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Overview of the North American Lumber Industry
What is the difference between softwood and hardwood lumber? And how do forest management styles between Canada and the United States differ?

Despite the historical aspect of the dispute, the US decision to place duties on Canadian softwood lumber imports is a relatively recent phenomenon. In 1982, the Coalition for Fair Lumber Imports, a coalition of US Lumber producers, petitioned the US government to place duties on imports of softwood lumber that had been harvested on Canadian Crown (government-owned) land.

This initial effort to place duties on Canadian softwood lumber imports did not succeed.

Since that time, however, US disaffection with Canada’s forest management system, and the belief that imports of Canadian softwood lumber are unfairly hurting American lumber producers, has increased. As a result, since 1986 there has been some form of tax or duty placed on all imports of Canadian softwood lumber to the United States.

In order to understand the roots of the dispute, it is helpful to learn more about softwood lumber, the softwood lumber industry, and differences in forest management styles between Canada and the United States.

Overview of the Softwood Lumber Industry

The terms ‘softwood’ and ‘hardwood’ are somewhat misleading. While softwood lumber is generally softer than hardwood, this is not always the case. Balsa wood, for example, is a type of hardwood that is very soft. The classification of a tree as either softwood or hardwood is based upon the tree’s method of reproduction and the type of needles it produces. Softwood trees are gymnosperms, developing from seeds that produce no outer covering. (A pine cone is an example of the type of seed produced by a gymnosperm). Hardwood trees, on the other hand, are angiosperms, growing from seeds that are fully enclosed. While softwood trees have needles or scalelike leaves, hardwood trees have broad, flat leaves. In North America, the majority of softwood trees are evergreens, retaining their needles year-around, while the majority of hardwood trees are deciduous and shed their leaves in the fall.

When it comes to commercial use, softwood is considered easy to work with. Hardwood, on the other hand, is valued for its durability, particularly higher-quality species such as oak. While softwood is commonly used for structural lumber (lumber used to hold up a building), hardwood is used in flooring, furniture-making, and other areas where the wood will be subjected to high levels of wear and tear.

The following table outlines several types of softwood and hardwood trees commonly found in North America:

Type of Wood

To a large extent, geography has dictated the importance of the softwood lumber industry to the Canadian economy. Forests make up 45 percent of the vast Canadian landscape. Over one-half of this forested land, or approximately 245 million hectares, is available for timber production. Softwood forests make up two-thirds of this commercially available land; the remainder is comprised of mixed woods (22 percent) and hardwoods (12 percent). This natural advantage has resulted in a situation where, in 2005, Canada is the world’s largest exporter of softwood lumber – with approximately 35 percent of the total world market.

While Canada’s northern climate provides an ideal natural environment for softwood trees, softwood forests exist in the United States, particularly the northwest. The Douglas Fir forests found in British Columbia extend south through Washington and Oregon, while northern California is famous for its redwood forests. These forests lie within the US National Forest system; accordingly, much of this forested land is unavailable for commercial purposes.

The southern United States is a primary source of softwood lumber, particularly southern pine. These softwood species, however, are considered inferior to Canadian softwoods. Combined with a booming American housing construction industry, the relatively lower quality of US softwood has led the United States to become one of the world’s largest importers of softwood lumber. Over 90 percent of US softwood lumber imports come from Canada.

Canada and the United States – Different Forest Management Styles

A key element of the softwood lumber dispute involves differences between Canada and the US concerning forest ownership and management styles. In the United States, 70 percent of total forest land is privately owned; nearly 90 percent of lumber production takes place within privately owned forests. Privately owned forest land is held in fee-simple ownership, whereby the owner (and his/her heirs) can manage, sell, or transfer the property as s/he sees fit.

The situation is very different in Canada, where over 90 percent of Canada’s forests lie within lands owned by federal or provincial governments (also known as Crown Land). The majority of Crown Land (78 percent) is owned by the provinces, while the federal government owns 22 percent. Overall, the provinces own 90 percent of land classified as productive forest land - land that is capable of producing more than a certain quantity of wood annually. (The territories fall into a separate category, and will be discussed later).

In contrast to the United States, only six percent of Canada’s forested land is privately owned. Canada’s privately owned forests are found primarily east of Manitoba, particularly in the Maritimes, where widespread private land ownership existed prior to Confederation.

This difference between Canada and the US, in terms of public and private ownership of forestry resources, has led to a significant divergence in the stewardship of their respective forestry industries. In the United States, where the majority of land is privately owned, companies compete for the right to harvest wood through an auction method on the open market. The competitive auction method ensures that companies pay the market price for logging rights.

In Canada, companies wishing to harvest wood from government-owned land do not compete with one another on the open market. Instead, the provinces grant licenses to private forest companies. Each company then enters into a tenure agreement with the provincial government, whereby the company is granted a licence to harvest trees from a specified portion of Crown Land. Tenures can be of short- or long-term duration. They may be area-based or volume-based tenures, granting the company either the right to manage the area or simply to obtain a specified volume of wood. Instead of being charged the market price for logging rights, the tenure holder pays what is known as a stumpage fee to the provincial government.

A similar situation exists in the territories, where significant portions of federal Crown Lands are located. In recent years, the federal government has handed responsibility for managing these lands to territorial governments, while retaining ownership over the land. Accordingly, companies wishing to harvest wood enter into an agreement and pay stumpage fees to the territorial government, not the federal government.

Each province or territory is responsible for setting the terms of tenure agreements. All tenure agreements require the tenure holder to follow responsible conservation and forest management practices. This is particularly true of longer-term tenures, where the company is granted a licence to manage the designated forest area.

Each province or territory is also responsible for the method of determining stumpage fees. Typically, governments factor in non-market-based criteria when setting stumpage fees, such as provincial revenue goals or the job-creation potential of the contract. Stumpage rates may also reflect the cost, to the forest company holder, of following responsible forest management policies. The goal is to encourage forest companies to be “good stewards” of the forest. Consequently, stumpage fees are often lower than the market price; in this way, they do not reflect the true economic cost of harvesting the wood.

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Regulation of the softwood lumber industry

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