Lumber industry takes steps to avoid trade dispute.

Despite an ongoing, lumber war between Canada and the United States, it's business as usual at Northern Ontario mills.

As of April 1, a five-year softwood lumber deal that set quotas on Canada's $10-billion lumber exports, to the United States was no longer in effect, and free trade kicked in. As a result, Canadian lumber producers are facing the possibility of paying costly duties.

Tembec Inc., a major Canadian forest products company, has not yet made any changes to the way it sells its lumber, nor has there been any change in the way the company ships its products across the border, Martin Michaud, Tembec's vice-president for the Northern Ontario division, says.

"There hasn't been much change, Michaud says of the cross-border softwood lumber agreement that expired March 31. "Really, the biggest impact was when the deal was put in place five years ago. That's when it changed our marketing and the way we were selling lumber."

Tembec, with mills in Hearst, Kapuskasing, to Cochrane and Timmins, produces lumber and pulp and paper products.

"(It's business as usual) because most of what's being discussed right now is really looking at the flow of wood between the two countries following the expiry of the agreement."

He says the Americans want to ensure that if there's a significant increase in the current flow of lumber, then a special tax is warranted.

"Until we know exactly what's going to happen to our lumber, it's a tough situation," Martin says, adding conflict between the two countries is unfortunate, especially since Canada is a "natural choice" for exporting wood to the United States.

"We really don't know - out of all the material we're shipping to the States right now what the return of that lumber is going to be. We won't be sure about that until we're clear that there is not going to be any retroactive charge of any kind on our shipments."

Last year, about 40 per cent of Tembec's products were exported to the United States, Michaud says. With recent production cut-backs at the company's sawmills in Ontario and Quebec, exports have been lower.

"It's hard to say what the final percentage (this year) is going to be."

Washington-based Weyerhaeuser Co, North America's largest lumber producer, has extensive holdings in both Canada and the United States. After months of remaining neutral, the company broke its silence recently when Steven Rogel, the company's president, sent identical letters to. Prime Minister Jean Chretien and United States President George W. Bush, urging the two leaders to appoint special envoys in order to avoid a potentially costly trade dispute between the two nations.

In his letter, Rogel said he does not believe a potential "protracted, expensive and uncertain legal process" would resolve the issue, and that government negotiations are needed instead of a countervailing duty (CVD) and anti-dumping petition proposed to avoid subsidies and dumping - or selling - at below cost in the United States market.

"I am writing to you to respectfully recommend a government-sponsored envoy process, or some form of government-sponsored negotiations, as a concurrent and separate process from the countervailing duty and anti-dumping petition submitted to the U.S. Department of Commerce," Rogel wrote. "Weyerhaeuser Company has concluded that an envoy process is the most likely means of achieving a fair, long-term solution for all parties."

He went on to say that consumers in the United States depend on Canadian lumber to meet "approximately one-third of their housing and repair/remodelling needs."

The United States does not have the softwood lumber manufacturing capacity or the forest resources to accommodate those needs, he noted.