Some may remember the infamous Softwood Lumber Sellout that David Emerson and Stephen Harper pushed through early in the Conservative government's mandate. As a Liberal Emerson said:

Industry Minister David Emerson said David Wilkins’ comments, are hypocritical because they suggest Canada hasn’t been serious about negotiating. The minister said Canadians may need to start gearing up for a trade war with the United States.

“Candidly, Canadians have to decide as a small trading economy, are we going to stand together?” Emerson said at the start of a federal cabinet meeting in Winnipeg.

“Are we going to be stronger than the sum of our parts or are we going to be endlessly bickering amongst ourselves and allowing the bully to basically mop the floor with us?” David Emerson, in 2005, then a Liberal

Then as a flip-flop Conservative he rolled over and kissed Bush's backside. It was a bad deal then and remains so now.

And now part of the deal is being challenged in court (hat tip to Red Tory). Moral of the story: if you care about Canadian sovereignty you can't vote Conservative. If you care about primary industries in Canada, you can't vote Conservative. If you want a government that will stand up to protectionist interests in the United States, you can't vote Conservative. Vote anything but, or strategically vote smart / vote for the environment.

The U.S. courts have ruled that Canada is entitled to every penny of the more than $5 billion dollars in tariffs illegally collected by the U.S. since early 2002. Canada’s legal position on the trade dispute is exceedingly strong, having been supported by numerous court victories over the years.

Yet what is this new government of Canada doing? Trying as hard as possible to shut down any legal challenges to the illegal U.S. tariff collection and ram through this new bill. How embarrassing to trade minister David Emerson that the U.S. Court of International Trade actually agrees with Canada’s long held position.

The agreement with the U.S. is an attack on the ability for federal and provincial governments to regulate themselves, free from undue political interference from the U.S. political machinery.

As I’ve noted here in the past, as a Liberal MP and cabinet minister in government, David Emerson said that Canada must continue to fight for what’s right and not simply cave into pressure from the U.S. and its well connected industry. Responding to U.S. Ambassador David Wilkins’ call last August for Canada and the U.S. to negotiate, not litigate, away the softwood lumber dispute:

Industry Minister David Emerson said David Wilkins’ comments, are hypocritical because they suggest Canada hasn’t been serious about negotiating. The minister said Canadians may need to start gearing up for a trade war with the United States.

“Candidly, Canadians have to decide as a small trading economy, are we going to stand together?” Emerson said at the start of a federal cabinet meeting in Winnipeg.

“Are we going to be stronger than the sum of our parts or are we going to be endlessly bickering amongst ourselves and allowing the bully to basically mop the floor with us?”

Strong words from Emerson then, but now, we hear nothing but a defeatist’s whine. And his boss? While sitting on the opposition benches, Stephen Harper, commenting on yet another softwood lumber trade challenge which ruled in Canada’s favour, said:

This is not a time for negotiation, this is a time for compliance.then opposition leader Stephen Harper

Now, as a Conservative MP and cabinet minister in government, Emerson appears perfectly happy to ram an exceedingly bad deal through parliament. Where’s the Emerson of old? Where’s the Harper that postured and posed and said he’d Stand Up for Canada, but instead is behind a deal which sells us all, not just the softwood lumber industry, down the river?

People didn’t vote for this.

But some timber execs have unburdened themselves to union members, claims Terry Tate, a financial secretary with the United Steelworkers in Williams Lake. “They’re telling us behind closed doors that this deal is horrible.”

Michael Wigen of Wynndel Box & Lumber Company in Creston, B.C. has been an outspoken critic of the deal. He said that operating under the new agreement will be precarious for the family-owned mills that compose the Interior Lumber Manufacturers’ Association.

“We’re losing our ass at 11 per cent,” he said of the current duty. ”[Now] we’re going to go to 15 or 22.”

To be reimbursed $10 million of the duties he paid during the last five years, Wigen first has to sign off litigation to get back all the money he paid, plus agree to 78 cents on the dollar instead. Then he’ll have to pay a 20 per cent tax to the Canadian government.

“We’ve been denied the use of that money for years, and we’ve lost 30 per cent on currency exchange. Now we’re to lose another 20 per cent,” he complained, urging the government to “let this deal die and let us go back to litigating.”

In addition to export charges being levied, there is a complex system of export quota reductions that is tied to price as well. Both export charges and quota reductions are calculated using the monthly average price as determined by Random Lengths.

Readers may recall that Canadian industry opponents to the deal were concerned about these provisions, in part due to the volatile nature of softwood lumber pricing which has both seasonal as well as economic cyclic influences. More lumber is used when weather makes building easier; more homes are built when housing markets are on the upswing. The price of lumber naturally climbs when both these cycles are pointed in the right direction.

