forward into the future months. In one case a mi l l is booked for pract ica l ly a l l i ts output t i l l the 32 end of 1963, i .e . , sold about f ive months ahead. These circumstances, however, 33 should be treated as exceptional and not the general rule. V. STUMPAGE IN BRITISH COLUMBIA AND THE PACIFIC NORTHWEST After freight and conversion costs, the next most important cost in lumber production is that of stumpage. In Canada stumpage and Royalty are not taken together but in the United States Royalty as such does not exist . Royalty in Canada is fixed for various parcels of forests, and the amount depends on when the forest was granted to the various owners. The rates of royalty range from a low of no royalty to a high of about $1.70 per thousand 34 board feet on certain types of forest product from certain parcels of forest. Stumpage varies from species to species and from forest to forest. In the United States i t is based on the species in the national forests. The 32. Mr. J . N. Lucas, Office Manager of Whonnock Lumber Co. L td . , advised the writer of this fact. 33. The next largest, market for Br i t i sh Columbia lumber after the United States is the United Kingdom. It is the practice of Br i t i sh lumber firms to close down their entire organizations for two or three weeks in the summer while their employees take their holidays. Hence there is a sl ight r ise in orders in June and another sl ight r i se in September. 34. Forestry Handbook for Br i t ish Columbia, pp. 224-225. 87 national forests of interest here are those in the Pac i f ic Northwest, where species similar to those found in Br i t ish Columbia grow. The Tar i f f Commission in i ts findings published a table comparing the stumpage rates applicable to 35 Douglas F i r , Ponderosa Pine and Southern Pine. The F i r and Ponderosa Pine are both found in Br i t i sh Columbia and the Pac i f ic Northwest, the F i r in the coastal area and the Pine in the inter ior . Some Douglas f i r grows in the inter ior , but the species is generally considered indigenous to the coastal rain forest. Table XII, page 88, shows the differences in the weighted average annual prices of stumpage in the United States national forests for the three species mentioned above in selected years from 1930 to 1961. The 1930 figures, re f lec -ting 1929 conditions, are given to show the effect of the boom conditions pre-valent in the United States prior to the depression. There is a time lag in computing stumpage which accounts for the delays between the booms and the high prices for stumpage. A boom year w i l l incur high stumpage during the following year, which has to be carried by the industry. The burden of high stumpage may be uncomfortable i f the boom becomes a depression. Similarly, i f a depression rates swings towards a boom, there w i l l be lower stumpage/applicable in the boom period than are jus t i f i ed , because of low lumber prices in the depressed year. United States Douglas F i r stumpage has climbed rapidly from a low of $1.20 per thousand board feet in 1933 to a high of $37.50 per thousand board feet in 1956 - - a year following a boom period. There was also a boom in 1959, 35. TC Publication 79, p. 99. 88 TABLE XII SOFTWOOD SAWTIMBER: WEIGHTED AVERAGE ANNUAL: PRICES OF STUMPAGE IN UNITED STATES NATIONAL FORESTS BY SELECTED SPECIES 1930-1961 (PER THOUSAND BOARD FEET) Year Douglas F i r Ponderosa Pine Southern 1961 $27.60 $12.10 $26.80 1960 32.00 19.10 34.50 1959 36.80 20.60 35.20 1958 21.80 19.10 31.10 1957 26.20 24.20 31.50 1956 37.70 27.20 37.40 1955 28.90 26.10 32.00 1950 16.40 18.30 26.70 1945 5.00 5.60 9.30 1940 2.30 2.20 4.50 1935 1.70 2.40 4.50 1930 3.30 3.60 3.20 Source: United States Tar i f f Commission, Softwood Lumber Report to the President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b)  of the Trade Expansion Act of 1962, TC Publication 79, (Washington, Government Printing Off ice, February 1963), p. 99. 89 and this meant that stumpage was high in 1960. F i r stumpage has varied more than that for Ponderosa and Southern Pine. Some differences in the stumpage rates paid for lumber in Br i t i sh Columbia and the Paci f ic Northwest can be accounted for by the different local conditions and attitudes of the lumbermen in the two regions. In the United States there is a fear in some areas that there w i l l be an inadequate supply of timber from the forests to meet the demand of a l l the forest products industries, and a feel ing that mil lers must therefore take whatever action is necessary to ensure their future supply of timber for as long as possible. This fear has made some lumbermen bid up the appraised prices for their raw material to several 36 times the value placed on the timber by the United States Forest Service. In Br i t ish Columbia there is not such severe competition for the available timber from other forest products, and lumbermen do not have to bid very much over the appraised value of the timber to ensure obtaining i t . In some cases in the Province the appraised price is actually the one b id , as there is no serious com-37 pet i t ion for the timber. Reference has already been made to a s l id ing scale which prevails in Br i t i sh Columbia in connection with stumpage. The s l id ing scale applies to a l l provincial Crown Land forest, but not to timber licenses and other forms of land tenure whereby the forest operator controls the forests. Lumbermen are aware of 36. TC Publication 79, p. 102, Fierst and Cooper, op. c i t . , pp. 39-40, and Transcript, pp. 114 and 121. 37. Interview of the writer with Mr. R. J . Stromberg, Forester, of the Br i t i sh Columbia Forest Service. 90 the s l id ing scale and other conditions pertinent to their licenses at the time they bid on the timber. A f u l l description of the terms of license is included in the announcement of the timber auction, and on one page of the contract, the 38 s l id ing scale provisions are set out in f u l l . The Br i t i sh Columbia Forest Service controls the stumpage on three dist inct types of operations d i rect ly . The f i r s t type is the open public auction. About 80 per cent of such sales are made at the appraised stumpage 39 value. This figure refers to a l l timber auctions at the present time in the Vancouver Coast Forest Area. It is in the Vancouver Forest Dist r ic t that many of the other forest product industries are located, and one would therefore expect i t to be the area in which there was the fiercest competition for the existing timber. The next major category is the one in which sealed tenders are submitted to the forest department for a certain parcel of timber. In this case the current forest user has the right to meet the highest tendered price. If he does not opt to do so, he may f ind that there is no more timber available for him in the forest unit in which he is operating. This method usually applies to small parcels, and the operations involved are generally considered to be the small it inerant type rather than the large permanent type of m i l l . 38. See Appendix B. 39. Interview of the writer with Mr. R. J . Stromberg, Forester, of the Br i t i sh Columbia Forest Service. 91 The third class involved is the Special Use permit, and conditions governing these are usually peculiar to the Forest Service's needs at the moment. Examples are the extraction of the windfall caused by the hurricane which h i t the coast of Br i t i sh Columbia, Washington and Oregon in October, 1962, and other specialty operations such as the extraction of gravel from pits in Crown forests. The United States Tar i f f Commission compared the average annual prices bid for stumpage in Br i t i sh Columbia and in the national United States forest located in the Paci f ic Northwest. The dollar amounts are comparable as the Canadian prices were converted to United States dollars at the spot rate of 40 exchange for Canadian dollars during each period. Table XIII, page 92, shows that the Br i t ish Columbia rates of stumpage are on the whole about half of the comparable rates in the United States in the northwestern part of Washington. The Canadian rates are not quite half of the American rates for interior f i r , but they are nonetheless much lower than those prevalent in the eastern Washington area. Hemlock exhibits the same trend, with the Canadian rates averaging about one half of the American rates. Hemlock and f i r are the major species in both areas and are the ones for which there is most competition. The interior d is t r i c t mi l ls depend on spruce for most of their raw material, but this species is not as popular as f i r and hemlock, and i ts stumpage rates are lower than theirs. In this instance, although Canadian rates are s t i l l lower than American rates, the margin has been narrowed down. 40. TC Publication 79, p. 103. 92 TABLE XIII SOFTWOOD SAWTIMBER: AVERAGE ANNUAL PRICES BID FOR STUMPAGE IN BRITISH COLUMBIA CROWN LANDS AND UNITED STATES NATIONAL FORESTS IN THE NORTHWEST BY SELECTED SPECIES AND BY DISTRICTS 1958-1961 (PER THOUSAND BOARD FEET: U.S. LOG SCALE BASIS) Species and Distr ic t Douglas F i r 1961 Coastal D is t r i c t s : Vancouver, B.C. $10.51 Northwestern Washington 23.08 Interior D is t r i c t s : Southern Interior B.C. 4.93 Eastern Washington 7.88 Year 1960 $15.30 32.52 7.73 10.93 1959 $14.67 38.44 8.72 15.72 1958 $10.10 22.70 5.82 6.33 Hemlock Coastal D is t r i c t s : Vancouver, B.C. Northwestern Washington 4.47 10.29 5.19 9.95 5.31 11.31 4.75 7.56 Spruce Interior D is t r i c t s : Southeastern B.C. Northern Idaho and Western Montana 4.29 6.60 5.70 6.69 6.75 11.81 4.10 6.73 Source: United States Tar i f f Commission, Softwood Lumber Report to the President on Investigation No. 7-116 (TEA-I-A) Under Section 301(b) of the Trade  Expansion Act of 1962. TC Publication 79, (Washington, Government Printing Off ice , February 1963), p. 103. CHAPTER VII WAGE, LOADING, AND SHIP CHARTER COSTS FOR SOFTWOOD LUMBER I. WAGE COSTS IN LOGGING AND SAWMILLING One of the fa l lac ies most commonly encountered when high and low wage countries are compared is that the high wage country operates under a disadvan-tage when competing with a low wage country. The fal lacy of this statement has 1 been exposed by many economists: a simple example w i l l demonstrate the flaw in the argument. If this supposition were true, America would be at a d is -advantage when trading with a low wage country l ike Japan. But in point of fact, high productivity more than compensates for high wages. Wage figures show there is a small advantage to Canadians in the lumber industry, but economic factors in the trade negate the advantage. The wage structures of the lumber industry have become more and more complex with the passage of time. It used to be that a base wage rate was applicable with only a few dif ferent ia ls added to i t for specia l t ies. Under current wage agreements the opposite is now the general case. There is a very large number of detailed categories of wages, a l l of which are negotiated at the time of contract negotiations. The base rate is now a token factor which is only applicable in rare instances. Because of the complexity of job c l a s s i f i -cation and def in i t ion, i t is impracticable to tabulate actual wage structures 1. Samuelson, op. c i t . , pp. 676-677. 94 as negotiated. Although one job may seem to be common to two or more firms, i t is probably common in name only, and the exact duties involved w i l l not be 2 the same. At the time of the Washington hearings some confidential information on the then current wage structure was submitted to the Commission to show that there was not a very large gap between the base rate wages in the United State 3 Douglas f i r Region and those in Br i t ish Columbia. This information is now no longer s t r i c t l y confidential , and some of i t has been made available to the writer. Although Br i t i sh Columbia wage rates are s l ight ly lower than those in the Pacif ic Northwest, the difference is re lat ively small. It is more than offset by the d i f f i cu l t terrain in which Br i t i sh Columbia logging operations are carried out, the higher interest on money in Canada than in the United States, and the advanced technology of the United States. These factors combined suggest that the output per man in Br i t ish Columbia is probably lower than in a similar operation in the Pacif ic Northwest, and the advantage in the difference in wage rates, since i t is so 2. Much of the information contained in the preceding paragraphs was obtained through an interview with Mrs. Fingarson, editor of Facts and Trends, a publication of the Vancouver Board of Trade. Copies of many of the union agreements negotiated within the greater Vancouver area are sent to her for compilation into trend information. The writer was able to glance through, but not note in de ta i l , several such union agreements in their or iginal form. 3 . In this context the Douglas F i r Region is the same as the Paci f ic Northwest referred to elsewhere in this paper. 4 small, is wiped out. 95 Tables XIV and XV, pages 96 and 97 respectively, show some pertinent information on the wages applicable to the Br i t i sh Columbia coast and the Paci f ic Northwest. The f i r s t , Table XIV, shows the changes which have taken place between 1946 and 1962 in the wage rates, and the second, Table XV, gives a detailed comparison of wage structures for the f a l l of 1962 and the f i r s t half of 1963. The gap between the wage rates in Br i t i sh Columbia and the Pac i f ic Northwest has been narrowing, but the current agreements made by the leading firms in Br i t i sh Columbia and the Pac i f ic Northwest have tended to widen i t s l ight l y . It has increased from about 10c an hour to about 12c an hour on the base rate. The International Woodworkers of America is the trade union in 5 both Br i t ish Columbia and the Pac i f ic Northwest. 4. This l ine of thought was expressed to the writer by Mr. Les l ie C. Reed, M.A., the Economist and Stat ist ic ian of the Council of Forest Industries of Br i t i sh Columbia. It was based on his research into the subject of wage costs in Br i t i sh Columbia and the Pac i f ic Northwest at the present time. 5. The argument that low wage countries have an unfair advantage over high wage countries would, i f true, apply equally within a country. There are wage di f ferent ia ls between the coast and the inter ior of Br i t i sh Columbia. There is no need to go further a f ie ld to show that wages are not the only factor which must be considered in the determination of the advantage of one country or region over another. In 1946 the base wage rates for the coast and inter ior were only 2c apart, at $0.67 and $0.65 respectively. Gradually the gap has widened and the coast has continued to pay higher base wage rates than the inter ior . The difference in 1962 was 13c an hour. In terms of percentages, the d i f ferent ia l has changed from 3 per cent in 1946 to 7 per cent in 1962. These figures were given to the writer by Mr. K. J . Bennett, Labour Relations Assistant, of Forest Industrial Relations Ltd. In spite of this wage difference, as has been shown elsewhere in this paper, the inter ior has gradually increased i ts proportion of the total annual cut of the Province even though the total volume of lumber cut on the coast has been steadily increasing. The different economic factors at work in the different regions of the Province have made the wage di f ferent ia l possible and have allowed competition between coast and inter ior to develop without either region suffering any real hardship. 96 TABLE XIV CHANGES IN BASE LABOUR RATES: DOUGLAS FIR REGION AND BRITISH COLUMBIA COAST 1946-1962 Year Effective Date Douglas F i r B.C. Coast Difference Region Region  1962 Entire Year $2.10 June 15 $2.00 $0.10 1958 September 1 1.93 Entire Year 1.72 0.21 1954 Entire Year 1.70 1.49 0.21 1950 May 1 1.45 June 15 1.20% 0.24% 1946 Apr i l 1 1.10 June 1 0.67 0.43 Source: Br i t i sh Columbia Council of Forest Industries. TABLE XV NEGOTIATED WAGES AND FRINGE BENEFITS: BRITISH COLUMBIA AND DOUGLAS FIR REGION LOGGING AND SAWMILL EMPLOYEES 1962 Paid Holidays Paid Vacations 1 year men 3 year men 15 year men 10 year men 20 year men Douglas F i r Region 6 1 week 2 weeks 3 weeks B. C. Coast Region 6 2 weeks (47. annual pay) 3 weeks (6%7.) 4 weeks (8%7.) Wages Base Labour Rate $2.09 Aver. Hourly Rate 1st 6 mos. 12 mos. Logging $3,048 $3,039 Sawmill 2.557 2.562 Aver. Hourly Earnings Logging $3.62 $3.67 Sawmill 2.90 2.95 Overtime 1% times regular rate Night shi f t Dif ferent ia l 6c $2.00 1st 6 mos. 12 mos. $2.87 $2,847 2.23 2.215 $3.42 2.62 $3.41 2.64 1% times regular rate 6c Others Health and Welfare 7%c package Pensions 10c package 10c package shared 50-50 3c on average Source: Forest Industrial Relations Limited. 98 I I . LOADING COSTS IN GENERAL The cost of loading lumber for the cargo market i s an item i n the cos t ing s t r u c t u r e i n which d i s t i n c t d i f f e r e n t i a l s ex i s t for the Canadian and American lumbermen. Loading costs are beyond the immediate c o n t r o l of the lumbermen except at ports where lumber i s loaded by members of the I n t e r n a t i o n a l Woodworkers of America (IWA). The IWA i s the trade union to which many of the sawmill employees of the lumbermen belong and with which lumbermen negot iate wages and working c o n d i t i o n s . In most ports the loading of lumber i s done by organizat ions unconnected wi th the lumbermen i n any way, and loading rates are determined by the longshoring companies handl ing the lumber. The two major B r i t i s h Columbia shippers charter s h i p s , and sometimes use vesse l s which are express ly designed for the handling of lumber. The number of such ships a v a i l a b l e i s l i m i t e d , and frequent ly convent iona l ly equipped vesse l s are used. Each v e s s e l has i t s own c h a r a c t e r i s t i c s , and there i s a l arge number of v a r i a b l e s a p p l i c a b l e to each ship which makes i t d i f f i c u l t to s ta te c a t e g o r i c a l l y that a given cost w i l l be incurred i n the loading of a l l s h i p s . There are two major c lasses of lumber cargo . The f i r s t i s that of loose lumber, in to which f a l l s very small bundles of s p e c i a l t i e s , such as mouldings or other machined customer ordered goods, and the more usual loose i n d i v i d u a l p ieces of lumber. The second c lass i s that of packaged lumber. The lumber i n t h i s c la s s i s made up in to fork l i f t c a r r i e r loads and i s u s u a l l y bound wi th s t e e l s t r a p p i n g . Packaged lumber i s more e a s i l y handled than loose lumber. 