Screwed for Crude

-On Softwood Lumber, Nafta, and Oil-

An editorial by Dante Lee at National Public Radio's site put me on the issue of Softwood lumber. It's a good article, and can be found here:

Comforting the Comfortable

Note: this site requires registration to post articles, but you can visit as a guest.

Canadians (or some of them, anyway) are quite familiar with "the theory that American timber companies are at a disadvantage in the global marketplace." There is a dispute between our countries over softwood lumber that has been going on for many years now. Under the NAFTA agreement, the US cannot tariff lumber imported from Canada, but has been applying such a tariff anyway. Canada has thrice appealed to the WTO, and three times the US has been ordered to rescind the tariff and pay back the more than $5 Billion already collected. Which order they have ignored.

So, ho-frickin'-hum, who cares? Well, here's the kicker. The US congress has actually tried to pass a bill that would transfer this $5 Billion out of general revenues, and DIVY IT UP AMONG THE LUMBER COMPANIES! I hope you are as outraged as I was when I heard this. Wait, there's more. The bill made it to the Senate, where the vote to ratify was tied. This of course brought in Dick Cheney who as Vice President gets the tie-breaking vote, which he used to kill the bill, known as the Byrd amendment. This is to my knowledge the only act Cheney has made as Vice President that I agree with.

Now you might well ask at this point why Cheney would do such a thing, since he has otherwise unrelentingly kissed the bloated doublewide ass of the corporate establishment. Well, there is a little-known provision in NAFTA that requires Canada to export 60% of its oil production to the US. The only way we can reduce our exports is if we reduce our own domestic consumption of oil. A related provision prohibits Canada from selling oil domestically at a lower rate than it charges the US.

Contrary to common belief, the US now imports more oil from Canada than it does from its second-biggest supplier, Mexico. Saudi Arabia, who everyone thinks is the largest supplier, has slipped to third. I guess if you see George Bush holding hands with a Saudi prince, you just make assumptions. No, not those kind of assumptions.

Canadian oil is, needless to say, much more secure politically, geographically and militarily. Cheney is well aware that if Canada were to use the softwood lumber dispute to withdraw from NAFTA, China and India would quickly move to bid on the oil that would be freed up. US security would be threatened.

For deep background on the Senate vote, (which took place Dec 22, 2005, before our last election gave us a Conservative government more friendly to US corporate interests), look here:

US Loses Softwood Ruling

For an update on how the new Conservative Government of Canada is now co-operating to resolve this dispute, look here:

U.S. raises duties on Canadian softwood lumber

For info on the NAFTA provisions that earmark Canadian oil for US consumption, look here:

What Your Mama Never Told You About NAFTA

While this issue may seem boring and irrelevant to a vast majority, it is worth bringing up a few key points. First, the protectionist policy exhibited here may be good for the US lumber industry, but it is bad for the much larger construction industry, as well as those US consumers who are building a new home or adding on to an existing one. The group I have the most sympathy for are those who are trying to rebuild homes and businesses after the devastation of hurricane Katrina. Second, the dubious method used to resolve the dispute does nothing to provide those consumers with any relief, merely transferring the benefits of an unfair tariff from American to Canadian coffers. The $900 Million tax cut mentioned in Dante's article may be compensation to the lumber companies for the much larger amount they expected to unfairly receive under the older scheme. Finally, I daresay that if more Canadians were aware that so much of Canada's oil production was earmarked as already belonging to the US while still in the ground there would be considerably more opposition to our continued participation in NAFTA.

Further to this discussion are the disastrous ecological and legal consequences of this aspect of the NAFTA deal, which are the subject of an article by the Canadian group Citizens for Public Justice (CPJ), which is here:

The High Cost of the Oil Sands

Canada has passed its peak of conventional oil supplies, and though TRILLIONS of barrels are trapped in the Alberta oil sands, those reserves cannot be extracted without using a lot of energy. This greatly contributes to the amount of CO2 emmisions Canada produces, and will eventually make it impossible for us to comply with our Kyoto accord obligations. Nonetheless, "A barrel of syncrude oil is profitable to produce as long as it’s priced above $30 or so. Transportation is what most of the oil is being used for, and enough drivers are willing to pay far more than $30 for the 490 km that that barrel of oil will take a Chevy Avalanche."

"Under a 1997 federal-provincial agreement.. oil sands projects are eligible for a plethora of tax deductions and a reduced royalty rate of just 1% of revenues until all capital costs are recovered." It should scarcely be any surprise then that CPJ calls for, "a renegotiation or an exit from NAFTA and an end to subsidization of the petroleum sector." What worries me is that the US has had a recent history of parking large numbers of M1A-Abrams tanks on and around oil reserves that it covets. I don't think the Abrams goes quite as far on a barrel of oil as does a Chevy Avalanche, but Alberta is a lot closer to the US than is say, hmmm, I don't know, Iraq.

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Update: Dante Lee, who as I mentioned inspired this post, could not believe that Canada was the #1 supplier of petroleum to the US. While this is a recent development, it is nonetheless true. I am relying on data from the US government's Department of Energy, the tables can be found here:

US Department of Energy oil import figures

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