Canadian producers, thanks to sharply declining U.S. housing starts, and the natural seasonality of lumber, are already on the hook for export charges, as the following table shows:

Of the 152 months covered in the summary table showing monthly prices from 1995 to 2006, average selling prices were over $355/thousand board feet in just 71 of those months – less than half the time (46.71%).

What Canada has signed onto is a system designed, deliberately, to shrink Canada’s forest products industry, and British Columbia, which alone provides lumber accounting for almost 19% of U.S. consumption, is the biggest loser.

Very shortly, sawmills and producers in many of the more than 300 forestry-dependent communities across the country will see the return of more than C$5 billion dollars, breathing new life into the sector at this crucial time.

Note the 5 billion dollars referenced? Some might think, “hey, we got the extra billion back and then some”, but that wouldn’t be true.

Approximately 5 billion dollars, U.S. dollars, were collected in illegal duties by the United States, over a course of time when the Canadian dollar was severely devalued. During the past couple of years the Canadian dollar has appreciated from approximately 61 cents to 90 cents. Canadian producers paid U.S. duties in U.S. dollars. The currency exchange losses during this period of time are enormous.

The lost opportunity costs, quite apart from currency losses, are equally significant. 5 billion US dollars could have been used by Canadian industry to further modernize and increase productivity, making them an even more formidable competitor against US producers. For those who worship at the altar of “free trade”, an unhindered and liberalized trade relationship is, according to the dogma, supposed to produce exactly such a result. Clearly this isn’t so when the implementation of such agreements is far from free.

Some might argue that being paid back when the Canadian dollar is at a relative high amounts to some twisted form of enforced savings, but only someone desperate enough to justify this breach of Canadian sovereignty and international law would step out on that limb.

Now Emerson is trying to paper over the lost one billion dollars which the U.S. has decided to keep, despite countless legal rulings by the courts – U.S. courts – which support Canada’s case that the duties were illegal all along.

By converting USD 4 billion and change into CAD, those not paying attention might just think we got back the 5 billion originally owed us. It isn’t so.

[1] Softwood Lumber Agreement 2006 (PDF)

For my own part, while I recognized the concerns being promoted by Orchard and his supporters as being legitimate, at the time I felt that NAFTA did not need extraordinary focus. For all the talk of NAFTA Chapter 11 and its impact on Canada’s resource exportation, there was always Chapter 22 – termination – to lean back on. My thinking was that responsible government, held in check by the people who vote them in, would never trade away Canada’s sovereignty for fear of the public backlash.

My view has changed.

There’s no responsible government in sight, and the softwood lumber sellout only serves to prove this.

My party, the ‘new’ Conservative Party, is not standing up for Canada when it trades away hard-won legal battles in the name of political expediency to win an ‘apparent’ victory at home.

Messrs Harper, Emerson, Wilson, et al have not won anything but have demonstrated to much stronger forces that the rule of law is to mean nothing when it comes to our legal agreements with the United States.

Why is the Prime Minister of our country aiding and abetting powerful U.S. lobby groups and the politicians they control? How is that ‘standing up for Canada’?

When will the next powerful U.S. lobby group appear on the scene and have its way with Mr. Harper? Will it be the healthcare and drug lobby? Will U.S. businesses successfully argue along the same lines as the ‘stumpage’ argument the lumber lobby used, and portray our universal healthcare system as an “unfair advantage” over U.S. corporations? Will the privatization lobby within Canada link forces with the US in an attempt to ‘even the score’?

That’s not a far-fetched scenario. Rapidly increasing health care costs in the United States have cost U.S. automobile manufacturers significant pain.

For each mid-size car DaimlerChrysler AG builds at one of its U.S. plants, the company pays about $1,300 to cover employee health care costs—more than twice the cost of the sheet metal in the vehicle. When it builds an identical car across the border in Canada, the health care cost is negligible. Washington Post “A heftier dose to swallow”

When will the next well-lawyered U.S. lobby group launch an attack on Canada, and what will we give up then?

These attacks on Canada’s sovereignty have to stop.

This means of course that Canadians have to stop politicians that allow such attacks.

Canada’s bargaining position was strong; our conditions were clear; and this agreement delivers. It’s a good deal that resolves this long-standing dispute and allows us to move on. Prime Minister Stephen Harper

Yet common sense says that accepting an agreement which is the antithesis of ‘free trade’ provides the United States with a dangerous trade precedent, one which history suggests they will not fail to exploit.

I ask again ”what happened to the David Emerson who said just before the last election:”

People think that just because softwood lumber is a relatively small percentage of NAFTA trade, that somehow we should ignore this, but you can’t. The reality is, NAFTA covers many many sectors, and if NAFTA‘s decisions and the dispute resolution mechanism is not respected in lumber, it won?t be respected in other sectors. David Emerson, October 2005

Emerson’s acceptance of the latest deal is a big flip-flop, second of course only to his overnight post-election conversion from Liberal to Conservative.