99 It is d i f f i cu l t to get exact loading costs for packaged lumber because there is s t r i c t competition between the lumber organizations involved, and any s ta t i s -t ics they may have compiled for their own information are confidential . Loose lumber consignments from Br i t i sh Columbia are generally sent to the United Kingdom and other markets outside the North American continent: most of the North American trade is in packaged lumber. There is a growing tendency for Br i t i sh Columbia shippers to send packaged lumber to the United Kingdom, where i t is beginning to f ind acceptance among Br i t i sh buyers. Because of the confidential nature of the figures given to the writer on the subject of loading costs, the discussion which follows is in general terms, and there w i l l be exceptions to some of the statements made. The data obtained show that there is a dist inct d i f ferent ia l in favour of the Br i t i sh Columbia shippers with regard to the loading costs incurred in the Pac i f ic Northwest and Canadian ports for loose and packaged lumber. The difference is substantial in the loose lumber trade, and although the amount is smaller for the packaged lumber trade between Br i t i sh Columbia and At lant ic Seaboard ports, nonetheless i t is s igni f icant . The actual difference in dollars is less for packaged lumber than loose lumber, but in both cases the Canadian loading costs are about one half of the costs incurred by Pac i f ic Northwest shippers. III. INDUSTRIAL STUDIES OF LOADING COSTS 6 A study was made within the last two years by MacMillan Bloedel and Powell River Company Limited of loading costs. It was found that the 6. The study was carried out by Mr. A. P. Campbell, Manager, Traf f i c Department of Canadian Transport Company, a subsidiary of MacMillan Bloedel and Powell River Company Limited, for their own information and use. 100 d i f ferent ia l between Br i t i sh Columbia and Pac i f ic Northwest shippers was between $7.50 and $8.00 per thousand board feet. The detailed figures leading to this conclusion are confidential , but the f ina l amount of the d i f ferent ia l was considered reasonable when discussed by the writer with a representative of the Shipping Federation of Br i t i sh Columbia. It was assumed for purposes of the study that the usual longshore gang consists of fourteen men. This assumption is made for convenience of calculation only, as the size of the gangs employed in loading lumber varies between ports. Although the trade union representing the longshoremen is the same on both sides of the border, the contracts negotiated with the Canadian and American employers are quite different in many respects, and one of the differences is in the size of the gangs. In Br i t i sh Columbia, the gangs in Vancouver are of eleven men. When packaged lumber or cargo is handled there may be a fork l i f t operator added to the gang i f there is not one already within the gang. In both New Westminster and Vancouver Island ports, the usual gang is thirteen men, but variations occur in different ports and in some cases an additional man may be used when packaged lumber is being handled. The study came to the conclusion that the average gang hour costs are $50 per hour in Canada and $62 per hour in the United States. These give costs of $4.50 and $14.00 respectively per thousand board feet when the rate of loading is taken into consideration (see below). When certain undisclosed amounts for overtime and other direct and indirect costs had been added, the rounded figures for Br i t i sh Columbia and the Paci f ic Northwest became $7.50 101 and $15.00 respectively. This gives a d i f ferent ia l between Br i t ish Columbia and the Paci f ic Northwest of between $7.50 and $8.00 per thousand board feet. The ab i l i t y of different gangs to stow lumber properly is important in the costing of the loading operations, but is one of the few variables which is under the control of the longshoremen. There are many variables which cannot be controlled by either the gang or the shipper, so that a statement made to the writer that the stowage of lumber in the United States was not as good as that in Br i t ish Columbia should meet with qual if ied credence. In many cases the American shippers are handicapped by having to use conventional vessels for lumber, while the Br i t ish Columbia shippers have at their disposal a few vessels spec i f ica l ly designed for the lumber trade. A further study, the results of which were made available to the writer, was carried out in 1960-1961 by the Shipping Federation of Br i t i sh Columbia on the loading and stowing of packaged lumber. A l imitation of the study is that i t applied only to a selected sample of ships at ports of which the Shipping Federation was a member. The study showed that loading took place at between 24 thousand and 17% thousand board feet per gang hour. The loading of loose lumber, which was not included in the study, would be appre-ciably slower than the loading of packaged lumber, so that the figures given above for loose lumber loading costs appear to receive confirmation from this study. 102 IV. LOADING SPEED The speed with which a consignment of lumber can be loaded into a ship is of v i t a l importance in costing the loading operation. A statement was made to the writer with particular reference to the loading of loose lumber that in the United States the loading is slower than i t is in Br i t ish Columbia. However, there are so many variables factors which enter into this aspect of loading that such a statement can give a misleading impression. The time i t takes to load lumber into a modern vessel with loading equipment especially designed to handle lumber w i l l be much less than that needed to load an old conventional vessel with slow gear. Further variables such as the placement (stowage) of the lumber within the different holds of the ship are relevant. If the lumber is loaded under the "wings" of the hold as opposed to onto the deck or hatch cover, then the time needed w i l l be much greater, as manual labour w i l l be necessary to move the lumber in to the wings from the middle of the hold where i t is placed by the loading device. The composition of the load is also important. If there are many odd length pieces or packages then the stowing of the lumber w i l l be slower.than when a l l the lumber is of the same length or simple multiples of the same length. Other variables which enter into the speed with which the lumber can be loaded are the time of day, the s k i l l of the machine man and the longshoremen, the design of the ship, and the weather, a l l of which have some bearing on the overall cost of loading the ship. One shipper told the writer that the average volume loaded in Br i t ish Columbia ports was about 11% thousand board feet per gang-hour, while in the 103 Paci f ic Northwest a. similar gang would load about 7 thousand board feet per gang-hour. It must be remembered that the size of gangs is not constant. Other figures were obtained for Br i t i sh Columbia which showed that the loading of lumber in packaged form had gone as high as 80 thousand board feet per gang-hour on some bulk carrier ships under optimum conditions. V. THE CHARTER PARTY The "charter party" is the name of the contract document which l i s t s the conditions of a charter. There are many clauses in a charter party, but those dealing with demurrage and dispatch^ are important in the present context. A charter party is not a standarized document and variations appear depending on the ship owner and the charterer involved. Nearly a l l of those used in the lumber carrying trade have clauses which allow for the levy of demurrage at between $700 and $1,500 per diem. This means that unless the vessel is loaded and ready for departure within the period stipulated in the charter party, the charterer w i l l have to pay a penalty, which may prove prohibit ive i f the vessel is delayed for several days. Because of this possible extra cost, loading speed is v i t a l to the shippers. To counter the effect of demurrage costs, there is usually also a clause allowing a charterer a bonus i f the ship is loaded ahead of schedule. The amounts of this bonus are negotiated individually and 7. "Demurrage; the detention of a vessel, freight car, e tc . , by the freighter beyond the time allowed for loading, unloading, e tc . ; also the payment made for such detention." Webster's Collegiate Dictionary 5th ed. , (Thomas Al len L td . , Toronto, 1941), p. 216. In the trade, dispatch is the opposite of demurrage, and is a bonus paid to the freighter for allowing the vessel to depart prior to the estimated departure time allowed for in the charter party. 104 are confidential . Because of the heavy costs of delay, overtime payments are frequently made to longshoremen to ensure the complete loading of the cargo within the time allowed in the charter party. If packaged lumber is loaded into a vessel or iginal ly chartered for loose lumber the shipper may reduce the loading cost for the consignment, but i f loose lumber has to be shipped in a vessel hired for packaged lumber, unforeseen demurrage w i l l probably be incurred. VI. LONGSHOREMEN'S WAGE RATES There is l i t t l e signif icant difference in the basic hourly wage rates paid to longshoremen in the Paci f ic Northwest and Br i t ish Columbia. There are some differences in the money paid for handling different cargoes and the d i f ferentcski l ls used within the longshore gangs. Table XVI, page 105, gives the basic wage rates since 1955. The rates for 1962 were the same as those for 1961 and these same rates and conditions continued in effect unt i l the Fa l l of 1963. Table XVI, page 105, shows that there has been a steady r i se in the basic wages paid to both the Br i t ish Columbia and the United States longshoremen since 1955. The wages paid to United States longshoremen have been higher than the wages paid to Br i t ish Columbia longshoremen. An exception occurred in the period from May 1961 to May 1962, when there was a difference of s ix cents in the Canadians' favour on the base wage rate. Table XVI, page 105, does not give the entire picture as there are other factors affecting the total wage paid to longshoremen. The longshoremen's wage rates in Br i t ish Columbia are 105 TABLE XVI BASIC HOURLY WAGE RATES FOR LONGSHOREMEN IN BRITISH COLUMBIA AND THE UNITED STATES WEST COAST -- 1955 - 1963 Year Br i t ish Columbia United States West Coast Year Time Time and % Time Overtime Mar 55 $2.19 $3.29 $2.27 $3.40% June 55 May 56 2.27 3.40 2.45 3.63% Oct 56 May 57 2.57 3.86 2.53 3.79% June 57 Sept 58 2.64 3.96 2.63 3.94% June 58 May 59 2.71 4.06 2.74 4.11 June 59 Nov 59 2.78 4.17 Aug 60 2.86 4.29 2.82 4.23 June 60 May 61 2.94 4.41 2.88 4.32 June 61 62 2.94 4.41 3.06 4.59 June 62 63 2.94 4.41 3.19 4.78% June 63 Sources: Shipping Federation of Br i t ish Columbia. Telephone conversation August 5th, 1963, with the Pacif ic Maritime Association in Seattle. 105a 8 higher than any others paid in Canada. In 1952, Br i t i sh Columbia rates were 18% per cent higher than the next highest rates in Canada, and this margin w i l l be increased to 23% per cent in 1963 after the new wage rates are implemented. Thus there is a dist inct disadvantage to the Br i t i sh Columbia lumber shippers when compared to shippers in other parts of Canada. The exact ports covered by the next highest wage rates were not revealed because of the confidential nature of the information. The longshoremen's wage rates on both the East and West Coasts of the United States are the same. The Br i t i sh Columbia rates were higher than the equivalent wage rates for United States longshoremen between 1957 and 1961. However, there are other factors which make the United States costs higher than the Canadian ones in terms of gang hours. In Br i t ish Columbia, longshoremen work two sh i f t s . Thereafter overtime applies up to midnight when most work usually stops. There is a guaranteed four hour's pay for the f i r s t dispatch of a man to a ship whether he starts in the morning, afternoon or evening. Various other guarantees govern the pay which must be given for work after the f i r s t four hours. Sk i l l and cargo di f ferent ia ls are not included when overtime is calculated, but are added on afterward. The amount of the differentia ls is lower in Br i t ish Columbia than in the United States. Lumber is not subject to a cargo d i f fe rent ia l . In the United States, longshoremen have a guaranteed eight hour day. The f i r s t s ix hours of the day shi f t are at the basic wage plus s k i l l and cargo d i f ferent ia ls . The last two hours are at overtime rates with the dif ferent ia ls 8. This was stated by Mr. A. L. Jeffery, Supervisor, Labour Analysis and Research Division of the Shipping Federation of Br i t i sh Columbia in an interview with the writer. 106 pyramided; that i s , overtime is calculated on the total wage rate including any d i f fe rent ia ls . The second shi f t starts work at the overtime rates paid for the last two hours of the f i r s t sh i f t . After s ix hours they are paid time and a half of the rate at which they started, and any di f ferent ia ls are again pyramided. The third sh i f t , which begins between 2:30 and 3:00 a.m., is only a f ive hour sh i f t . It starts at the rate at which the second shif t f inished, but there is no overtime rate for this sh i f t . In other words, each new shift starts at a basic rate of time a half the rate of the previous sh i f t , and any di f ferent ia ls are added on before overtime is calculated. By the third shi f t a longshoreman w i l l be earning more than $8 and hour. (Wages of a Br i t i sh Columbia longshoreman in comparable circumstance would be between $4.50 and $5 an hour.) This arrange-ment means that the cost of loading at night with a gang of 14 men could amount to as much as $112 per gang-hour. In Br i t i sh Columbia cargo dif ferent ia ls range from 15c to 35c an hour. In American ports from Cal i fornia to Washington they range from 10c to $1.20 an hour. It can be seen that a large number of factors enter into the computation of loading costs for lumber in Br i t ish Columbia and Paci f ic Northwest ports. There is a d i f ferent ia l in favour of the Br i t ish Columbia shippers which amounts to $7.50 to $8.00 per thousand board feet, or considerably more in the case of loose lumber. There can be no denial that this fact alone gives Br i t ish Columbia shippers a competitive advantage over those in the Paci f ic Northwest. 107 VII. CHARTER TERMS The Puerto Rican market provides an excellent i l lus t ra t ion of the adverse effect of the Jones Act on the Pac i f ic Northwest cargo market. After the United States Tar i f f Commission hearings, the United States government relaxed the en-forcement of the Jones Act to permit Paci f ic Northwest lumber shippers to use foreign bottoms for the transportation of lumber to Puerto Rico. "B r i t i sh Columbia lumbermen, who can ship their goods on cheaper foreign-flag vessels, had completely taken over the Puerto Rican market when the exemption was f i r s t 9 passed last October (1962)." Since the or iginal l i f t i n g of the res t r i c t ion , "more than 5 mi l l ion board feet of United States lumber had been shipped because 10 of the exemption," and even greater expansion of the market is expected with the extension of the exemption for two years which is currently under considera-tion in the United States House of Representatives. However, although Pac i f ic Northwest lumbermen are now free to charter foreign vessels to carry lumber to Puerto Rico, the terms of the charter parties which American shippers encounter are more stringent than those available to Br i t i sh Columbia lumber sh ippers .^ In the case of a Canadian shipper, i t is possible for the charterer to include a clause whereby the terms of the charter may be extended for two or three days beyond the stipulated term of the charter. This allows for any 9. "Senate B i l l to Aid U.S. Lumbermen," The Vancouver Sun, December 7, 1963, p. 26. 10. Ibid. 11. This was told to the writer by Mr. T. W. Mi l l e rs , Labour Analyst of the Shipping Federation of Br i t ish Columbia. He was unable to suggest a reason for this severity. 108 unforeseen delays which may arise during the l i f e of the charter beyond the con-t ro l of the ship or the charterer, due to bad weather or str ikes. During the extension period the charter rates continue in effect, and thereafter a penalty rate applies. The rate may be based on a period of between one to f ive days, and i f the period of the extension is exceeded by as l i t t l e as one hour, the penalty rate for an entire base period is charged. No extension period at a l l is permitted to United States charterers at the present time. Any American organization entering into a charter arrange-ment must be certain i t has a charter which is long enough to cover a l l possible delays. If a United States firm charters a foreign f lag vessel and the ship is delayed for any reason whatsoever so that i t is unable to complete the operation for which i t was chartered within the time l imit specified in the charter party, the charterer must start paying the punitive overtime rates immediately the 12 charter expires. In both types of charters there is no reduction in the charge i f the vessel has completed the operation for which i t was chartered before the expira-tion of the charter. Thus, i f there is a 30 day charter and the operation is completed in 29 days, the charge is s t i l l made for the f u l l 30 days. 12. This was stated to the author by Mr. A. L. Jeffery, Supervisor, Labour Analysis and Research Divis ion, of the Shipping Federation of Br i t i sh Columbia. 109 VIII. CHARTER RATES AND CONFERENCE RATES The devaluation of the Canadian dollar had advantages for Canadian exporters, but in the case of the Br i t i sh Columbia lumber shippers a d is -advantage is entailed when i t comes to the charter of shipping space to carry lumber from Br i t i sh Columbia ports. Traditionally international charters are paid either in pounds ster l ing or in United States dol lars. When the Canadian dollar was devalued, the cost of charters was increased by the amount of the devaluation. As well as cargoes shipped by ocean freight, Canadian lumber hauled by r a i l on American railroads is also affected. Since 1957 the United States conference rate for the shipment of lumber from West Coast ports to the Eastern Seaboard has been constant at US$36 per thousand board feet for rough green lumber and US$27 per thousand board feet for dry dressed lumber. Prior to 1957 there were frequent changes in the con-ference rate and also in the foreign flag charter rates. Table XVII, page 110, compares the conference and charter rates for the past few years. Only in 1950 and 1957 has the charter rate recently been higher than the conference rate. The relationship of the rates has a dist inct bearing on lumber shipping costs, as the Br i t i sh Columbia shippers use the United States conference rates regardless of the charter fluctuations when quoting freight on lumber to their Eastern Seaboard customers. If the charter rates happen to be higher than the con-ference rates, Br i t i sh Columbia producers have to absorb the difference, and i f , as at present, charter rates are lower than the conference rates, the producers have an added cost advantage. Br i t i sh Columbia producers have a 110 TABLE XVII UNITED STATES CONFERENCE RATE FROM PACIFIC COAST PORTS AND CHARTER RATES FROM BRITISH COLUMBIA PORTS FOR WATERBORNE LUMBER SHIPMENTS TO UNITED STATES NORTH ATLANTIC PORTS IN UNITED STATES CURRENCY (PER THOUSAND BOARD FEET) 1950-1962 Year and Month U.S. Conference Rate Foreign Flag Charter Rate 1950 January- $26.50 $23.00 December 26.50 31.50 1955 February 31.00 35.50 March 33.00 X 1957 January 34.65 42.00 September 36.00 39.00 1958 Apr i l 36.00 24.85 October 36.00 27.60 1959 Apr i l 36.00 27.25 October 36.00 27.50 1960 Apr i l 36.00 30.50 October 36.00 25.00 1961 Apr i l 36.00 28.00 October 36.00 25.00 1962 Apr i l 36.00 24.00 Source: United States Tar i f f Commission, Softwood Lumber Report to the President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b)  of the Trade Expansion Act of 1962. TC Publication 79, (Washington, Government Printing Off ice, February, 1963), p. 91. I l l general policy of price s tab i l i t y , and do not "raise prices at the sl ightest 13 provocation." In Apr i l 1962, the charter rate was US$12 per thousand board feet lower than the conference rate for green lumber. Charter vessels do not have different rates for rough and dressed lumber, so that the di f ferent ia l on dry lumber was US$3 per thousand board feet in favour of the Br i t i sh Columbia shippers. The amount of the di f ferent ia l absorbed by the discount on the Canadian dollar amounts to about $2. The remaining $1 to $10 increases further the ad-vantage the Br i t i sh Columbia shippers already have from the discount on the Canadian dol lar . The difference between the wages paid in the lumber industry in Br i t ish Columbia and the Paci f ic Northwest is small, and is probably absorbed 13. Fierst and Cooper, op. c i t . , p. 48. The practice of price s tab i l i t y found among Br i t ish Columbia lumber shippers is one which has been evolved over time. During the period covered in this investigation and generally since the end of World War II, price s tab i l i t y has been one of the Br i t ish Columbia lumber se l le rs ' main se l l ing points, one which is appreciated by American buyers on the East coast, and presumably elsewhere in the United States. The exact reason for the policy followed by a l l the shippers was considered confidential , but one of the points mentioned by representatives of the industry was that i f prices were raised above those at which the Paci f ic Northwest lumbermen were offering their lumber, the Canadians would be unable to se l l a l l that they wished to in the United States. The obvious reason against price reductions, namely revenue reductions, was not mentioned to the writer by anyone. Since Br i t ish Columbia lumbermen are able, because of their low stumpage and d i s t r i -bution costs, to se l l profitably at a lower price than the Americans, they do not wish to jeopardize by frequent price changes for minor variations in costs the good w i l l they have acquired from their price s tab i l i t y pol icy. Mr. R. H. Edgett, General Sales Manager of Seaboard Lumber Sales Limited, and Mr. Peter Gregory, General Sales Manager of Cooper-Widman Limited, implied that price s tab i l i ty at a reasonable level was best for prof i t maximization and was closely connected with the general sales pol ic ies of their respective companies. 112 in the physical differences between the two areas. The differences in the labour rates for loading lumber, however, do give the Br i t ish Columbia shippers a substantial advantage over their United States competitors for the eastern United States Markets. Not only the wages but also the loading time and volumes handled favour the Br i t ish Columbia shippers. CHAPTER VIII TARIFFS AND DOLLAR EXCHANGE RATES AFFECTING THE SOFTWOOD LUMBER INDUSTRY I. THE THEORY OF TARIFFS AND QUOTAS IN INTERNATIONAL TRADE The t a r i f f at present applicable to most lumber imported into the United States is $1 per thousand board feet. Before a detailed discussion of the ta r i f f s imposed by the United States is undertaken, the different effects of t a r i f f s w i l l be discussed, and their usefulness in modern society c l a r i f i ed . 1 The American economist, Paul Samuelson, devotes one entire chapter of 2 his textbook to the economics of t a r i f f protection and free trade. Three classes of argument are made for the protection of domestic industry from foreign imports. These are those which are economically fa lse, those which are 3 economically sound, and those which are not direct ly related to economics. Non-economic factors, such as national defense, orientated industries, and similar items of national benefit, may be protected by t a r i f f s . Ta r i f f s , however, must be used with caution, as the implementation of protective mechanism for non-economic reasons may cause more harm to the economy than the problems they are meant to solve. The excessive use of ta r i f f s and quotas 1. Samuelson, op. c i t . , p. 672-688. 2. The reader is referred to Samuelson's text should he wish to go further into the subject of ta r i f f s and their economic effects, as the following is a br ief summary only of the different arguments presented for and against the imple-mentation of ta r i f f protection. 3. Samuelson, i b i d . , p. 673. 114 disrupts the free operation of international trade and of the pr inciple of com-parative advantage, which is one commonly accepted in the discussion of inter-4 national trade. Although an exact def init ional statement of the principle of comparative advantage often takes several pages in leading textbooks on the subject, the basic components of the pr inc ip le , as compiled from David Ricardo's or iginal presentation of the theory with;which-he proposed to replace the theory of absolute advantage, are that "whenever two countries produce commodities at re lat ively different (labour) costs, i t w i l l be advantageous for each country to special ize in the production of those commodities whose costs are re lat ive ly low.""' From the basic concept advanced by Ricardo, the principle has come to mean that "a country would export the product in which i t had the greater advantage and import the commodity in which i ts advantage was less or i t had a 6 comparative advantage." Some of the fal lacious arguments which are voiced by proponents of ta r i f f s and which are not of good economic reasoning are the following. It is 7 said that tar i f fs keep money in the country:*' So they do, but they also restr ic t 4. Ib id. , pp. 649-59 and 673-74. 5. P. T. Ellsworth, International Economics, (New York, MacMillan, 1947), p. 25. 6. C. P. Kindleberger, International Economics, revised edit ion, (Homewood, I l l i no i s , Richard D. Irwin, Inc., 1958), p. 87. 7. Samuelson, op. c i t . , p. 674. 115 imports and exports, and hence the standard of l i v ing in the protected economy suffers, as do the economies of the trading partners of any country which follows such a l ine of reasoning in i ts t a r i f f operations. The next two argu-ments were used in the Tar i f f Commission hearings, and are quite commonly heard. They are that tar i f fs should be used (1) to maintain high money wages, and (2) 8 to help special interest groups. In the present context this would mean that lumber workers in the United States could expect to have continued higher money wages than lumber workers in Br i t ish Columbia i f , and when, additional protec-tive ta r i f f s were imposed, and that a special interest group, the lumbermen, would have their industry benefitted. The petit ioning lumbermen obviously did not real ize that real wages would f a l l as prices rose, and that the money wage increase, made possible by the increased t a r i f f protection, would be negated in the long run. Furthermore, i f a special interest group were favoured, the general economy of the country might be harmed by the increase in prices which i t was conceded would be a by-product in the lumber case i f additional ta r i f f s were levied and quotas were imposed. The lumber industry also had the idea that ta r i f f s should be used for re ta l ia t ion. If this l ine of reasoning were carried to i ts logical extreme, there would be very limited international trade, and the country would be firmly 9 ensconced behind an impregnable fortress of t a r i f f s . No protected industry's goods would enter the country even i f the demand for them happened to be high. 8. Ib id. , p. 678. 9. Ib id. , p. 678. 116 Another fallacious argument used by the Lumbermen's Economic Survival Committee was that which Samuelson cal ls the " s c i en t i f i c " t a r i f f . This is the idea that a t a r i f f should be imposed to "equalize the cost of production at home and 10 abroad." This idea ignores the comparative cost advantage necessary for international trade. If a l l costs and resources were identical among a l l nations, there would be no need for international trade: as i t i s , there are differences, even when the costs are apparently the same. The existence of the differences among the nations makes international trade possible. The lumbermen in the United States also used the "per i l point" argument in their request for protection. This is the argument that at a certain point, when an industry is in danger of obl iteration because of foreign competition, 11 then tar i f f s and/or quotas should be applied. Once again, the argument does not allow for the fact that special ization by the industry of a country which has an advantage may increase the advantage unt i l i t becomes absolute. If an industry is imperilled because i t can no longer use the resources at i ts d is -posal as ef f ic ient ly as other countries or other industries in the same country, then i t is time that that industry ceased i ts operations to allow the resources which i t is using uneconomically to be used to better advantage by other 12 industries. The industry deserves to be imperil led. 10. Ib id. , p. 679. 11. Ib id. , p. 679. 12. Ib id. , p. 679. 117 The third group of arguments is that consisting of those which are economically sound, and which just i fy the use of protective mechanisms in modern economies. In one such case, a ta r i f f may be used to swing the terms of trade, i .e . , the rat io of a country's export prices to import pr ices, against the foreigner. This means that part of the ta r i f f is borne by the foreigner, and not a l l of i t is at the expense of the domestic economy. The danger of 13 this type of thinking, as pointed out by Samuelson, is that i f prohibit ive tar i f f s are used they w i l l destroy trade between the countries, and there w i l l be no comparative or absolute advantage possible for either country. Thus, an optimal ta r i f f is one which has the effect of swinging the terms of trade just far enough to favour the country imposing the ta r i f f but not so far as to pre-vent a l l trade with i ts trading partners. The lumbermen used the c lass ica l argument in Washington that the lumber industry in the Pacif ic Northwest was suffering from unusual unemployment and should be entit led to t a r i f f protection to overcome this unemployment. This is one of the acceptable t a r i f f concepts, and is an application of what is known as the multipl ier effect. The effect of protection of an industry when there is undue unemployment is that for every job which is created in that industry, as a result of the protection, there are other jobs created or maintained within 14 the economy as a whole ar is ing from the consumption of the men now employed. Protection of an industry can also be just i f ied economically in terms of 15 divers i f icat ion. Putting a l l of an economy's eggs in one basket is unsound, 13. Ib id. , p. 680. 14. Ib id. , p. 681. 15. Ibid. , p. 682. 118 and good business sense dictates against such a policy because of the instab i l i ty which results from such a situat ion. Tar i f fs then may be sound which allow the existence of economic industries within a country so as to avoid complete dependence on a limited number of industries. Absolute advantage is not the aim of the economy for these industries. They may be only marginally advantageous at some periods, but nonetheless their excuse for existence is to maintain a balanced economy. II. UNITED STATES TARIFFS ON SOFTWOOD IMPORTS The commissioners of the Tar i f f Commission hearings on the softwood lumber industry in 1962 were requested by the appellants to increase the ta r i f f s on softwood lumber imports and/or impose a quota l imitation on lumber imports. Neither the quota nor the increase in t a r i f f was recommended by the Commission in i ts report to the Pres ident .^ The nominal t a r i f f which does exist and which was not changed as a result of the hearings is a cost which Canadian exporters have to consider in their costings of United States market lumber sales. The highest that the ta r i f f on lumber has ever been is $4 per thousand board feet: the lowest that i t has ever been on the major species shipped from Br i t ish Columbia is $1 per thousand board feet. The latter rate applies now to f i r , hemlock, larch, some pines, and some spruces. The dollar amount, however, has changed in significance as a portion of the value in lumber imports. The $4 per thousand board feet duty was f i r s t applied in 1931, when i t represented 16. TC Publication 79, p. 4. 119 5.4 per cent of the value. On an average ad valorem basis the t a r i f f of $4 per thousand board feet represented 24.2 per cent at i ts highest, in 1932, and 1.2 17 per cent at i ts lowest, in 1951-1952. When the United States lumber t a r i f f was f i r s t implemented in 1931 there were some subdivisions in i t . F i r , hemlock, larch, pine and spruce came under the $4 per thousand board feet c lass i f i ca t ion , while cedar, except Spanish Cedar, and a l l other softwood not otherwise specified came under a $3 per thousand board feet rate of duty. In 1936 the f i r group t a r i f f was reduced to $2 per thousand board feet, an average of 9.2 per cent ad valorem, and cedar and other species to $1.50 per thousand board feet, an average of 2 per cent ad  valorem. In June 1938 the f i r group was revised. Northern White and Norway Pine and Western White and Englemann Spruce had a duty of $0.50 imposed, which amounted to 2 per cent ad valorem, and the balance of the f i r group, including f i r , hemlock, other pine and other spruce, remained at $2 per thousand board feet. The rec lass i f icat ion divided the former f i r group into coast and inter ior species. At that time the duty on the new f i r group amounted to 10.2 per cent ad valorem, and the ta r i f f on cedar and other major softwoods, to 3 per cent ad valorem. The next major t a r i f f change occurred at the end of 1947 and was effective in 1948. At that time the General Agreement on Tar i f fs and Trade (GAIT) was implemented, and Canada and the United States were participants in 17. The figures quoted in this and the succeeding two paragraphs are taken from TC Publication 79, p. 78. the agreement. The duty f e l l to $0.25 on the pines and spruce group, and $1 per thousand board feet on the f i r group. At the same time the cedar c l a s s i f i -cation was changed so that a l l cedar except Spanish Cedar had a duty of $0.75 per thousand board feet, and a l l other softwood not elsewhere specified con-tinued at the old duty of $1.50 per thousand board feet. The cedar duty was then 0.5 per cent ad valorem: comparable figures for the other species were 18 not available to the Tar i f f Commission. The amount of duty was continued through 1961 and has not been changed since then. The 1961 ad valorem rate amounted to 0.4 per cent on the pine spruce group, 1.5 per cent on the f i r category, 1 per cent on cedar, and 1.8 per cent on a l l other softwoods. As far as the Br i t i sh Columbia coast shippers are concerned, the t a r i f f in which they are most interested is that on the f i r group, followed 19 by that on spruce. The interior shippers are interested in the ta r i f f on pine. Some cedar is shipped, but the volume is re lat ively small. Table XVIII, page 121, gives the breakdown of the production of lumber in Br i t ish Columbia in 1962 by species. It shows that those species fa l l ing into the f i r group for t a r i f f c lass i f icat ion purposes constitute about 60 per cent of the total production, while the spruce group constitutes about 26 per cent, leaving only 14 per cent for the cedar and the unspecified categories of softwood. The exact species breakdown of exports to the United States is not given as the propor-tionate production of the Province indicates the relat ive importance of each 18. TC Publication 79, pp. 8-9. 19. The f i r group consists of f i r , hemlock, larch, and some pines and spruces. These species are common in the coastal region. The spruce group consists of Northern White and Norway Pines, and Western and Englemann spruce. 121 TABLE XVIII CURRENT DUTY ON IMPORTANT SPECIES AND PERCENTAGE OF SPECIES CUT IN THE INTERIOR AND ON THE COAST OF BRITISH COLUMBIA 1962 Species Coast B i l l i on f.b.m. % Interior B i l l i on f.b.m. % Duty per thousand f.b Douglas F i r 985 32% 1,157 40% $1.00 Hemlock 1,391 45 89 3 1.00 Balsam 20 1 37 1 1.00 Cedar 550 18 83 3 0.75 Spruce 61 2 1,272 44 1.00/0.25 Pine 25 1 175 6 1.00/0.25 Others 26 1 80 3 1.50 100% 100% Source: Br i t i sh Columbia Lumber Manufacturers Association, Annual Report 1962, Table 5. United States Tar i f f Commission, Softwood Lumber -- Report to the  President on Investigation No. 7-116, (TEA-I-4) Under Section 301(b) of the  Trade Expansion Act of 1962. TC Publication 79, (Washington, Government Printing Off ice, February, 1963), pp. 78-79. 122 of the ta r i f f c lass i f i cat ions . Hemlock and balsam are often shipped together as the species are very similar in appearance and qual i t ies , and also this i s the way in which the two species have been marketed in the past. It is assumed in this case that the hemlock rate w i l l be applied by the ta r i f f authorities in the United States. The figures available do not distinguish between the d i f -ferent species of pines and spruces and therefore i t w i l l depend on the ind iv i -dual shippers consignments as to which duty rate is applied. III. VOLUME AND VALUE OF LUMBER IMPORTS INTO THE UNITED STATES Table XIX, page 123, shows the volume of dutiable imports into the United States by species. The duty may have affected the volume of Canadian exports seriously when i t was 24 per cent ad valorem. The amount of dutiable imports at that time was only 97 mi l l ion board feet. The shipments of the 1930's are very small when compared to those made in the last few years. The duty has fa l len in value to a small fraction of what i t was, and has become nominal in amount and effect. Even i f the duty had been raised to the figure suggested by the petitioners at the hearings, $6 per thousand board feet, the rate would have been only about 9 per cent ad valorem. Even had the rate been raised, i t is not l ike ly that the Canadian shippers would have been deterred by the duty and stopped se l l ing lumber in the United States. The ad valorem rate of duty would have fa l len below 9 per cent very shortly as the American pro-ducers would have raised their prices i f i t had been imposed. Table XX, page 124, gives the values of the two major species imported into the United States in recent years. The wholesale prices for domestic 123 TABLE XIX VOLUME OF DUTIABLE IMPORTS OF SOFTWOOD INTO THE UNITED STATES BY MAJOR SPECIES 1955-1961 (IN MILLIONS OF BOARD FEET) Year 1961 1960 1959 1958 1957 1956 1955 Northern Pine 1156 1035 1099 803 751 832 933 F i r Group 2548 2322 2400 2091 1736 2036 2097 Cedar 296 272 242 258 221 258 285 Other Softwoods 3 2 2 2 4 5 11 Source: United States Tar i f f Commission, Softwood Lumber -- Report to the President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b)  of the Trade Expansion Act of 1962. TC Publication 79, (Washington, Government Printing Off ice, February, 1963), pp. 78-79. 124 TABLE XX AVERAGE ANNUAL VALUE OF DOUGLAS FIR AND SPRUCE IMPORTED INTO THE UNITED STATES AND WHOLESALE PRICES OF UNITED STATES DOUGLAS FIR 1950-1962 (PER THOUSAND BOARD FEET) Douglas F i r Spruce Year Domestic Imported Imported 1962 $58.36 $58.27 1961 $71.30 61.62 70.04 1960 75.00 63.00 72.30 1959 78.90 67.44 77.63 1958 69.40 66.70 73.44 1957 71.80 63.46 74.14 1956 81.20 1955 80.90 74.43 79.73 1950 73.30 70.74 79.27 Source: United States Bureau of the Census, S ta t is t i ca l Abstract of the United States, (Washington, Government Printing Off ice, May 1962), p. 352, Table 471, and p. 692. , S ta t is t i ca l Abstract of the United States, 83rd ed. , (Washington, Government Printing Off ice, 1963), p. 360, Table 479. 125 Douglas F i r in the United States during the same period are given for comparison The table shows that the unit value of spruce has been remarkably steady. The f a l l in the wholesale price of Douglas F i r since 1955-1956 shows the general trend of most species. The price of Canadian lumber has been from $3 to $12 per thousand board feet lower than that of American lumber at the wholesale leve l . At re ta i l level the difference is only $1 to $2 per thousand board feet. Table XXI, page 126, l i s t s the average price per thousand board feet received for a l l species for the f i r s t four months and for the entire year of the years from 1955 to 1962 inclusive. There has been a decline in the average prices for a l l species in a l l markets except Austral ia since 1955. These figures were obtained from a Canadian source, Seaboard Lumber Sales Company Limited, and tend to show a lower average price than those given in Table XX, page 124, which were obtained from the United States Stat is t ica l Abstract. IV. EXCHANGE RATE OF THE CANADIAN DOLLAR As most of the imports of softwoods into the United States come from Br i t i sh Columbia, i t is of interest to American buyers to know what is taking place in regard to the value of the Canadian dol lar . In 1952 the Canadian government decided that a free exchange rate would be best suited to Canada's economy. The free exchange rate applied to the Canadian dollar unt i l 1962, when i t was decided to go off the free exchange and peg the Canadian dollar 20. Lumbermen's Economic Survival Committee and National Lumber Manufacturers Association, Brief Before the United States Tar i f f Commission in the matter of INVESTIGATION NO. 7-116, SOFTWOOD LUMBER, (November, 1962, mimeographed), p. 29. Hereinafter referred to as L.E.S.C. 126 TABLE XXI AVERAGE ANNUAL PRICE OBTAINED IN BRITISH COLUMBIA EXPORT TRADE FOR ALL SPECIES OF SOFTWOOD PER THOUSAND BOARD FEET FREE ALONG SIDE 1955-1962 Year F i rs t Four Months Entire Year U.K. Aust. So. A f r . U.S. U.S. A l l A l l Water Rai l Markets Markets 1962 67.00 87.50 72.00 58.50 47.50 63.50 64.50 1961 69.00 83.50 70.00 53.50 44.50 61.50 63.00 1960 81.50 99.50 81.00 57.00 68.00 67.50 64.00 1959 73.00 77.00 67.50 56.50 57.00 61.50 66.50 1958 72.50 76.50 71.00 54.00 64.00 65.00 63.50 1957 75.00 91.50 72.00 50.50 47.00 68.00 67.50 1956 79.00 93.50 78.00 59.50 64.50 71.00 74.00 1955 73.50 85.00 80.00 59.50 61.50 71.00 73.00 Source: Seaboard Lumber Sales Company Limited. The figures have been rounded to the nearest half dol lar . 127 within certain specif ic l imi ts . The exchange rate for the Canadian dollar was set at U.S. $0,925 plus or minus one per cent. During the free exchange dollar era, the forces of supply and demand set the value of the Canadian dol lar , and for purposes of convenience the Canadian dollar was expressed in terms of the American dollar in international monetary c i r c l es . (The American dollar and the pound ster l ing are used as base currencies in terms of which world currencies are expressed.) During the free exchange decade (1952 to 1962) there were variations which had been unexpected in the value of the Canadian dol lar . When the dollar was at a premium over the American dol lar , Canadian exporters received less for their lumber, as they were paid in United States dol lars . If exporters tr ied to raise prices to recover the premium difference, they were operating under disadvantageous competitive conditions. Now that the dollar is at a discount, the Canadians are able to charge the going price for their lumber, but when payments for the lumber are converted into Canadian dol lars, they get more than the American price in terms of dol lars, so that returns to the exporter are increased. Table XXII, page 128, shows the annual fluctuation of the Canadian dollar in terms of American dollars during the free exchange decade. 