Voices against the latest deal continue to speak out:

May 12 (Bogdan Kipling, Chronicle Herald) U.S., Canada declare ceasefire, not end to softwood lumber wars

The decades-long American tariff war on Canadian lumber is not over, the purring and glad-handing in Washington and Ottawa notwithstanding. There is no peace treaty.

The [U.S.] Coalition for Fair Lumber Imports and its friends in Congress will be back for more Canadian hide. They will start complaining around 2011, just in time to tell presidential candidates in 2012 what’s coming down the chute.

They will invent new Canadian subsidies. They will charge Canada with dumping – selling below cost. They will whine about injury to their industry. They will point to American jobs lost or threatened by unfair competition from Canada. They have trotted these charges out before and they’ll trot them out again.

That’s the future.

The article makes reference to an address made last November by Elliot J. Feldman, a well known U.S. trade lawyer who sides with Canada on this issue and trade matters in general. Regardless of one’s views on NAFTA, its worth reading the full text of his address to the World President’s Organization (PDF)

May 11 (Steve Mertl, CP) Lumber executive confident of softwood deal despite negative legal report

In his report, [Washington trade lawyer Elliot] Feldman warns among other things that the framework accepted in late April undercuts NAFTA and gives back Canada’s victories over five years of trade litigation – wins that would have been permanently entrenched and would have given companies back all illegally collected lumber duties.

It also raises the spectre of American interference in Canadian forestry policies while allowing the United States to continue with trade practices that violate NAFTA and WTO rules.

Well no wonder Tembec CEO James Lopez is so optimistic. [sarcasm off]

May 11 (Les Whittington, Toronto Star) U.S. `gave up nothing’ on softwood After a two-week study of the draft deal meant to end decades of cross-border friction, lumber producers have decided to pull out all the stops to try to change the agreement, which they see as a danger to free trade and thousands of industry jobs.

“Nobody’s happy with this. Our objective is to get back to free, unencumbered access to the U.S. market, but this is clearly not the way — this is a managed trade agreement,” said Carl Grenier, executive vice-president of the Free Trade Lumber Council.

On April 27, when it was announced that Canada and the U.S. had arrived at a long-sought deal on softwood lumber exports, Harper was praised for standing up to the White House to obtain concessions for Canadian forestry companies.

Harper’s image as a tough negotiator had already been etched by Bush who, after meeting the PM in March in Cancun, Mexico, talked about his “steely resolve” on the softwood issue.

But a U.S. source close to the negotiations insists it was just the opposite. Harper was quietly convinced by Bush that the new government in Ottawa could achieve a major breakthrough in U.S.-Canada relations by working with Washington to resolve the nagging softwood dispute.

Bush raised the possibility again when he phoned Harper on April 22 to offer condolences over the death of Canadian soldiers in Afghanistan.

After that, there was an intense push in both capitals to craft a deal.

But, the source said, “on the Canadian side, the instruction was, `Just get it done.’

“And on the U.S. side, it was, `Give up nothing,’ and they didn’t give up anything.”

Caving in on Bush’s orders to give the embattled president, one of the least popular in all of U.S. history, a win on the U.S. domestic front, buys Canada exactly what, we ought to wonder. Where’s the win-win in this arrangement?

Is it too cynical to speculate that Stephen Harper was willing to trade away a billion dollars and “free trade” in order to deliver the appearance of a Canadian government win, a gift for his friend George W., and buy a little wind for David Emerson sails?

One BC forest company rep was more honest. He said the Harper government would probably have been uninterested in pursuing the legal fight any longer in the face of pressure from the White House. In the end though, we should remember the words of former BC chief bureaucrat Doug McArthur. After about a year, he said, especially if the price of lumber falls, Canadian firms will be screaming to get out of it. Then what?

A weakened president cornered by the very powerful U.S. lumber lobby means that any deal arrived at during the remainer of G.W. Bush’s term is naturally going to favour U.S. producers. Did Harper and Emerson allow Canada to take one on the chin? The question leads to another.

If Canada has been seen by the White House to cave on this issue, then what do we get in return? Or, if Canada has been seen to be granted a gift by the White House, what do we still owe?

Liberal trade critic Dominic Leblanc said the Conservatives appear willing to sell out Canadian lumber companies, provinces and communities to appease the White House.

“The government will simply cut a deal because it will make for a better barbecue at (President Bush’s) ranch in Texas,” he said.

NDP trade critic Peter Julian said he believes the Tories are rushing to reach a deal with the U.S. just to “rehabilitate David Emerson’s image.”

He said one softwood executive he spoke to Thursday told him it was the worst lumber deal he had seen in 25 years.

To be fair, its not all about Emerson – its about trying to convince Canadians that Emerson was “worth it”, not for Emerson’s sake but for Harper’s.

Not going to work.