128 TABLE XXII RATE OF EXCHANGE: UNITED STATES DOLLARS PER CANADIAN DOLLAR 1952-1962 Year Rate 1962 $0,936 1961 0.988 1960 1.031 1959 1.043 1958 1.030 1957 1.043 1956 1.016 1955 1.014 1954 1.027 1953 1.016 1952 1.021 Source: United States Tar i f f Commission, Softwood Lumber -- Report to the President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b)  of the Trade Expansion Act of 1962. TC Publication 79, (Washington, Government Printing Off ice, February 1963), p. 90. CHAPTER IX RAIL SHIPPING COSTS AND PATTERNS, AND THE LOCAL MARKET I. RAIL FREIGHT RATES FOR LUMBER The importance of the r a i l market for lumber has been increasing since the end of World War II. Before the war most lumber dispatched from Br i t i sh Columbia and the Pac i f ic Northwest to domestic or foreign markets went by water. Only a re lat ively small amount went by r a i l , and almost none by truck. After the war the importance of the r a i l market increased rapidly and is s t i l l increasing. Road transportation systems have also entered the lumber transport f i e ld and now serve some customers previously served by r a i l . There are many separate freight rates applicable to lumber sent by r a i l depending upon point of or ig in , destination, and routing. Simplifications of the number of rates involved has been achieved by dividing the continent into general regions, with standardized freight rates within and between the 1 regions. The detailed freight rates and routings can be obtained from any one of the many railway off ices throughout the United States and Canada. A few typical rates are given in Table XXIV, page 130, Shippers from the lumber pro-ducing areas of western Washington and the state of Oregon in the Paci f ic Northwest occasionally have a small r a i l freight advantage over shippers in 1. One of the regions involved in the local lumber trade from the Paci f ic Slope is that which includes the greater Vancouver area and extends down through coastal Washington and Oregon. There is a separate region for the northern part of the province. There are several regions in eastern Canada and the northeastern United States in which special rates apply. This information was obtained by the writer in an interview with Mr. Norman Napier, Freight Adviser of Canadian National Railways in Vancouver. 130 TABLE XXIII RAILWAY ESTIMATED WEIGHTS FOR WESTERN SOFTWOOD SPECIES (PER THOUSAND BOARD FEET) Species Green Part Dry Dry Hemlock 4400 3600 2700 Ponderosa Pine) ) 4600 4000 3600 Yellow Pine ) Cedar 3500 3000 2500 Jack Pine 4000 3000 2700 TABLE XXIV RAILWAY FREIGHT RATES FOR LUMBER FROM THE PACIFIC NORTHWEST AND SOUTHERN BRITISH COLUMBIA TO SELECTED DESTINATIONS (IN CENTS PER TON MILE) Destination . Chicago New York San Francisco Los Angeles 34,000 ' lbs . 103% 126% 50,000 lbs. 93% 108% 60,000 lbs. 87% 96% 70,000 Loaded Fu l l Vis ible Capacity lbs . Incentive Ordinary 134 141 141 148 84% 91% Source for both Tables: Mr. Norman Napier, Freight Adviser for the Canadian National Railways in Vancouver, in an interview with the writer, August, 1963. 131 the Vancouver and New Westminster areas of Br i t i sh Columbia or shippers in Prince George in northern Br i t ish Columbia. Rai l freight charges are based on the ton mile. The railways estimate the cost of moving lumber from the west to the markets in terms of units of 100 pounds weight instead of the usual thousands of board feet. To fac i l i t a te freight rate quotation, the railways have established estimated weights for the different species. Those pertinent to this paper are given in Table XXIII, page 130. None of the l i s t s made available to the writer showed Douglas F i r , but according 2 to Seaboard Lumber Sales Co. L td . , the normal weight used for Douglas F i r is 2300 pounds per thousand board feet. The standard loads carried by railways must be considered in combination with these estimated weights. The normal car used for carrying lumber is 40 feet s ix inches long. Table XXIV, page 130, shows the load categories used for freight purposes together with the rates to f re -quently occurring destinations. The rates to eastern and central United States points are the same from Vancouver and the surrounding area, Seattle, Washington, and Portland, Oregon, a l l of which are in area #1. In the Railway Tar i f f Schedules the Fu l l V is ib le Capacity rates are shown in two parts. One part applies when the railway car is loaded to f u l l v i s ib le capacity, contains not less than 55,000 pounds, and is consigned to a point within the incentive area: the other, higher, part applies when a s imilar ly loaded car is destined for a point 3 that is not within the incentive area. Underweight consignments are charged 2. Interview of the Writer with Mr. R. Edgett, General Sales Manager of Seaboard Lumber Sales Co. Ltd. 3. Interview of the Writer with Mr. N. Napier, Freight Adviser of Canadian National Railways in Vancouver. 132 at the f u l l r a t e . The incent ive -area d i f f e r e n t i a l was introduced by the r a i l -ways to persuade lumber shippers to ship the maximum amount of t h e i r orders by r a i l . I t app l i e s to c e r t a i n areas i n the eastern United States and Canada whose exact borders are def ined i n the r a i l t a r i f f schedules . The incent ive area boundary i s extremely complicated, as i t f luc tuates from one s t a t i o n to another along the d i f f e r e n t r a i l l i n e s enter ing the a r e a . An example of the complexity of the r a t e system i n use i s that the r a t e from Vancouver to Winnipeg i s higher than that from P o r t l a n d to Winnipeg for the same load of lumber: the Canadians pay $1.39 per ton-mi l e , whi le the non- incent ive ra te for P o r t l a n d shippers i s $1.41, and the incent ive ra te i s $1.34 per ton-mi le . There i s a stop o f f system a p p l i c a b l e i n par t s of Canada whereby a p a r t i a l l y loaded car can be stopped over before reaching i t s d e s t i n a t i o n and the load completed i n order to take advantage of the lower o v e r a l l rates a p p l i -cable to f u l l l oads . Stop over charges range between $16.20 and $19.50. A s i m i l a r p r i v i l e g e i s a v a i l a b l e to lumbermen of the P a c i f i c Northwest. A t the present time a surcharge i s l e v i e d on Canadian r a i l f r e i g h t t r a v e l l i n g on American l i n e s , amounting to f i v e per cent of the t o t a l f r e i g h t . This i s a d i r e c t r e s u l t of the devaluat ion of the Canadian d o l l a r . I I . RAIL SHIPPING PATTERNS In the process of the compi lat ion of the data for t h i s s ec t ion i t became apparent that there were severa l d i s t i n c t patterns for the product ion , inventory , and t o t a l shipments of lumber from the prov ince ' s m i l l s . They are i l l u s t r a t e d 133 in Figures I, II and III, pages 134, 135 and 136 respectively. Although volume has increased overall since 1955, provincial patterns for production, shipment and inventory have not changed. It can be seen from Figure I that there is a bui ld up of stocks from about September through to March of the following year, followed by a steady decline t i l l the end of the summer. There is a clear pattern for production in the f i r s t s ix months of every year, but the last six months are not so consistent. There is a general increase in production from January to March, a sharp decline in A p r i l , and a rapid recovery in May. The recovery is typical ly followed by a decline in production in July, but thereafter there is no clear pattern. The Br i t i sh Columbia industry has a trade union contract year ending in July, and any strikes would f a l l in this part of the year or l a t e r „ thus contributing to the inconsistency of the pattern. The distort ion of the patterns in 1959 was caused by a combination of several factors. The biggest single disrupting factor was an extended str ike over wage settlements which temporarily crippled the industry for three months in the middle of summer. Combined with this was the fact that the f i r e hazard in the summer of 1959, while not extreme, had closed down some operations even before the str ike had occurred. The distorted pattern for the rest of the year was caused by the attempts of the lumber producers to make up for the lost pro-duction and to capital ize on the economic boom which had arisen in the United States in that year. Shipments also display standardized but different patterns in both the coast and inter ior regions. On the coast, there is a gradual bui ld up of ship-ments to a maximum in May, a sharp decline in June and July, and a part ia l 900.^ 134 -iH — 1951 ' LUMBEfc INVENT0E.Y —1^5)3 -LUMBER. INVENTORY — I9_>l -LUM&EIZ INVENTORY AVEBA6e • LUMBER INVENTORY PBZ YEAK FKPM l<355 TO 19(2)2 TFT J J A .. . 6 • :.. P I <•>ufze . i. MILLIONS Of FEET LUMPEK BRITISH.'..COLUM&lA F0IZ V / A R . I O U 6 N M0MTH& INVENTORY IN Y E A K * . 135 M I L L I O N S OP &Ok\ZZ> F E E T L U M B E R P K O P U c V T l P N |K1 Fl cSUEE 3 l MILLIONS OF BOAEP FEET LUM&EK SHIPMENT'S, 3 V KAIL ,TEUdK. A M P WATER, &KIT16.H COLUMBIA C0A4>T ANP INTER lOEl A V E K A 6 E 7 . T H O U G H 1355.Ti? I9<*2. 137 recovery in August. Thereafter the flow of shipments is more or less steady, with a s l ight decline towards the end of the year. The pattern for the interior is quite dif ferent. There is a steep r ise in shipments from January to March, and thereafter very sl ight variation from month to month unt i l October, the time of the low in prices, when there is a drop back to the January leve l . The average for shipments from the province as a whole is influenced at different times of the year by either the coast or the inter ior . There is a sharp r ise in average shipments from January through March, followed by a sl ight decline in A p r i l , caused by the decline in shipments from the inter ior in that month. There is then a recovery unt i l the peak is reached in May, followed by a decline in July due to the decline in coastal shipments, and a r i se in August, also influenced by the coast. Shipments are f a i r l y steady un t i l l October, when they start dropping back to the January leve l . The coast can continue production throughout the winter months while the inter ior is prevented from doing so by the weather, so that in winter the coast influences the provincial average more than does the inter ior . The delay between production and shipment of lumber ranges between 60 and 90 days. H I . TRUCKING COSTS The truck freight costs are not fu l l y comparable to r a i l rates, as different systems of charging are used. However, the overall cost of sending lumber or. shakes down the Pac i f ic coast from Vancouver is about the same by road and by r a i l . It costs about $500 to send a typical r a i l car-load of shakes from Vancouver to Southern Ca l i forn ia . The rate for a f u l l truck load 138 of shakes to the same point is about $420. However, the truck can carry much less than the railway car. The normal heavy duty truck load is about 40,000 pounds, and the r a i l car may carry between 60,000 and 70,000 pounds. The difference between the r a i l and truck freight rates, when converted to a rate per one hundred pounds of freight, are as follows. Rai l freight per hundred pounds based on r a i l car lots of 55,000, 60,000, and 70,000 pounds are 91c, 83c, and 71c respectively, while a rate for about 40,000 of shakes sent by road to Southern Cal i fornia is about 95c per hundred pounds. The rates themselves are not a l l of the cost involved: r a i l cargo may have to be delivered to the customer by road at the other end, and the cost of this service must be added to the cost of freighting the lumber. There is no general figure which can be 4 given for this delivery charge as circumstances vary so much from case to case. IV. DOMESTIC CONSUMPTION OF BRITISH COLUMBIA LUMBER The local market for lumber in Br i t ish Columbia is a substantial one, absorbing more than one-fifth of the total lumber produced in the province. A very large proportion of shipments for local sale is made by truck. Table XXV, page 139, shows the proportion of total shipments sold in the domestic market. Included in the total for Canada is that portion of Br i t i sh Columbia's production which does not leave the province. It is generally about one-fourth of total shipments, having ranged from 21.2 per cent in 1962 to 27.6 per cent in 1959. Consumption has gradually declined since the peak in 1959. 4. The information in this paragraph was supplied by Mr. J . N. Lucas, Off ice Manager of Whonnock Lumber Company. 139 TABLE XXV DISTRIBUTION OF LUMBER SHIPMENTS FROM BRITISH COLUMBIA TO PRINCIPAL MARKETS AS A PERCENTAGE OF TOTAL SHIPMENTS FROM BRITISH COLUMBIA (1955-1962) Year 1962 % 1961 % 1960 7. 1959 7. 1958 % 1957 % 1956 7. 1955 7. United States 50.5 48.6 45.7 47.7 44.4 38.6 40.2 39.0 United Kingdom 9.3 9.0 11.2 6.9 7.4 10.6 9.2 16.0 Canada 30.4 32.0 33.8 38.2 40.0 40.3 41.2 35.0 Other Countries 9.8 10.4 7.2 7.2 10.5 10.5 9.4 10.0 Total 100 100 100 100 100 100 100 100 Source: Government of Canada, Dominion Bureau of S ta t i s t i cs , Production, Shipments, and Stocks on Hand of Sawmills in Br i t i sh Columbia, (Ottawa, Queen's Printer, 1955-1962), passim. V. RAIL AND CARGO LUMBER MARKETS COMPARED 140 Table XXVI, page 141, breaks down shipments to the United States according to the shipping medium used. It shows the increasing importance of United States markets for coast r a i l shippers and truck shippers. The inter ior r a i l market is decreasing in importance. During the period covered in the Table, 1955 to 1962, the total volume of shipments was r is ing steadily. Table XXVII, page 141, gives the actual volumes shipped during the period under con-sideration. There was a slow decline in shipments of lumber from the coast following the 1955 boom in the United States. The 1959 boom in the United States did not have an effect on Br i t ish Columbia unt i l the middle of the year, when stocks of lumber began to drop to very low levels due to the unforeseen demand. The industry on the coast of Br i t i sh Columbia increased i ts shipments to a record high level in 1960, and has continued on the upswing ever since. The inter ior has steadily increased i ts production during the last seven years, 5 and produced more than half as much again in 1962 as i t did in 1955. That Br i t i sh Columbia shippers enjoy a considerable f inancial advantage over their American competitors in the cargo f ie lds has been shown above. The same cannot be said of the r a i l market. Profits for coastal Br i t i sh Columbia shippers, therefore, depend largely on the proportions of their general output which are sold in the United States by r a i l or water. The normal expected prof i t at m i l l , i . e . , before administrative expenses, is about $4 to $6 per thousand board feet. Canadian mil ls do not seem to be as eff ic ient in their overall 5. In Appendix C at the end of this paper w i l l be found tables which show (1) total shipments for the coast and inter ior month by month from 1955 to 1962, (2) production and stocks for Br i t i sh Columbia as a whole for the same period, (3) lumber shipments (according to transportation method) to the United States for the period, and (4) distr ibution of lumber shipments from Br i t i sh Columbia to i ts pr incipal markets. 141 TABLE XXVI DISTRIBUTION OF LUMBER SHIPMENTS FROM BRITISH COLUMBIA TO THE UNITED STATES BY TRANSPORTATION METHOD AND ORIGIN 1955-1962 (AS A PERCENTAGE OF TOTAL SHIPMENTS TO THE UNITED STATES) Year 1962 1961 1960 1959 1958 1957 1956 1955 cy at OJ at m OJ cy m _ _ _ _ _ _ /o /o to to lo to /o to By Rai l from Coast 46.0 41.5 37.7 45.5 26.2 39.2 43.3 41.6 from Interior 18.4 21.0 23.4 22.6 40.5 40.4 37.8 36.4 By Water from Coast 34.2 34.4 35.2 31.9 33.3 20.4 18.9 22.0 By Truck from both 1.4 3.1 3.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 % of B.C. Shipments sent to U.S. 50.5 48.6 45.7 47.7 44.4 38.6 40.2 39.0 TABLE XXVII VOLUME OF SHIPMENTS FROM BRITISH COLUMBIA TO ALL DESTINATIONS 1955-1962 (IN MILLIONS OF BOARD FEET) Year 1962 1961 1960 1959 1958 1957 1956 1955 Coast 2954 2903 2755 2304 2482 2344 2422 2694 Interior 1936 1743 1542 1651 1582 1282 1245 1190 Source of both Tables: Government of Canada, Dominion Bureau of S ta t is t i cs , Production, Shipments, and Stocks on Hand of Sawmills, in Br i t ish Columbia, (Ottawa, Queen's Printer, 1955-1962), passim. 142 operations as some of the American mi l ls because their prof i t should surely be larger since they have an advantage of $7.50 to $8.00 per thousand board feet in loading costs, $12.00 per thousand board feet in sea freight, and a large but varying advantage in stumpage. The mi l l that ships by cargo can send i ts lumber green, se l l ing i t as fast as i t is produced. Mi l l s that se l l in the r a i l market may ship their lumber green, par t ia l l y dried, or k i ln dried. There is a price d i f ferent ia l of between $5 and $10 per thousand board feet for k i ln dried lumber 6 over green lumber offered by lumber buyers, depending upon the end use of the lumber. A i r dried lumber w i l l not fetch a higher price than green lumber, but i t is cheaper than green lumber to r a i l as that part of i ts weight due to the water i t contains has been reduced. The amount of investment required for drying varies with the type of operation carried out. It ranges from the cost of f u l l drying k i ln f a c i l i t i e s to the cost of holding lumber in stock a few weeks after cutting to allow par t ia l a i r drying. 6. Crow's Price Reporter (Portland, Oregon). This pamphlet, published weekly, l i s t s the r e ta i l prices real ized for green and k i ln dried Douglas F i r studs (2"x4"x8'). CHAPTER X AN ANALYSIS OF THE MAIN BRIEFS SUBMITTED TO THE UNITED STATES TARIFF COMMISSION IN OCTOBER 1962 I. A GENERAL SURVEY OF THE HEARINGS No organization l ight ly undertakes the preparation and defence of a case before such a body as the United States Tar i f f Commission unless i t has a case i t can support against any known opposition. There is a great deal of hard work involved in the preparation and presentation of a l l the facts relevant to the case; there are contacts to be made with other interested parties as well as a f u l l assessment of the opposition that is bound to ar ise. A statement was made to the writer by one of the members of the Canadian 1 team whom attended the hearings that probably one of the reasons why the action in i t iated by the Lumbermen's Economic Survival Committee did not succeed was that there had been inadequate preparation and ver i f i cat ion of material. This remark does not do justice to the American witnesses who appeared before the Commission but i t does indicate the attitude that was taken by the Br i t i sh Columbia lumbermen in the defence of their r ight to se l l lumber in the United States. The Canadians did not endeavour to present a counter case before the Commission: their sole tact ic was to cast doubt on the va l id i ty of the data and arguments presented by the petit ioners. They thus avoided the revelation of any data about Br i t i sh Columbia operations which were not raised in the f i r s t instance by the United States lumbermen. 1. Mr. Les l ie R. Reed, Stat ist ic ian and Economist for the Council of Forest Industries of Br i t ish Columbia, in an interview with the writer. 144 The investigation by the United States Tar i f f Commission was made on the basis of an application by the Lumbermen's Economic Survival Committee of Seattle, Washington. The scope of the investigation was limited i n i t i a l l y to the investi-2 gation of the imports of f i r , spruce, pine, hemlock, and larch. It was later expanded to cover a l l species of softwood imported into the United States. The petitioners started the hearings with the presentation of a long 3 paper in which they outlined their case for an increase in the ta r i f f on lumber and the imposition of a quota on the imports of softwood lumber. Although i t is not possible within the context of United States trade practice to l imit American trade with any specif ic a l l y or friendly nation, i t was clear that the lumbermen had Canada in mind when they petitioned the United States govern-ment. The decision of the Commission applies to a l l softwood lumber exporters to the United States, but the amount coming from countries other than Canada is 4 so small as to be ins ignif icant . It was known to a l l parties that the Trade Expansion Act of 1962 was under active consideration by Congress at the time the action was started and 5 that the new act would probably be in effect before the hearings were completed. 2. TC Publication 79, p. 2. 3. Mr. Doyle, Executive Vice-President of the National Lumber Manufacturers Association, was the f i r s t witness for the Lumbermen's Economic Survival Committee. Transcript, p. 16. 4. TC Publication 79, p. 88. 5. Ib id. , p. 2. 145 The pertinent sections of the new act are: Section 301(b)l: (The Tar i f f Commission) shal l promptly make an investigation to determine whether, as a result in major part of concessions granted under trade agreements, an a r t i c le is being imported into the United States in such increased quantities as to cause, or threaten to cause, serious injury to the domestic industry producing an a r t i c le which is l ike or direct ly competi-tive with the imported a r t i c l e . Section 301(b)2: In making i t s determination...the ta r i f f com-mission shal l take into account a l l economic factors which i t considers relevant, including id l ing of productive f a c i l i t i e s , inab i l i ty to operate at a level of reasonable p ro f i t , and unem-ployment or under-employment. Section 301(b)3: For purposes of paragraph (1), increased imports shal l be considered to cause, or threaten to cause, serious injury to the domestic injury concerned when the t a r i f f commission finds that such increased imports have been the major factor in causing or threatening to cause such injury.^ The act was in fact signed into law during the hearings, and the hearings were concluded under i ts authority. The Lumbermen's Economic Survival Committee summarized i ts case in a short pamphlet which was submitted to the interested parties after the hearings were completed. The other major organizations which had submitted individual briefs or statements to the Commission also summarized their cases and made the summaries public after the hearings. Both sides were able to use copies of the 7 transcript of the hearings in the preparation of their summaries. The trans-script of the hearings is contained in seven volumes, and runs to some 1300 pages. In addition, there are many individual br ie fs , some of which were not incorporated into the transcript as they were presented as exhibits rather than read aloud. 6. F ierst and Cooper, op. c i t . , pp. 2-3. 7. TC Publication 79, p. 2. 146 I I . THE PRINCIPAL ARGUMENTS OF THE PACIFIC NORTHWEST LUMBERMEN One of the main concerns of the Lumbermen's Economic S u r v i v a l Committee was the d e f i n i t i o n of the words "major part" and "major fac tor" , as the T a r i f f Commission was asked to inves t iga te the softwood lumber industry under terms of Sec t ion 301(b) of the Trade Expansion Act i n which these expressions occur . The Committee f e l t that i t was impossible to ass ign a q u a n t i t a t i v e value to the e f fec t of the imports and i n th i s way to determine whether or not the imports were a major part or major fac tor i n causing i n j u r y to the American softwood lumber i n d u s t r y . Because of the i m p o s s i b i l i t y of making such a mathematical d i s t i n c t i o n as would be needed, they f e l t that the intent of the l e g i s l a t i o n should be fo l lowed. The Committee was c e r t a i n that under t h i s i n t e r p r e t a t i o n of the a c t , the i n j u r y sustained by the domestic industry r e s u l t i n g from Canadian imports would be considered major, and arose because of trade con-cessions granted to the Canadians. "While the i n t e n t i o n of the l e g i s l a t u r e must be ascer ta ined from the words used to express i t , the manifest reason and obvious purpose of the law should not be s a c r i f i c e d to a l i t e r a l i n t e r p r e t a t i o n 8 of such words." The Committee quoted t h i s passage from a Federa l court case of 1897 as a concise expression of i t s o p i n i o n . I t should be noted that the complaint so far considered does not mention the s p e c i f i c point that the Canadians may have had competit ive advantages over the United States producers , but only that the domestic industry was s u f f e r i n g i n j u r y , and that the i n j u r y arose from trade concessions granted to the Canadians. For example, there had been a 75 per cent r e d u c t i o n i n the amount of the t a r i f f a p p l i c a b l e to most lumber imports . 8. L . E . S . C . , op. c i t . , p . 10. 147 A second point made by the Committee was that the ad valorem rate of 9 the current t a r i f f had fa l len unt i l i t was now negl igible. The Committee asked that i t be raised to the maximum permitted under the Trade Expansion Act of 1962, which would make the ad valorem rate just under 10 per cent. They did not mention the fact that as soon as the duty was imposed, prices would r i se , and the _d valorem rate would f a l l again. The third thing stressed by the Committee was the exemption granted to Canadian exporters from marking their lumber. They fe l t this was detrimental 10 to the domestic industry. The Customs Administrative Act of 1938 declared that lumber imported into the United States must be marked to show the country of or ig in . There was a proviso included in the legis lat ion which permitted the President of the United States to suspend this requirement in accordance with a trade agreement made with Canada in the same year. The General Agreement on Tar i f fs and Trade continued the exemption granted.to Canada in 1938. Lumber imported from Canada is also exempted from the rul ing that unmarked imported 11 lumber is subject to an additional duty of 10 per cent. The subject of marking goods imported into the United States was raised by President J . F. Kennedy in a memorandum sent to Congress in 1962. He said: The original purpose of marking duties was to assure that labels as to country of origin could be re l ied upon by American con-sumers of imported goods. At present these duties serve the additional purpose of helping to prevent mislabeling of products 9.. Cf . Supra, p. 122. 10. L.E.S.C., op. c i t . , p. 13. 11. L.E.S.C., op. c i t . , p. 17. 148 of the Communist bloc as products of the free world countries in order to evade the higher duties placed on Communist goods and other restr ict ions of trade that would benefit our adversaries. The Committee considered that marking ensured that the provisions of the Buy 13 American Act be complied with. They thought that some lumber yards would not stock Canadian lumber i f i ts country of origin were shown. These three points were the ones upon which the lumbermen of the Paci f ic Northwest placed most weight. Further factors which they l is ted as proofs of injury are l i s ted below. III. SECONDARY ARGUMENTS BY THE PACIFIC NORTHWEST LUMBERMEN The lumbermen stated that many of the smaller communities throughout the west depend to a large extent on the healthy operation of the lumber industry. Failure of the industry in these areas would i n f l i c t economic hardship on the communities. They said that although h is tor ica l l y the United States imported large quantities of lumber, none of the imports was necessary because raw materials, manpower and f a c i l i t i e s were a l l available in the United States and could pro-14 duce a l l the softwood needed. In this argument they fa i led to take into con-sideration the concept of comparative advantage in international trade. Further-more, i f the production units in Canada which have come into being because of 12. Ibid. 13. TC Publication 79, op. c i t . , p. 11. 14. L.E.S.C., op. c i t . , p. 21. 149 the large American market, were suddenly id led, the resulting shock to the Canadian economy would affect adversely the substantial Canadian-American trade, which as a whole is very much in the Americans' favour. There are indeed large resources of softwood lumber available in the United States, but the comparative advantage of lumbermen in the Paci f ic Northwest has been decreasing over time. The timber is now being used by other forest product industries in which the United States has a favourable comparative advantage, due largely to technologi-cal advance. The lumbermen stated that the softwood lumber industry in the Pacif ic Northwest had suffered mi l l closures during the period covered by the investi-15 gation. This is quite l i ke ly , as there were price fluctuations during the 16 period, and almost a l l industries have marginal operators in them. The larger the total number of production units in an industry, the larger the number of marginal producers who w i l l decide that i f prices are fa l l ing the time has come to get out of that particular business. Since the end of World War II, prices have fa l len s l ight ly and costs have r i sen. A table was given in the findings of the Tar i f f Commission in which index values for stumpage of soft -wood lumber, the price of a l l lumber, and the price of a l l commodities, were l i s t ed . The table shows that there has been a downward trend in lumber prices of 9 points (based on 1947-1949 values as 100), while at the same time there has been an increase in the stumpage price index of 49 points. The general 17 index for a l l commodities on the same basis shows an increase of 8 points. 15. TC Publication 79, p. 82. 16. Ib id . , p. 100. 17. Ibid. 150 One of the c r i te r i a for petit ioning for protective ta r i f f s and quotas under the Trade Expansion Act of 1962 is a demonstrable inab i l i ty of an industry to operate at a reasonable p ro f i t . Because of the fa l l ing prices and r i s ing costs i t is probable that prof i ts as a whole over the entire industry were f a l l i n g . Economic cycles affect the amount of profit possible within an industry, and competition from foreign imports w i l l also keep prof i t margins down. The emphasis in the United States on large integrated units producing a great proportion of the total output of the industry means that the large industr ial units also w i l l show a decrease in prof i ts when conditions are not as satisfactory in the economy as a whole as the industry might l i ke . A decline in the prof i ts of the whole forest products industry would support the lumbermen's claims that softwood lumber producers are faced with circumstances that make prof i ts hard to come by. The d i f f i cu l t y l ies in the def init ion of "reasonable" p ro f i t s . No doubt some operators would be sat isf ied with making any prof i t at a l l , while others consider that anything less than the 5 or 6 per cent net return on sales after taxes, which was in fact achieved by the industry as a 18 whole in the years 1958 and 1959, is inadequate. The lumbermen said there has been a downward trend in softwood lumber production in the United States. This is indeed cause for worry to those for whole lumber is their sole means of survival , i .e . , the small non-integrated mil ls in the country. For the large integrated mil ls a decline in one l ine of production is offset by an increase in another. The large units are in d i f f i -18. L.E.S.C., op. c i t . , p. 24. 151 cult ies only when they find themselves in a posit ion where the production of a l l their lines must be reduced because of economic conditions beyond their 19 control . Although no agreement was reached as to exactly what the decline in employment in the lumber industry in the Pacif ic Northwest had been, i t was conceded by both parties that there had been an overall decline in employment in the industry. The Committee stated that there had been a decline in sales of lumber. Consumption of lumber in the United States had decreased, but the consumption of other lumber products had increased. The inventory of lumber at year-end in the United States had also increased. They said that under normal circum-stances the decline in the number of production units in operation coupled with the decrease in employment in the industry would have taken up the slack caused by the decline in sales. The increase in inventories, therefore, demonstrated that conditions in the industry were not normal. Their statement that there had been a spectacular increase in the volume of imports into the United States was well founded. The increase had taken place in spite of a f a l l in the overall consumption of lumber in the United States. Lumber is a very price-elastic commodity, i e . , any increase in the 20 price encourages consumers to switch to competitive materials, when i t is more economical to use the substitute than to use lumber. In some cases the 19. L.E.S.C., op. c i t . , p. 26. 20. N.A.H.B., op. c i t . , pp. I j3. 152 alternative material is a forest product, e .g . , plywood, and in some cases i t is not, e .g . , aluminium siding. These considerations affect producers on both sides equally. The foreign supplier is aware that there is a market for his lumber in the United States at a price for which he can profitably export i t . Factors which may raise the costs for domestic producers, such as the Jones Act or the policy of the United States Forest Service, are important to the foreign softwood supplier of the United States market as they make i t possible for him to compete in the United States with the domestic producers, and enable him to real ize a higher price than he would otherwise be able to ask. The Committee stated that the decline in prices over the past few years had been caused by increasing imports in the face of declining production. ^ Canadian pr ices, they said, were usually $1 per thousand board feet lower than 21 those for domestic lumber at the r e ta i l leve l . It has been shown elsewhere in this paper that the Br i t i sh Columbia exporter could offer his lumber at much lower prices than he actually does because of his cost advantages in stumpage and freight costs. The Canadians, however, have so far preferred to s e l l at a competitive price and maximize their p ro f i t s . the price of lumber has been determined to a considerable extent by the ava i lab i l i ty of substitute materials, and this is the chief explanation for the relat ive s tab i l i t y of lumber prices in the last decade. Imports from Canada, representing over this period about 10 per cent of the United States supply, have not had an appreciable effect on the pr ice . It may be conceded that under current circum-stances the Canadians enjoy larger prof i ts than to the United States cargo shippers. The evidence clearly establishes, however, that Canadian shippers have followed the market, have not undercut the 21. L.E.S.C., op. c i t . , p. 29, referring to Transcript, p. 35A. Cf. Transcript, p. 379. 153 going prices and have been able to se l l their lumber at the same or higher prices than those at which American lumber of l ike grade 22 has been available because they have been able to give better service. It is important to note that the Canadian cargo shippers have not upset the market by charging the lower shipping rates which result from the use of foreign bottoms. Instead, they continue to require their At lant ic Coast customers to pay the conference rate.23 F ina l ly , the lumbermen said that there had been a dist inct decline in the proportion of the domestic market supplied by their own mi l l s . This was only to be expected with a decrease in the consumption of lumber in the United States and an increase in the amount of lumber imported from Canada. The volume of lumber exported from the United States has remained constant. IV. THE CANADIANS' REPLY To begin with, the Canadians said that the Americans had not established a Prima facie case, and used the o f f i c i a l transcript of the hearings to cast doubt on the va l id i ty of some of the statements made before the Commissioners. For example: The pet i t ion which launched this investigation was f i l ed by the self styled Lumbermen's Economic Survival Committee. The petit ion alleged that the Committee represents "lumber producers in Washington, Oregon, Idaho, Montana, and Ca l i fo rn ia , " However, 2'2. S t i t t and Hemmendinger, Brief in Opposition on Behalf of the U.S.  Lumber Distributors and U.S. Lumber Remanufacturers, (Byron S. Adams, Washington, D . C , November 15, 1962), pp. 11-12. 23. F ierst and Cooper, op. c i t . , p. 33. 154 when the f u l l membership l i s t of the committee was submitted for the f i r s t time towards the end of the hearings, i t was disclosed that there was but one producer from Idaho, and no producer from Montana or from Ca l i f o rn i a . . . . The Committee apparently never even met^^ The Committee had said that many mil ls in the Pac i f ic Northwest had been forced out of business through Canadian competition, and a l i s t of such mil ls was promised to the Commissioners. After much discussion on the closure of m i l l s , i t became apparent that in the case of one mi l l which the Committee had cited as an example, the mi l l had indeed closed, but the reason for the closure had not been Canadian competition but American competition for the 25 limited amount of timber in the area surrounding the m i l l . Further mil ls on the l i s t were discovered to have ceased lumber production because of internal competition among American mil ls in the Pacif ic Northwest. Some cargo mil ls had found they could no longer compete profitably as such and had converted to 26 r a i l m i l l s . Another mi l l had instal led a plywood plant. S ignif icant ly, the plywood plant was bui l t without outside financing, despite alleged depressed 27 conditions in the lumber industry. The Canadians' second point was that the United States softwood lumber industry was not in fact suffering from any serious injury. The Canadians were not convinced that the id l ing of productive f a c i l i t i e s had been a result of Br i t i sh Columbia exports. The Commissioners were confused as to what exactly 24. F ierst and Cooper, op. c i t . , p. 5. 25. F ierst and Cooper, op. c i t . , p. 10. 26. Ib id . , pp. 10-12. 27. Ib id . , p. 7. was meant by the statement that 200 mil ls had been closed because of imports and endeavoured to c lar i fy the matter by direct questioning of a Committee 28 witness, but the matter remained obscure. The Canadians asserted that some mi l l closures were inevitable because of the "h is tor ic shi f t of the lumber industry to larger units>at the expense of a greater number of smaller units, 29 and...the frequent shi f t of mi l l sites in search of new timber supplies." There was no evidence that the "rate of recent mi l l closures...(was) h is tor ica l l y 30 abnormal for the industry." The lumbermen's claim that the Pac i f ic Northwest mil ls were unable to operate at a reasonable level of prof i t was discussed at some length. It was found after the reading into the transcript of extracts from the f inancial statements of some Paci f ic Northwest lumber producing firms that although prof i ts and sales were not as good in 1960 and 1961 as they had been in the boom years of 1955 and 1959, they were s t i l l satisfactory. The weakness of the Canadian case at this point is that the statements which were read into the record were those of well known and re lat ive ly large companies. Statements from small companies were not included, and possibly such statements would not have supported the Canadian contention, as small companies have a harder time making ends meet than large companies. Among the firms who stated that condi-tions had been satisfactory were American Forest Products Corporation, the Anaconda Company, Boise Casacade, Diamond National, McCloud River Company, and 31 the Weyerhaeuser Timber Company. 28. Fierst and Cooper, op. c i t . , p. 15. 29. Ib id . , p. 17. 30. Ib id . , pp. 18-19. 31. Fierst and Cooper, op. c i t . , pp. 23-25. 156 The Canadians did not deny there was unemployment in the lumber industry, but said i t was not of serious proportions. In fact, there had been 32 a 32.5 per cent decrease in unemployment in 1962 compared with 1961. The exact figures for unemployment in each sector of the lumber industry were not available, as the general category in which the unemployment s tat is t ics in the 33 United States is given includes "Lumber and wood products, except furniture." Housing starts are the recognized control factor in the lumber industry. The construction industry is the most important single user of lumber; i f there is a decline in the number of units bui l t by the construction industry, then the lumber industry w i l l suffer. Housing starts fluctuate because of factors outside the control of the lumber industry. The r ise in the number of 34 housing starts in 1962 over those in 1961 should have al leviated the d i f f i -cult ies faced by the Paci f ic Northwest lumber industry. Production, shipments, and inventories for 1962 were not yet known at the time of the hearings, but i t was thought they would improve during the year, and a general feeling of 35 optimism prevailed throughout the industry. Wages in the lumber industry had increased in 1962 over the 1961 levels , and weekly earnings had also increased. This indicated that the industry was in a posit ion to accede to the unions demands for higher wages. 32. Ib id . , p. 25. 33. Ibid. 34. Ib id. , p. 28. 35. Fierst and Cooper, op. c i t . , p. 28. 157 The third point the Canadians discussed in their summary was entit led "Even assuming the domestic softwood industry were to be suffering serious injury, an increase in imports had not been the major factor in causing or 36 threatening to cause such injury." In general, i t was stated, the past patterns of Br i t i sh Columbia trade with the United States have been f a i r l y con-s istent . The volume of Br i t ish Columbia exports has increased when the domestic softwood production has increased and decreased when production levels have f a l l en , although there have been exceptions in a few years. What is surprising is that the pattern has not completely changed, with Canadian imports constantly increasing regardless of American production. The supply of lumber in the 37 United States is fixed for at least one forest generation, unt i l the effects of planned sustained yie ld forestry begin to be f e l t . Similarly the l imit w i l l soon be reached in the amount of exportable surplus available from Br i t ish Columbia because of the limitations imposed by sustained y ie ld po l i c ies . The factors which the Canadians fe l t had most influence on the American softwood industry were: 1. The effect of the Jones Act on the cost and ava i lab i l i t y of intercoastal shipping. 2. The growth in the use of such sub-stitutes as plywood. 3. The shortage of timber at reasonable pr ices. 4. The volume of private housing starts. 5. The quality and ava i lab i l i t y of Canadian lumber. Since the Jones Act came into effect in 1920, i t has forced the American firms to pay $12-$16 per thousand board feet more for shipping their lumber to the 36. Ib id . , p. 31. 37. F ierst and Cooper, op. c i t . , p. 39. 38. Ib id . , pp. 31-32. 158 east coast than they would have had to pay had the Jones Act restr ict ions on the use of foreign bottoms not been in effect. The Canadians have not cut their prices by the amount of the d i f ferent ia l but have taken an increased c . 39 p ro f i t . Many softwood lumber mil ls have switched to softwood plywood because a higher u t i l i za t ion rate from logs is possible with plywood than is with lumber. For this reason plywood is taking over an,increasing proportion of the end-uses tradit ional ly assigned to lumber, e .g . , sheathing, subflooring, 40 roofing, boxes, and concrete forms. Timber prices have been soaring upwards in recent years, and bidders 41 for Government timber regularly offer two or three times i ts appraised value. The bidding of more than the appraised amount for stumpage occurs because there is such great competition among the large number of sawmills in the Paci f ic Northwest for the fixed supply of timber that in some cases mil ls are unable 39. Ib id . , pp. 32-33. 40. F ierst and Cooper, op. c i t . , pp. 33-38. 41. The United States Tar i f f Commission compiled a table, which i t published in the Commission's f indings, on the average annual appraised and bid stumpage prices in the National forests of the Paci f ic Northwest. Stumpages bid for Douglas F i r between 1958 and 1961 were 137 per cent, 168 per cent, and 207 per cent of appraised value for northern Washington, eastern Washington, and northern Idaho and western Montana respectively. Similar averages for the same regions for the same time period for Hemlock were 149 per cent, 379 per cent, and 122 per cent respectively. Spruce averages were 117 per cent, 113 per cent, and 183 per cent in 1960-1961, but the comparable figures for 1958-1959 were not available to the Commission. TC Publication 79, p. 102. 159 to survive for lack of raw material. The Pacif ic Northwest i s overpopulated with mil ls and the fixed supply of timber is not suff ic ient to keep them a l l 42 operating prof i tably . According to Dr. Kenadjian, one of the witnesses before the United States Tar i f f Commission, the fa l l i ng off of business in 1960 and 1961, which had persuaded the lumbermen to make their pet i t ion, was due to the cyc l ica l fa l l ing off of the housing construction industry, and had nothing to do with imports. Similarly, the upswing starting in 1962 was also due to an upswing 43 in housing construction. F ina l ly , many witnesses test i f ied that Canadian timber in general was "brighter, better packaged, easier to handle and better in q u a l i t y , " ^ than the domestic lumber produced and sold in the United States. The Canadians maintained stable prices and absorbed fluctuations in cost, and would supply fractional size lumber on request.^"* 42. F ierst and Cooper, op. c i t . , pp. 38-45. 43. Fierst and Cooper, op. c i t . , pp. 45-46. 44. Ib id. , p. 48. 4 5 . Ib id . , pp. 47-49. CHAPTER XI SUMMARY AND CONCLUSIONS I. POLITICAL, ECONOMIC AND GEOGRAPHIC FACTORS DISCUSSED IN THIS THESIS In order to examine the subject of this paper, the movement of Br i t ish Columbia lumber to United States markets, in i ts proper context, i t has been necessary to examine in some detai l the economic and po l i t i c a l atmosphere in both Canada and the United States before, during and immediately after the investigation by the United States Tar i f f Commission into the softwood lumber industry in October 1962. The investigation was inaugurated because of a pet i t ion f i l ed with the Tar i f f Commission by the Lumbermen's Economic Survival 1 Committee. It was found that there were far reaching changes in o f f i c i a l United States foreign policy at that time, typif ied by the l ibera l implications 2 of the Trade Expansion Act of 1962. There were also changes taking place in Canada, among which were the devaluation and pegging of the Canadian dollar at US$0,925, plus or minus one per cent in May 1962, and the replacement of 4 one po l i t i c a l party by another as the party in power in Ottawa. In addition to these changes, there are also the factors which have been in existence for a number of years. Among them are the proximity of Canada and her forest resources to the United States, the apparent inabi l i ty of the 1. TC Publication 79, p. 1. 2. Steel, op. c i t . , p. 31. 3. TC Publication 79, p. 18. 4. Supra, p. 18. 161 United States softwood industry of the Paci f ic Northwest and elsewhere to meet 5 the softwood demand in the country, and the cost advantages enjoyed by the Canadians through the fortunate position in which they find themselves as 6 7 regards to cargo shipment and as regards their own internal s i tuat ion. A l l of these and several other less important factors have assisted the development of the Canadian-American softwood lumber trade. Most of the soft -wood available for trade is in Br i t i sh Columbia, so that the trade became essentially one between Br i t i sh Columbia's coast and inter ior regions and the g United States lumber markets in the central and eastern United States. The lumber is shipped to these markets either by cargo (water) or by r a i l and truck transportation. II. COST AND PRICE FACTORS The determination of prevail ing prices for lumber and the ascertainment of costs pertinent to the production of lumber in both the Paci f ic Northwest and Br i t ish Columbia were undertaken. It was found that there are three main 5. Armstrong, The Evolution of the Softwood Lumber Industry in the  West, pp. 2 and 5. 6. TC Publication 79, p. 20. 7. Ib id . , p. 17. 8. Cf. Supra Table V, p. 48, and Appendix C , Table II. 162 categories in which costs may be c lass i f ied for the sake of convenience, namely extraction, conversion, and distr ibut ion. There are dist inct price patterns for softwood lumber depending on the species involved and on the region from which 9 the lumber comes. In each region there is a dist inct price for the lumber and a dist inct seasonal cycle through which the price pattern moves. Br i t i sh 10 Columbia softwood producers endeavour to make the most use of the patterns, but their efforts are balanced by the counter-efforts of the buyers to capital ize on the low points of the price cycles. III. SUPPLY AND DEMAND FACTORS There is a large number of small and medium-sized mil ls and a few 11 large ones located in Br i t i sh Columbia and the Paci f ic Northwest. There is a very large number of small lumber consumers in the United States, but only a 12 relat ively few large lumber buyers. Only the largest integrated lumber companies and lumber wholesalers can possibly have any effect on lumber prices. Everyone else must follow the price patterns set by the giants. 13 Housing is the largest single factor affecting the demand for lumber, and hence the number of housing starts affects the price of lumber, and the orders, production, and stocks on hand in each of the lumber producing areas. 9. Clark Row, op. c i t . , p. 26. 10. Mr. Laird Wilson, American Division Manager, of Seaboard Lumber Sales Limited, in an interview with the writer. 11. Sperry Lea, The U.S. Softwood Lumber Situation in a Canadian- American Perspective, Sponsored by the National Planning Association (U.S.A.) and the Private Planning Association of Canada, (Canada, 1962) pp. 7-8. 12. N.A.H.B., Op. c i t . , p. 2, and St i t t and Hemmendinger, op. c i t . , p. 1. 13. Stanford, op. c i t . , pp. 46^50. 163 Population and climatic conditions in the areas where housing is in demand 14 affect the lumber industry just as do the prevail ing climatic conditions 15 in the lumber producing regions. There must be a time delay between the cutting of the timber and the delivery of the lumber. The sheer distance of the Paci f ic Slope from the high density consumption markets in the eastern United States creates delays which must be allowed for by the lumbermen. The ab i l i t y or fa i lure of the lumber industry in the Paci f ic Northwest to meet the demand for lumber in the United States governs, in part, the volume of Canadian softwood lumber exports. There is a gap between production and consumption of softwood lumber which is f i l l e d by softwood lumber imports.*^ Any increase in the price of lumber aggravates the inroads already made into the traditional 17 softwood lumber markets by other wood and non-wood substitute materials. The f ierce competition for the fixed supply of timber available in the Pac i f i c Northwest to meet the demand not only for lumber but also for other 18 forest products has led to increased stumpage prices in the area. This is one major factor in giving Br i t i sh Columbia lumbermen a cost advantage which enables 14. Clark Row, op. c i t . , p. 26. 15. Ib id . , p. 27. 16. TC Publication 79, p. 80. 17. S t i t t and Hemmendinger, op. c i t . , p. 9. 18. TC Publication 79, pp. 16-17. 164 them to compete effect ively in the United States lumber market. Other advan-tages which the Br i t i sh Columbia lumbermen have over their Paci f ic Northwest 19 r iva ls are a devalued Canadian dol lar , lower freight rates for the cargo 20 21 22 market, lower loading costs, and lower wage rates. To offset these 23 advantages par t ia l l y are higher r a i l freight costs and greater fringe benefits 24 for sawmill employees. IV. CONCLUSIONS There is a shortage of domestic softwood lumber in the United States  which can best be supplied by Br i t ish Columbia. There is a def ic i t of production compared to consumption of softwood 25 lumber in the United States. A large and signif icant proportion of the total 26 United States softwood consumption is imported from Br i t ish Columbia. The proportion of imports to the total consumption of the United States has been steadily increasing for many years and there is no short term prospect that the 27 posit ion w i l l change. There is a large exportable surplus of lumber available 19. Ib id . , p. 17. 20. Ib id. , p. 91. 21. Cf. supra, pp. 99-100. 22. Cf. TABLE XIV, p. 130. 23. Cf. supra, p. 132. 24. Cf. TABLE XV, p. 139. 25. TC Publication 79, p. 80. 26. Cf. TABLE V, p. 48, and TC Publication 79, p. 52. 27. TC Publication 79, p. 80. 165 28 from Br i t ish Columbia coastal and inter ior regions. The United States is a conveniently located accessible market for Br i t ish Columbia's surplus lumber. Br i t i sh Columbia does not export exclusively to the United States, but also 29 se l ls lumber to the United Kingdom, Europe, Austra l ia , and South A f r i ca . Softwood lumber producers in the Pac i f ic Northwest are caught in a cost 30 price squeeze. The cost of their raw material in terms of stumpage paid for timber has been forced up by severe competition to well above the appraised 31 value of the timber. In order to get the volume of timber necessary to maintain profitable through-puts in their mi l ls they must bid up to several times the appraised pr ice . In Br i t i sh Columbia, because of the control exercis by the producers over the industry and by the Government Forest Service through the system under which stumpage is set and b id , much of the timber is sold for 32 the appraised value, and se l ls for a lower stumpage price than that available 33 to lumbermen in the Pac i f ic Northwest. The amount of the stumpage advantage varies according to the species involved and the location of the timber: where there is a large demand and a short supply, the stumpage may be several times the value of the timber; where the species is not in such great demand, the 28. Cf. TABLE IV, p. 45. 29. Cf. TABLE XXI, p. 126. 30. TC Publication 79, p. 16. 31. TC Publication 79, p. 102. 32. Cf. supra, p. 90. 33. Cf. TABLE XIII, p. 92. 166 stumpage more nearly approaches the appraised value. The advantage to Br i t ish 34 Columbia lumbermen ranges from $1.30 to $12.57 per thousand board feet. In some cases the costs of extracting the timber are said to be higher in Br i t ish Columbia because of the physical d i f f i cu l t i es encountered in removing the • u 3 5 timber. Br i t i sh Columbia lumber producers have no advantage over Pac i f ic Northwest  producers with regard to conversion costs. The costs of converting timber to lumber have been examined wherever common ground exists among different mi l l s , e .g . , wages and cost of capital equipment. Br i t i sh Columbia's basic wages for sawmill employees are lower than 36 those in the Paci f ic Northwest, but the difference has been decreasing over the past few years. Wage structures in logging and mi l l ing act iv i t ies are broken down into such minute detai l according to work to be performed and responsib i l i t ies , and job names vary so much from company to company as to make 37 comparison of wages extremely d i f f i cu l t i f not impossible. Analyses of the productivity per man and the direct and indirect wage costs of the labour needed to produce a common unit of lumber have been made by some of the lumbermen in the Province, but the results of their studies are confidential . The overall 34. Ibid. 35. Mr. Les l ie Reed of the Br i t ish Columbia Council of Forest Industries, in an interview with the writer. 36. Cf. TABLE XIV, p. 130. 37. Interview of the writer with Mrs. Fingarson of the Vancouver Board of Trade. 167 conclusion they reached was that the high wages paid in the Pacif ic Northwest did not put the American producers at a disadvantage when compared with Br i t ish Columbia lumbermen. Any advantage which the low wages might confer on Br i t i sh Columbia lumbermen is offset by the d i f f i cu l t terrain in which they have to operate and the allegedly low efficiency in production which their operations 38 achieve when compared to normal Paci f ic Northwest operations. The effect of the devaluation of the Canadian dollar on the cost of capital equipment works s l ight ly to the disadvantage of the Br i t ish Columbia industry. It is doubtful whether the f u l l 7% per cent of devaluation was passed 39 on to Canadian purchasers, but some portion of i t certainly was. However, the increase in the cost of conversion per thousand board feet attributable to devaluation is probably so small as to be ignored by the individual mi l le r . In any case i t would be more than offset by what is effectively a 7% per cent increase in the prices he receives from his American customers. It is d i f f i cu l t to see any great advantage either way in drying costs. Where new drying kilns have been purchased by Br i t ish Columbia producers since devaluation, the capital cost w i l l have been increased by 7% per cent, but when the increase is allocated over the many thousands of board feet which can be dried in a k i ln during i ts l i f e span, the increase per thousand board feet is negligible even when appreciated depreciation schedules are used. The low cost 38. Interview of the writer with Mr. Dalton, Manager of the Overseas Sales Division of MacMillan, Bloedel and Powell River Company Ltd. 39. Cf. Chapter III, Section V. 168 of Br i t i sh Columbia wages applicable to "drying" staff w i l l have l i t t l e effect on costs. Distribution costs greatly favour the Br i t ish Columbia producers with regard to  water-borne lumber, and s l ight ly favour American producers with regard to ra i l - borne lumber. In the third category of costs, those relating to distr ibut ion, the greatest differences between the lumbermen of the Pac i f ic Northwest and of Br i t ish Columbia are found. In the continental United States market the only advantage that the Paci f ic Northwest lumbermen have is the now nominal ta r i f f which is imposed on softwood imports. The ta r i f f ranges from $0.25 to $1.50 per thousand board feet, and that applicable to most Canadian exports is $1.00 per 40 thousand board feet. In the cargo market the Canadians enjoy many advantages. The cost of freight is lower by between $3.00 and $12.00 per thousand board feet than American conference rates, depending on whether the lumber is green or dressed, but about $2.00 of the difference is absorbed by dollar devaluation, 41 since freight is paid in American dol lars. Loading costs are lower for 42 Canadians than those for Americans by $7.50 to $8.00 per thousand board feet, 43 44 and loading rates are faster. Charter party clauses are more favourable, 40. TC Publication 79, pp. 78-79. 41. Ib id . , p. 91, and supra, p. 42. Supra, p. 101. 43. Supra, pp. 101-103. 44. Supra, p. 108. 169 45 and the ava i lab i l i t y of shipping space is better. A l l these factors add up to a cost advantage of about $15.00 per thousand board feet on water-borne shipments in addition to that ensuing from high American stumpage rates. In the r a i l market i t appears that American producers have an advantage. The high cost of stumpage s t i l l applies, and conversion costs are roughly equal on both sides of the border, but a 5 per cent surcharge on r a i l freight rates, levied on Canadian shippers to counter the effect of the devaluation of the 46 Canadian dol lar , seems to t ip the balance in the Americans* favour. This is corroborated by the fact that several American firms have recently retired from the cargo market to devote themselves to the r a i l market exclusively, and have 47 there done very well in spite of the high capital cost of insta l l ing drying k i l n f a c i l i t i e s and the long holding of lumber in stock needed in this market. In the short haul truck market, i t seems that i t depends upon the type of trucks used as to how much advantage or disadvantage w i l l accrue to a mi l l in comparison to other mil ls on either side of the border. Some firms in Br i t i sh Columbia have been able to capital ize upon the inflow of truck-hauled bulk produce from Cal i forn ia , and have hired the trucks bringing in such commo-dit ies as f ru i t and canned goods to carry "clean" lumber products on their back hauls. There is a limited number of products clean enough to be used as back 45. S t i t t and Hemmendinger, op. c i t . , p. 11. 46. This was stated by Mr. N. Napier, Freight Adviser to Canadian National Railways, in an interview with the writer. 47. For example, Simpson Timber Company of Seattle, Washington, and others not mentioned by name, Fierst and Cooper, op. c i t . , pp. 9, 11. 170 haul cargo. Some shippers are of the opinion that there is a surplus of truck capacity, and that freight rates can be kept down by playing one trucking l ine 48 against another. The only foreign market common to the United States and Canada is Puerto Rico. There is only one offshore market common to Paci f ic Slope producers, Puerto Rico, which is a self-governing commonwealth loosely attached to the 49 United States. Due chief ly to the influence of the so-called "Jones Act " , Canada's share of this market has risen from 16 mi l l ion board feet in 1953 to 50 77 mil l ion board feet in 1962, while the sales of one large sales organization, Williams Sales Company of Sumter, South Carolina, to Puerto Rico f e l l from 53 51 mi l l ion board feet in 1952 to 22 mil l ion board feet in 1961. The 87th (i Congress suspended the Jones Act with reference to Puerto Rico on October 24, 52 1962, just before i t adjourned in order to remedy the situation. In addition to the foregoing, Canadian lumber producers en j oy several  intangible advantages. According to American wholesalers who test i f ied at the Tar i f f Commission 48. Interview with Mr. J . N. Lucas, Office Manager of Whonnock Lumber Company, who ship lumber and lumber products to the Cal i fornia market by truck. 49. The Book of the States 1962-1963, Vol . XIV, (Chicago, I l l i no i s , Council of States' Governments, 1962) footnote 1, p. 547. 50. B.C.L.M.A., Annual Report 1962, Table 1. 51. Transcript, p. 341. 52. St i t t and Hemmendinger, op . c i t . , p. 11. Since October 1962 there has been a considerable increase in the volume of lumber sold from the Pacif ic North-west to Puerto Rico. The American lumbermen have been able to recapture 5 per cent of the market, and w i l l probably increase their share further with the two year extension of the exemption at present being considered by Congress. Cf . "Senate B i l l to Aid U.Sa Lumbermen", The Vancouver Sun, Dec. 7, 1963, p. 26. 171 hearings, "Canadian lumber is generally cleaner, of more uniform quality, and 53 better packaged (than American lumber)." Buyers were frequently unable to find 54 American lumber for sale in the s izes, species, or quantities they wanted. "The American suppliers (do) not show the same interest and zeal in providing service as the Canadians. For instance they (do) not ca l l upon their customers 55 regular ly." Owing to factors such as these, American purchasers have a pre-ference for Canadian lumber strong enough to make them disregard a s l ight ly higher pr ice. The United States Pac i f ic Northwest softwood industry may best remedy i t s  current adverse economic position by internal reforms rather than external  t a r i f f and quota protection. The l i s t of advantages enjoyed by Br i t i sh Columbia producers and shippers indicates that there may well have been just i f i cat ion for the claims made by the United States Pacif ic Northwest lumbermen that their industry was suffering hardship and possibly injury due to Br i t ish Columbia competition. The advantages which have been shown to belong to the Br i t ish Columbia shippers, however, are of such a nature that the United States lumber industry must remedy the situation which has led to the Canadian's having these advantages by internal action affecting i t s e l f . To this end i t might seek (1) further l i f t i ng of the Jones Act restr ict ions on the movement of lumber between United States ports on 53. S t i t t and Hemmendinger, op. c i t . , p. 18. 54. Ib id . , and Fierst and Cooper, op. c i t . , p. 19. 55. S t i t t and Hemmendinger, op. c i t . , p. 19. 56. Ibid. 172 foreign bottoms, (2) use of bulk carrier vessels for lumber, (3) faster loading methods, (4) rigorous negotiations on ship charters for lumber cartage, (5) an investigation by both the Federal and State governments in the Pacif ic Northwest, with f u l l co-operation from the private timber owners in the area, into the reasons for the high stumpage prices which prevail in the Paci f ic Northwest, especially in those species which are common to the Pac i f ic Northwest and Br i t ish Columbia, (6) greater co-operation between United States sel lers and buyers for the improvement of sales co-ordination ac t i v i t i es , (7) a campaign to persuade lumber users to u t i l i z e the required and necessary quality of lumber only in end-use applications rather than the higher grades now generally pre-ferred where a lower appearance grade would suf f ice . A l l of this programme can be undertaken within the United States. If would doubtless be countered by competitive ac t iv i t ies from Br i t ish Columbia sales organizations, and in any event, some imports w i l l continue to be necessary to f i l l the gap between pro-duction and consumption. If, however, lumber is as important to the American economy as the volume used indicate, then act iv i t ies such as those suggested above, rather than the ta r i f f and quota protection requested by the Lumbermen's Economic Survival Committee, would help promote greater use of domestic lumber than is presently the case. An increase in the use of domestic lumber rather than imported lumber would benefit the domestic industry d i rect ly , but a l l ac t iv i t ies to promote the use of domestic lumber must be tempered by the r e a l i -zation that the timber resources of the United States must be used in the most economical way, whether this be in the production of lumber or the production of other forest products. The best returns from the forest must be the aim of a l l those engaged in the forest products industry. 173 V. SUGGESTIONS FOR FURTHER STUDY During the course of this investigation of the movement of lumber from Br i t i sh Columbia to the United States, i t became apparent that this study is by no means complete. There are many other f ie lds which could be investigated in the general area of the movement of Br i t ish Columbia lumber to i ts markets. Some suggested topics for further study are: (1) the loading methods employed in the Pac i f ic Northwest and Br i t i sh Columbia for lumber, (2) the bidding of stumpage in these areas, (3) the further application of sustained y ie ld forestry practices in the Paci f ic Northwest in private and public forest lands, (4) the reasons for the differences in the charter party terms available to Canadian and American lumber shippers, (5) the effect of further removal of Jones Act restr ict ions (Puerto Rico w i l l provide a very convenient f i e l d of investigation for this topic) , (6) the effectiveness of the r a i l incentive rate, (7) the comparative eff iciency in manpower u t i l i za t ion in the Pacif ic Northwest and Br i t i sh Columbia, (8) the comparative efficiency of logging methods in these two areas, and (9) the implications of the Sherman Anti-trust Act and associated laws in the United States and the Combines Investigation Act in Canada with regard to the lumber industry. B I B L I O G R A P H Y BIBLIOGRAPHY I. BOOKS Armstrong, G.R. The Evolution of the Softwood Lumber Industry in the West (A Review and Economic Analysis) . Baldwinsville, New York: (n.n.), September, 1962. (mimeographed) The Book of the States 1962-1963. Vol . XIV. Chicago: Council of States' Governments, 1962. The Forest Club. Forestry Handbook for Br i t i sh Columbia. Vancouver, B.C.: University of Br i t i sh Columbia, 1953. Goodman, Bernard. Industrial Materials in Canadian-American Relations. Detroit: Wayne State University Press, 1961. Gosse, Richard. The Law on Competition in Canada. Toronto: The Carswell Company Limited, 1962. Guthrie, John A. and G. R. Armstrong. Western Forest Industry --An Economic  Outlook. Baltimore: The John Hopkins Press, 1961. Published for Resources for the Future Inc. Lea, Sperry. The U. S. Softwood Lumber Situation in a Canadian-American Perspective, (n.p.): (n.n.), 1962. Sponsored by the National Planning Association (U.S.A.) and the Private Planning Association of Canada, (mimeographed) Neale, A. D. The Antitrust Laws of the United States of America -- A Study of  Competition Enforced by Law. Cambridge: University Press, 1960. Samuelson, Paul A. Economics -- An Introductory Analysis. 4th Ed. New York: McGraw-Hill Book Company, 1958. Stanford Research Institute. America's Demand for Wood 1929-1975. Stanford, Ca l i forn ia : Stanford Research Institute, 1954. A report prepared for Weyerhaeuser Timber Company, Tacoma, Washington. Steel , Ronald, (ed.). U.S. Foreign Trade Pol icy. Vol. XXXIV, No. 5 of The Reference Shelf. New York: The H. W. Wilson Company, 1962. Vaccara, Beatrice N. Employment and Output in Protected Manufacturing Industries. Washington, D.C.: The Brooking Inst itut ion, 1960. 176 II. NEWSPAPERS AND MAGAZINES Argus (Seattle, Washington), January 25, 1963, pp. 1, 12. Br i t i sh Columbia Government News (Victoria, B.C.), January, 1962, pp. 2-3. Crow's Price Reporter (Portland, Oregon), published weekly, December 12, 1963. The Province (Vancouver, B.C.), February 15, 1962, p. 14. Row, Clark. "Seasons Set Pace for Act iv i ty in Lumber Business," The Lumberman, January, 1961, pp. 26-28. The Vancouver Sun, February 3, 1961. "Senate B i l l to Aid U.S. Lumbermen," The Vancouver Sun, December 7, 1963, p. 26. III. GOVERNMENT PUBLICATIONS 1. Government of Br i t ish Columbia. Government of Br i t ish Columbia, Bureau of Economics and Stat is t ics , Department of Industrial Development, Trade, and Commerce. Br i t ish Columbia -- Manual  of Resources and Development. V ictor ia , B.C.: Queen's Printer, December, 1961. . Export Opportunities in the Far East. V ic tor ia , B.C.: Queen's Printer, August, 1962. . Summary of Business Act iv i ty in Br i t ish Columbia 1961. Victor ia , B.C.: Queen's Pr inter, 1962. . Summary of Business Act iv i ty in Br i t ish Columbia 1962. V ic tor ia , B.C.: Queen's Printer, 1963. 2. Government of Canada Government of Canada. House of Commons Debates, O f f i c i a l Report; Thursday, June  13, 1963: Volume CVIII, No. 21, 1st Session of 26th Parliament. Ottawa; Queen's Printer, 1963. . Revised Statutes of Canada 1952. Vol . V. Ottawa: Queen's Printer, 1953. . Dominion Bureau of S ta t is t i cs , National Accounts and Balance of Payments Division. Quarterly Estimate of the Canadian Balance of International  Payments. Ottawa: Queen's Printer, June, 1963. 177 . Dominion Bureau of S tat is t ics . Canada Year Book 1962. Ottawa: Queen's Printer, 1963. • Dominion Bureau of S ta t is t i cs . National Accounts, Income and Expenditure. Ottawa: Queen's Pr inter, 1963. . Dominion Bureau of S tat is t ics . Trade of Canada: Commodities Imported From Each Country Twelve Months Ended December 1961. Ottawa: Queen's Pr inter, 1962. . Trade of Canada: Exports by Countries 1961. Ottawa: Queen's Printer, 1962. . Trade of Canada: Exports by Countr ies 1962. Ottawa: Queen's Pr inter, 1963. . Trade of Canada: Imports by Countries January-September 1962. Ottawa: Queen's Pr inter, 1963. . Production, Shipments, and Stocks on Hand of Sawmills East of the Rockies. Ottawa: Queen's Pr inter, 1955-1962. Issued monthly. . Production, Shipments, and Stocks on Hand of Sawmills in Br i t ish Columbia. Ottawa: Queen's Pr inter, 1955-1962. Issued monthly. . Ministry of Northern Affa i rs and National Resources. Resources for Tomorrow -- Conference Background Papers. Ottawa: Queen's Printer, 1961. 3. Government of the United Kingdom Her Majesty's Stationery Off ice , Board of Trade. "Accounts Relating to Trade and Navigation of the United Kingdom for Each Month." London: Her Majesty's Stationery Off ice , December 1956 and December 1962. . Central S ta t is t i ca l Off ice . "Monthly Digest of S ta t i s t i cs , " No. 214. London: Her Majesty's Stationery Off ice , October, 1963. 4. Government of the United States Kennedy, John F. Economic Report of the President Transmitted to Congress  January 1962. Washington: Government Printing Off ice, 1962. Magnuson, Warren G. Transport Requirements for the Growth of Northwest North America: A Letter from the Chairman, Alaska International Rai l and Highway Commission, transmitting the Final Report of the Alaska International Rai l and Highway Commission, pursuant to Public Law 884, 84th Congress. 3 vols . Washington: Government Printing Off ice, May, 1961. 178 United States Bureau of the Census, S ta t i s t i ca l Abstract of the United States, 82nd and 83rd Ed. Washington: Government Printing Off ice, 1962, 1963. United States Congress, House of Representatives. United States Code, 1958 Ed. containing the general and permanent laws of the United States in force January 6, 1961. Vol . III. Washington: Government Printing Off ice, 1959. United States Congress, Senate, Committee on Finance. Trade Expansion Act. Hearings before the Committee, 87th Congress, 2nd Session, on H.R. 11970, An Act to Promote the General Welfare, Foreign Pol icy, and Security of the United States through International Trade Agreements and through Adjust-ment Assistance to Domestic Industry, Agriculture, and Labour, and for other Purposes. Part I. Washington: Government Printing Off ice , July, 1962. United States Tar i f f Commission. Softwood Lumber (Report to the President on Investigation No. 7-116 (TEA-I-4) Under Section 301(b) of the Trade  Expansion Act of 1962. TC Publication 79. Washington: Government Printing Off ice, February, 1963. IV. BRIEFS AND STATEMENTS BEFORE THE UNITED STATES TARIFF COMMISSION 1. Individual Briefs and Statements Dr i sco l l , William J . "Statement of the Vice-President of the Blanchard Lumber Company, Walpole, Massachusetts, October 10th, 1962." Flynn, Gerald W. "Statement of the President of the A.C. Dutton Lumber Corporation, Poughkeepsie, New York, before the U.S. Tar i f f Commission, Washington, D.C., October 10th, 1962." Furman, John. "Statement for the U.S. Tar i f f Commission, Washington, D.C., by the President of Furman Lumber Inc., Boston, Massachusetts." Hoffmeister, B.M. "Statement of the President of the Forest Industries of Br i t ish Columbia before the United States Tar i f f Commission, Washington, D.C., October 2, 1962." Maroney, John H. "Testimony of the Vice-President of Shepard and Morse Lumber Company, Boston, Massachusetts, October 10, 1962." Meltzer, Abe. "Testimony of the President of the Triangle Corporation, Great Neck, N.Y., before the U.S. Tar i f f Commission, Washington, D.C., October 10, 1962." Michael, Steve. "Statement of the Manager of the West Coast Door Incorporated, Tacoma, Washington, October 10, 1962." 179 National Association of Homebuilders. "Statement of the National Association of Homebuilders of the United States," submitted to the United States Tar i f f Commission November 6, 1962. Pogue, H. M. "Progress to September 1962, and Future Prospects of the Br i t ish Columbia Sustained Yield Forestry Program." A paper presented at the request of the Council of Forest Industries of Br i t ish Columbia. Schine, David. "Statement of the Vice-President of the City Lumber Company of Bridgeport, Connecticut. October 10, 1962." Wagner, Corydon. "Brief of the Vice-President of the R.D. Merr i l l Company before the United States Tar i f f Commission, Washington, D.C., October 2, 1962." 2. Summaries of the Briefs and Statements. F iers t , Herbert H. and Mitchell J . Cooper. Brief of the Council of Forest Industries of Br i t i sh Columbia before the United States Tar i f f Commission -- Investigation No. 7-116 -- Softwood Lumber. Washington, D.C.: Byron S. Adams, November 15, 1962. Gottl ieb, Edward, and Associates Limited (of Washington, D . C ) . "Summary of 'The Canadian Case' as submitted during the October 2 to 12 hearings of the U.S. Tar i f f Commission in Washington, D.C." A paper prepared for the Council of the Forest Industries of Br i t ish Columbia and released to the trade press and others in both the United States and Canada. Lumbermen's Economic Survival Committee and National Lumber Manufacturers Association. Brief Before the United States Tar i f f Commission in the  Matter of Investigation No. 7-116 -- Softwood Lumber. (n.p.): (n.n.), November 15, 1962. S t i t t and Hemmendinger. Brief in Opposition on behalf of U.S. Lumber Distributors  and U.S. Lumber Remanufacturers before the United States Tar i f f Commission  in the Matter of Softwood Lumber. Washington, D . C : Byron S. Adams, November 15, 1962. Ward and Paul Inc. Of f ic ia l Report of the Proceedings before the United States Tar i f f Commission in the Matter of Hearings on Softwood Lumber Investigation  7-116. Washington, D . C : Ward and Paul Inc., 1962. 7 vols . V. MISCELLANEOUS PAPERS AND UNPUBLISHED MATERIALS Br i t i sh Columbia Lumber Manufacturers Association. Annual Report 1962. Vancouver, B.C.: Clark and Stuart, 1963. 180 "Br i t i sh Columbia Timber Harvest." Canadian Pulp and Paper Association. "Pulp and Paper in Br i t i sh Columbia." Fisher, Joseph L. "Our Resource Situation and Outlook -- Public Policy and Individual Responsibi l i ty." Washington, D . C : Resources for the Future Inc., 1960. Gr i f f i ths , Dr. B. "Br i t ish Columbia Continuous Inventory Tables." Computed from the annual reports of the Br i t i sh Columbia Forest Service. . "Total Annual Cut in Br i t i sh Columbia by Major Species and D i s t r i -bution." Compiled from annual reports of the Br i t ish Columbia Forest Service. Hoffmeister, B. M. "U.S. and Canada Free Trade Area in Relation to Forest Products." Address given to the Pac i f ic Northwest Trade Association, Apr i l 8th, 1963, Yakima, Washington. Koerner, Walter C "Submission to the Royal Commission on Canada's Economic Prospects." Vancouver, B.C., February 29, 1956. "The Lumber Industry and U.S. Trade Pol icy . " An otherwise unidentifiable pamphlet supplied by the Council of Forest Industries of Br i t ish Columbia. MacMillan, Bloedel, and Powell River Limited. Annual Report 1962. . Stat ist ics compiled for internal use and made available to the writer. May, 1963. Reed, Lesl ie C. "Growth of Softwood Lumber and Equivalent Structural Materials." A paper prepared for the Council of Forest Industries of Br i t ish Columbia September, 1962. The Royal Bank of Canada. "A Collection of Monthly Letters on Conserving Canada's Resources — Her So i l , Forests, and Water." Montreal: (n.n.), September, 1961. Seaboard Lumber Sales Company Limited. Stat ist ics Compiled for internal company use and made available to the writer, May 1963. Vancouver Merchants' Exchange. "Annual S tat is t ica l Report" 1962. Widman, Charles R. "The Br i t ish Columbia Lumber Industry in World Markets." A speech given to the Ad and Sales Bureau of the Vancouver Board of Trade, March 25, 1963. William Brandts (Timber) Limited (36 Fenchurch Street, London, E .C 3). "Approximate Stat ist ics Exports and Imports of Sawn and Planed Softwoods." May, 1962. A P P E N D I X APPENDIX A DEVALUATION OF THE CANADIAN DOLLAR Presented by the Council of Forest Industries of Br i t ish Columbia-^ It is nothing more than a coincidence that circumstances compelled the Canadian Government to announce devaluation of the Canadian dollar at a time when many people in the United States were expressing great concern over the increase in American imports of Canadian lumber. Unfortunately, in the minds of these people the two sets of circumstances might appear to be connected when, in fact, there is no connection. The devaluation of the currency was dictated by the pressure on the external value of the Canadian dollar and that, in turn, arose from the substantial adverse trade balance on both v i s ib le and inv is ib le account. For pract ical purposes that adverse balance l ies completely in the Canadian-American trade balance. Canada has no adverse balances of any conse-quence with any other country in the world. To put i t another way, we can say that devaluation became necessary because Canadians were buying far more from Americans than they were se l l ing to them. We feel that this point deserves emphasis for two reasons. The f i r s t is that in some quarters in the United States, when the agitation against Canadian lumber imports began, the opinion was expressed that the Canadian lumber industry had powerful and active a l l i es in their Provincial and Federal governments, who by f i s ca l action in such matters as stumpage rates and the l ike 1. Transcript, Exhibit No. 23. 183 were subsidizing or bonusing the exporting industry. This is quite wrong and i t would be compounding the error to think that devaluation of the dollar was adopted as an additional means of affording even more support from Canadian governmental authorit ies. The second reason why we must not labour the matter of devaluation in considering Canadian lumber exports is that we cannot divide international trade of the dimensions of total American-Canadian trade into neat and tidy compartments by commodity and achieve for each commodity a credit balance in one country's favour. If Canada exports more lumber to the United States than i t imports, then i t imports much more in other commodities. We should consider this lumber problem in proper perspective. It is a part of a whole that, in i ts entirety, represents the greatest quantum of trade that exists between two countries anywhere in the world. Canadian lumber exports, as a percentage of total American consumption, increased when the Canadian dollar was at a premium over the American dol lar , or was s t i l l close to pari ty. This point must not be overlooked, because i t shows that there have been other factors affecting the level of imports. We do not deny, that on the day after the Canadian dollar was devalued to i ts present level the Canadian lumber exporter got more Canadian dollars in Canada for his shipment to the U.S.A. However we should l ike to refute the allegation that these extra dollars a l l went into the pocket of the Canadian exporter and to that extent he had them to use as a means of knocking down prices in the U.S.A. and increasing s t i l l further his share of the American market. 184 It might be advisable to bring the whole problem into sharper focus i f we were at this stage to interchange the terms "Canada'1 and "Br i t ish Columbia" because, as the members of the Commission already know, i t is the Province of Br i t ish Columbia that is the point of origin for the predominant share of total Canadian lumber exports. The exporter in Br i t ish Columbia can, for this purpose, be taken as the typical Canadian operator. The dollars he gets from the sale of lumber in the U.S.A. are sp l i t f ina l l y between: Stumpage and Royalty A l l other operating costs Taxes Profits - which together with depreciation are used in part to cover new capital expenditures. STUMPAGE AND ROYALTY By far the greater part of the timber cut in Br i t ish Columbia, whether by the largest or smallest operators, comes from Crown timber. Even though Crown timber in sustained y ie ld units is sold by competitive bid, the cost has not been settled f ina l l y on the completion of bidding, because subsequently the Government's "s l id ing scale" formula comes into operation. The net se l l ing price received by every mi l l is checked monthly and weighted average prices for lumber (in some cases logs) are determined. As of this date, the compilation of these figures is taking into account the higher Canadian dollar real izat ion achieved since devaluation. When that real izat ion shows an increase of 15% over the average real izat ion that prevailed when the timber was acquired, the Stumpage and Royalty is increased by varying percentages. If some-one says that 15% is a wide margin during which the sawmill can be enjoying a handsome bonus on his shipments, let him remember that once the S/R has been raised to the new level i t cannot be reduced unt i l prices have declined 185 by 15% from the new average real izat ion so that, in a period of fa l l ing prices, there is no immediate r e l i e f . Let i t also be remembered that taxes at both Provincial and Federal levels s t i l l have to be faced. OTHER OPERATING COSTS It is in the realm of other operating costs that i t is d i f f i cu l t to be specif ic but, where at the same time the f u l l impact of devaluation has to be measured. The day after devaluation, every single thing that goes into a sawmill and that comes from outside Canada began to cost more money. It makes no difference whether i t was a ball-bearing from Sweden or a starting switch from the United States, the premium on Swedish Kronor or American dollars went up by s l ight ly more than did the premium the mi l l would get on i ts lumber sales in the United States. At any given point of time, there would not be a direct dollar relationship between the two sets of f igures, but the point is some of the prof i t was immediately lost in these direct increases in operating costs. There are indirect increases also and the f u l l impact of these s t i l l has to be measured. Items made in Canada, but containing an important element of imported raw material or imported components, face the same inevitable increase in cost. F ina l ly , the cost of l iv ing i t s e l f , in the opinion of a l l Canadian economists, must at least move up s l ight ly and this certainly w i l l bring in i ts train requests that cannot be denied for upward revision of wage rates. TAXES It is not necessary in. this submission to go into any detai l on the Canadian tax structure or to make any comparisons between the Canadian and American taxing systems or tax rates. Nevertheless, some of the extra Canadian 186 dollars the Canadian sawmill w i l l receive as a result of the devaluation wi l l most certainly go in increased Federal and Provincial taxes. At the present time, the Federal tax rate on Canadian companies is 21% on the f i r s t $35,000 of prof i ts and 50% on a l l prof i ts in excess of $35,000. Br i t ish Columbia companies, engaged in any phase of the forest industries, share with their counterparts in the Province of Ontario the dubious dist inct ion of being the most heavily taxed industry in Canada, because these two Provinces also apply a logging tax. In the case of Br i t ish Columbia, the tax is 10% on a l l prof i ts in excess of $25,000. At the present time, the Provincial logging tax is allowed as a deductible expense in determining Federal income tax, but consideration is now being given to an arrangement under which two-thirds of the Provincial tax i t se l f would be deducted from the amount of the Federal tax l i a b i l i t y . Even i f this development takes place, the effect w i l l be that on a l l prof i ts in excess of $35,000 per year, the total tax b i l l w i l l be 53-1/3%. We referred at the outset to the feeling we think some Americans have that Canadian Governmental authorities are actively supporting, by one means or another, the maintenance of high Canadian exports. It is quite true that they naturally encourage exports and w i l l assist in trade promotions, trade missions, and in export financing and insurance (neither of these two latter to the sawmill industry or to the export of lumber to the United States), but insofar as tax re l i e f is concerned, the Canadian lumber industry has been singularly unsuccessful in having i ts tax rates reduced, although they have made numerous representations to both Federal and Provincial authorit ies, asking for tax r e l i e f . 187 PROFITS Probably the best answer to any suggestion that devaluation of the currency offers an easy or painless way to increase export is that countries never seem to adopt devaluation except when they are driven to i t to maintain the external value of their monetary unit. The reason for this reluctance i s , of course, simply that everything that comes into the country costs more. Probably the Canadian lumber industry is one of the biggest users of imported capital goods. This heavy reliance on imports of equipment ranges from the largest operators down to the very smallest and, in fact, i t is possible the relat ive dollar percentage of imported capital goods to total capital investment is higher in a small sawmill than i t is in a large corporation. The best way to i l lus t ra te what devaluation has meant is to quote a few typical examples. At a date just before devaluation, a TD-92 tractor, made in the United States, would cost in Vancouver $19,375. After devaluation, the price became $20,760. A TD-25 tractor moved similarly from $53,465 to $56,450. On the pricing of imported goods generally, consideration must be given to the fact that sales taxes and other Governmental levies are calculated on the Canadian dollar value of the item in question. In the case of logging or sawmill equipment, i t has been calculated that there w i l l be a basic increase of between 11% and 12% in the landed value in Canada of an imported a r t i c l e , because of the fact that a l l customs and import calculations now have to be made on the basis of, say, $110.00 Canadian instead of $100.00 Canadian. END APPENDIX B EXTRACT FROM BRITISH COLUMBIA FOREST SERVICE CONTRACT FORM - SLIDING SCALE CLAUSE Notwithstanding the rates bid as set out in condition 2(a), stumpage rates of any or a l l species quoted in provision (vi i ) below wi l l be adjusted up or down whenever the average market value as determined by the Chief Forester (which determined value shal l hereinafter be referred to as the "Average Market Value") has departed by 15 per cent or more from the Average Market Value which formed the basis on which the existing stumpage rates were established, provided: (i) The Basic Ratio shal l be the relationship of the stumpage rate bid to the Average Market Value quoted in Provision (vi i ) below, ( i i ) When the Average Market Value is greater than that quoted in provision (vi i ) below, and at the same time has departed not less than 15 per cent from the Average Market Value which formed the basis on which the existing rates were established, the new stumpage rate shal l be five-fourths (5/4) of the Basic Ratio times the New Average Market Value; provided such stumpage rate shal l be rounded off to the nearest ten (10) cents. ( i i i ) When the Average Market Value is less than that quoted in provision (vi i ) below, and at the same time has departed not less than 15 per cent from the Average Market Value which formed the basis on which the existing rates were established, the new stumpage rate shal l be three-quarters (3/4) of the Basic Ratio times the new Average Market Value; provided such stumpage rate shal l be rounded off to the nearest ten (10) cents. (iv) Notwithstanding the provisions of any other clause, when the Average Market Value has departed not less than 15 per cent from the Average Market Value which formed the basis on which the existing rates were established, and at the same time is within the range of 10 per cent of the Average Market Value quoted in provision (vi i ) below, the new stumpage rate shal l be the original rate bid (as set out in condition 2(a) of the contract). A further adjustment w i l l be made in accordance with ( i i ) or ( i i i ) above when the Average Market Value has departed not less than 15 per cent from that quoted in provision (vi i ) below, (v) Notwithstanding any other condition herein, except as provided in clause ( iv), the new stumpage rate as a result of any adjustment shal l not be less than the minimum used by the Forest Service for stumpage appraisals at the time of the adjustment. (vi) The increase or decrease per C c f . in stumpage rate as a result of any adjustment made in accordance with Clause ( i i ) or ( i i i ) above shal l not exceed one-half of the increase or decrease per M b.m. in the Average Market Value. (vi i ) The Average Market Values which formed the basis on which the stumpage rates set out in condition 2(a) were established are as follows: Species Average Market Value Species Average Market Value 189 ( v i i i ) A l l material scaled on and after the date specified in the notice of adjustment shall be paid for at the stumpage rates set out therein, (ix) The District Forester shall determine the revised rates of stumpage and notify the licensee of such rates and effective date thereof. APPENDIX C DETAILED FIGURES ON LUMBER PRODUCTION IN BRITISH COLUMBIA The figures in the following tables have been taken from the reports on sawmill production, stocks and shipments in Br i t ish Columbia as reported by the 1 Dominion Bureau of S tat is t ics . The estimates for non-reporting mil ls have been ignored and only the actual reported figures used, hence the figures in these tables w i l l not correspond exactly with those used elsewhere in this paper. The tables have been compiled to show the trends and patterns which govern the stocks, production, and sales of lumber from Br i t ish Columbia to i ts principal markets. The category "Other destinations" referring to shipments to the United States includes the central and southern United States: the data for the Pacif ic and At lant ic coasts are shown separately. The influx of Br i t ish Columbia lumber into the central and southern United States markets as well as the eastern At lant ic market has caused several 2 changes in the distr ibution pattern of domestic lumber in the United States. The movement of Canadian lumber into the eastern United States has meant that the lumber which used to go into that market from domestic sources in the west and south has been displaced and now must go elsewhere. Similarly the entry of Br i t ish Columbia lumber into the central and southern United States has meant that the traditional market for the Southern Pine region output has been 1. DBS, Production, Shipments and Stocks on Hand of Sawmills in Br i t ish  Columbia, monthly. 2. This opinion was expressed by Messrs. L. Reed, R. Edgett, and Dalton in their conversations with the writer. 191 replaced and that Southern Pine producers must find either new markets for their lumber or new uses for their timber resources in the manufacture of other forest products. A l ike situation arises in the Paci f ic coast market, where lumber is sent by a l l three means of transportation. Some of the lumber goes from Br i t ish Columbia to coastal points in the Pac i f ic Northwest, while other shipments go to inter ior destinations. Br i t ish Columbia shippers have affected many aspects of the domestic lumber industry in the United States and may in part be responsible for the trend towards other forms of u t i l i za t ion of the timber resources of the areas into which the lumber has been shipped and domestic lumber displaced by Canadian imports. The tables have been designed to show the importance of the interior Br i t i sh Columbia producers and their separate ac t i v i t i es . The two regions, the Coast and the inter ior , have their own patterns of operation which, in the average, tend to balance out to give a uniform flow of lumber from the province as a whole. 192 TABLE 1 DISTRIBUTION OF BRITISH COLUMBIA COAST AND INTERIOR LUMBER TO PRINCIPAL MARKETS FOR 1955 TO 1962 IN MILLIONS OF BOARD FEET 1955 1956 1957 1958 1959 1960 1961 1962 To: United States From: Coast 961.7 925.7 837.8 1046.5 1019.6 1153.7 1266.1 1309.2 Interior 545.9 550.1 564.0 744.5 858.0 796.5 987.7 1159.2 Total 1507.6 1475.8 1401.8 1791.0 1877.6 1950.2 2253.8 2468.4 To: United Kingdom From: Coast 587.7 333.2 377.7 303.6 270.8 506.6 414.4 446.2 Interior 13.3 6.0 7.2 6.3 1.4 5.7 5.5 8.6 Total 601.0 339.2 384.9 309.9 272.2 512.3 419.9 454.8 To: Other Countries From: Coast 415.1 344.2 385.1 344.8 283.8 392.8 482.6 476.5 Interior 0.7 - 0.5 0.1 - 0.1 - 0.5 Total 415.8 344.2 385.6 344.9 283.8 392.9 482.6 477.0 To: Canada* From: Coast 729.2 819.1 743.4 786.8 729.6 702.0 740.2 721.7 Interior 629.9 689.1 710.5 831.0 791.3 739.4 749.6 767.5 Total 1359.1 1508.2 2453.9 1617.8 1520.9 1441.4 1489.8 1489.2 To: **Local B.C. Sales550.4 621.8 592.5 625.4 593.5 567.0 595.0 582.9 From: Coast 371.4 400.8 405.8 476.8 490.2 473.0 431.2 449.3 Interior Total 921.8 1022.6 998.3 1102.2 1089.7 1040.0 1026.2 1032.2 Total Coast 2693:77 2422.2 2344.0 2481.7 2303.8 2755.1 2903.3 2953.6 Total Interior 1189.8 1245.2 1282.2 1581.9 1650.7 1541.7 1742.8 1935.8 Total Shipments 3883.5 3667.4 3626.2 4063.6 3954.5 4296.8 4646.1 4889.4 Total Production 4814.3 4637.2 4358.5 4840.5 4726.5 5202.9 5454.7 6251.3 Stocks, other sales, etc. 930.8 969.8 732.3 776.9 772.0 906.1 808.6 1361.9 * The sales for Canada include local sales made in B.C. **Local sales, mainly by road delivery, are included in the Canadian f igure. 193 TABLE II DISTRIBUTION OF LUMBER EXPORTED TO THE UNITED STATES FROM BRITISH COLUMBIA BY DIFFERENT TRANSPORTATION METHODS FOR 1955 TO 1962 IN MILLIONS OF BOARD FEET 1955 1956 1957 1958 1959 1960 1961 1962 Coast by road to: Paci f ic coast points - - 0.4 2.3 1.8 1.5 4.4 5.3 At lant ic coast points - - - - - - - -Other destinations - - - 0.6 2.5 6.6 - 8.0 Total - - 0.4 2.9 4.3 8.1 14.1 13.3 Coast by Rail to: Paci f ic coast points 19.2' 12.3 18.9 11.3 11.6 8.9 21.7 17.9 Atlant ic coast points 18.0 15.8 24.9 20.7 26.9 29.2 24.5 8.8 Other destinations 584.6 613.6 506.5 421.6 383.4 419.2 424.3 425.3 Total 621.6 641.7 550.3 453.6 421.9 457.3 470.5 452.0 Coast by water to: Paci f ic coast points 5.8 8.4 8.4 7.3 8.0 25.0 38.7 54.4 At lant ic coast points 334.3 275.6 278.7 582.7 585.7 663.3 742.6 789.5 Other destinations - - - - - - - -Total 340.1 284.0 287.1 590.0 593.7 688.3 781.3 843.9 Total from Coast 961.7 925.7 837.8 1046.5 1019.9 1153.7 1266.1 1309.2 Interior by Road to: Pac i f ic coast points - - 0.8 1.9 2.6 3.0 4.1 3.5 Other destinations - - - 15.4 4.0 61.9 48.2 20.0 Total - - 0.8 17.3 6.6 64.9 52.3 23.5 Interior by Rail to: Pac i f ic coast points 8.9 5.0 7.5 4.5 3.3 2.5 1.0 2.9 Atlant ic coast points 29.4 20.8 8.1 4.7 25.3 17.9 29.6 61.4 Other destinations 507.6 524.3 547.6 718.0 822.8 711.2 904.8 1071.4 Total 545.9 550.1 563.2 727.2 851.4 731.6 935.4 1135.7 Total from Interior 545.9 550.1 564.0 744.5 858.0 796.5 987.7 1159.2 Total from B.C. 1507.6 1475.8 1401.8 1791.0 1877.6 1950.2 2253.8 2468.4 194 TABLE III LUMBER SHIPMENTS FROM BRITISH COLUMBIA BY THE COAST, INTERIOR AND IN TOTAL BY MONTHS FROM 1955 TO 1962 IN MILLIONS OF BOARD FEET 1. COAST Year Jan Feb Mar Apr i l May June July Aug Sept Oct Nov Dec 1955 80.4 77.7 76.8 80.9 82.6 96.0 79.3 93.3 85.8 76.6 70.4 62.1 1956 79.8 81.6 82.9 83.2 88.6 78.1 65.4 86.3 71.6 74.3 79.5 54.4 1957 77.9 65.2 75.2 77.5 84.7 69.6 50.1 66.7 74.6 63.6 76.3 56.4 1958 73.7 71.1 88.4 81.9 81.2 89.6 89.2 84.5.73.9 129.9 102.5 80.4 1959 91.3 110.2 108.4 132.3 140.4 124.2 32.7 4.4 43.3 92.1 54.9 86.1 1960 87.3 97.4 137.0 109.5 110.8 89.1 59.9 92.9 96.3 92.6 85.2 98.2 1961 83.9 110.5 111.3 119.4 116.2 118.6 96.3 99.8 107.5 97.4 101.4 103.8 1962 121.3 109.0*137.0 132.1 134.2 103.4 90.3 113.7 100.4 65.6 72.8 111.0 Av. 86.9 90.3 102.1 102.1 104.8 96.1 70.4 91.8 81.7 86.5 80.4 81.6 2. INTERIOR 49.9 44.4 45.5 55.9 59.7 53.6 39.6 37.8 51.9 50.4 56.0 51.1 47.5 54.6 47.2 29.2 49.3 53.7 54.4 60.8 56.1 60.8 48.7 40.4 66.3 65.9 77.5 85.0 86.7 79.2 54.3 46.0 80.0 94.6 85.7 84.5 84.3 83.3 57.5 55.8 77.0 88.7 73.9 88.4 70.2 69.0 58.0 57.8 88.9 99.4 93.5 102.1 93.1 91.2 80.4 66.7 106.6 110.3 118.1 120.0 100.7 121.1 91.4 68.5 71.2 75.9 75.6 78.7 74.8 76.6 59.6 50.3 3. TOTAL 134.0 123.3 104.5 127.5 130.7 124.4 125.0 96.8 147.5 155.5 166.7 169.5 160.6 209.1 156.8 126.4 1955 37.8 37.1 40.3 43.3 1956 40.9 40.7 43.1 37.5 1957 26.9 30.8 43.3 38.8 1958 40.4 45.0 44.1 54.1 1959 41.9 52.1 67.7 70.6 1960 45.3 50.4 64.0 53.8 1961 54.0 59.0 83.1 76.3 1962 66.0 96.6* 88.3 88.6 Av. 44.1 51.5 59.2 57.9 1955 118.2 114.8 117.1 124.2 1956 120.7 122.3 126.0 120.7 1957 104.8 96.0 118.5 116.3 1958 114.1 116.1 132.5 136.0 1959 133.2 162.3 176.1 202.9 1960 132.6 147.8 201.0 163.3 1961 137.9 169.5 194.4 195.7 1962 187.3 205.6*225.3 220.7 Av. 131.1 141.8 161.3 158.9 88.9 127.6 175.4 112.4 141.9 .6 143.2 156.0 .6 181.8 170.5 .7 164.2 179.5 *Estimated 195 TABLE IV MONTHLY PRODUCTION OF PRINCIPAL BRITISH COLUMBIA SPECIES 1955 TO 1962 (MILLIONS OF BOARD FEET) Month 1955 1956 1957 1958 1959 1960 1961 1962 Average January 388.0 405.7 289.5 362.0 385.9 403.7 413.5 468.0 389.5 February 386.0 386.3 346.3 380.2 419.0 452.8 439.9 484.3 414.3 March 421.7 416.8 386.4 394.9 463.3 495.2 519.7 547.0 451.9 Apr i l 334.6 334.6 321.4 340.9 410.1 373.5 407.3 405.7 366.0 May 383.0 381.4 378.8 402.2 419.9 452.6 465.5 486.1 421.2 June 439.6 416.5 405.2 430.6 502.5 491.6 519.4 524.0 466.2 July 411.0 390.6 402.4 424.6 306.8 395.2 451.4 489.2 408.9 August 460.8 448.8 400.2 439.9 266.5 498.2 493.0 574.2 447.7 September 472.0 405.0 389.1 465.4 354.3 457.1 471.9 516.1 441.2 October 432.0 411.2 390.9 473.6 428.1 409.8 461.1 546.0 444.1 November 326.7 362.7 343.5 375.8 362.5 389.1 441.8 479.3 385.2 December 351.7 277.6 304.8 350.4 407.6 384.1 400.2 431.4 363.5 4807 4637 4359 4841 4727 5203 5485 5951 MONTHLY BRITISH COLUMBIA LUMBER STOCKS 1955 TO 1962 IN MILLIONS OF BOARD FEET Month 1955 1956 1957 1958 1959 1960 1961 1962 Average January 512.6 512.6 564.2 608.7 570.9 686.8 777.6 769.5 625.4 February 515.0 545.1 623.4 633.7 608.1 724.0 802.8 813.1 658.1 March 566.2 563.1 669.9 614.1 623.6 789.6 871.4 851.7 693.7 Apr i l 486.0 554.5 671.8 593.0 578.1 735.3 770.2 773.7 645.3 May 475.9 535.3 593.3 551.9 531.9 728.6 728.1 677.5 602.8 June 479.9 529.0 523.9 546.8 517.8 689.6 698.2 657.4 580.3 July 469.5 518.5 558.6 514.3 485.0 713.3 667.2 688.1 576.8 August 437.4 514.0 551.7 512.7 508.1 737.1 661.2 692.8 576.9 September 472.4 510.0 567.0 533.3 532.1 740.1 666.4 726.6 593.5 October 513.2 557.5 562.9 521.3 564.2 723.4 688.6 799.0 616.3 November 463.8 570.5 576.5 512.3 600.3 730.4 719.3 826.7 624.9 December 515.0 601.7 585.6 536.7 605.9 735.6 742.4 837.6 645.0 

Cite

Citation Scheme:

        

Citations by CSL (citeproc-js)

Usage Statistics

Share

Embed

Customize your widget with the following options, then copy and paste the code below into the HTML of your page to embed this item in your website.
                        
                            <div id="ubcOpenCollectionsWidgetDisplay">
                            <script id="ubcOpenCollectionsWidget"
                            src="{[{embed.src}]}"
                            data-item="{[{embed.item}]}"
                            data-collection="{[{embed.collection}]}"
                            data-metadata="{[{embed.showMetadata}]}"
                            data-width="{[{embed.width}]}"
                            async >
                            </script>
                            </div>
                        
                    
IIIF logo Our image viewer uses the IIIF 2.0 standard. To load this item in other compatible viewers, use this url:
http://iiif.library.ubc.ca/presentation/dsp.831.1-0102429/manifest

Comment

Related Items