Obviously, a number of factors have contributed to the downturn in the wood products industry in the Pacific Northwest. Unprecedented federal deficits, high interest rates, anemic housing starts for several years, inflated federal timber contracts, trade barriers in the Japan and other Pacific Rim nations, he overvalued dollar, as well as higher wages and production costs than other regions have all played a role.

The fact remains, however, that demand for Northwest wood products is at or near record levels. Even so, many of our mills are shutting down in the Northwest and thousands of men and women are being thrown out of work.

One major factor behind this seeming contradiction is the explosive growth in Canadian wood products coming into this country. Overall Canadian market share in the United States has increased from 18.7 percent in 1975 to roughly 31 percent last year. Incredibly, the Canadian percentage is even higher in Washington State, amounting to a full one-third of all softwood lumber. The problem is even more dramatic for shake and shingles, where the Canadian market share has jumped from 33.7 percent of the U.S. market in 1975 to roughly 75 percent currently.

According to industry statistics, Canadian lumber imports accounts for 22,000 of the 30,000 forest products industry jobs lost nationwide in the past five years.

As Chairman of the House Subcommittee on International Economic Policy and Trade, I am strongly committed to developing free and open international trade practices whenever possible. I am not convinced, however, that what Canada is doing in the wood products arena represents fair trade policy. Specifically, Canadian lumber producers enjoy a tremendous advantage over U.S. manufacturers due to artificially low-or subsidized-stumpage prices established by the Provincial governments, which control roughly 95 percent of the timberlands.

According to the Northwest Independent Forest Manufacturers, British Columbia mills paid less than $10.00 per thousand board feet for their timber in 1983, while our Northwest mills paid over $95.00 per thousand board feet. While these figures are not directly comparable due to differences between the two nations in timberland management, roadbuilding and other practices, I find it very difficult to explain away every penny of such a gross disparity between the stumpage prices.

Ironically, at the same time that Canadian subsidies are hurting our nation's timber industry, Canada's forest management practices are threatening to devastate Canada's industry as well. The subsidies offered by the Provinces and other practices are sacrificing Canada's long-term forestry for short-term profits. The Canadian system of subsidization and guaranteed profit margin have eliminated the risk for Canadian manufacturers and driven production and production capacity far beyond sustainable levels. If that's not indicative of subsidy, I don't know what is. Here's what Mr. Bill Young, recently-retired Chief Forester of British Columbia had to say about his Province's management practices in a speech in Vancouver on January 22, 1985:

"The most recent in-depth analysis has projected that B.C. will have a one-third reduction in its annual rate of harvest if forest management investments remain at the current level, utilization of the resource remains at the current level, and the rate of alienation of forest land maintains the historic trend."

A coalition of U.S. wood products firms petitioned the U.S. government for relief in 1982. The petition sought countervailing duties equal to the Canadian subsidy to enable U.S. firms to compete on an equal footing. The petition was denied in May 1983, when the Department of Commerce claimed that any subsidy which existed was insignificant.

I can assure you that the thousands of men and women who have lost their jobs due to unfair Canadian imports don't consider the enormous stumpage subsidy insignificant. The problems lies in the vague definition of "subsidy" in U.S. trade law, which prevented the Department of Commerce from making a proper judgment in this case.

Since 1983, the problem of subsidized Canadian imports has continued to mount. As a result, the U.S. industry is galvanized as never before to take whatever steps necessary to address these crippling imports. As the result of industry pressure, the two governments began discussions February 26th on the state of the industries in the two nations and the factors affecting wood products trade between the two nations.

I fully support these discussions, but I've seen little indication that the talks will bring results anytime soon. Quite frankly, the Canadians are in the driver's seat. They don't have any reason to negotiate.

As the result, I have introduced legislation before the Committee, H.R. 1648, that attempts to resolve the Canadian import problem in a tough, but equitable manner.

My bill would provide a powerful incentive for both sides to negotiate a bilateral resolution.

Briefly, the bill would set a one-year period for negotiations. The goals of the talks are a voluntary restraint agreement limiting Canadian imports, termination of Canadian stumpage subsidies, and elimination of tariff and non-tariff barriers to wood trade on both sides.

If a successful agreement is not approved by Congress within one year, my bill would impose two penalties. First, the President would be required to increase tariffs on Canadian wood, lumber, plywood, and veneer imports by 10 percent; this tariff increase should be seen as only a temporary prescription. Second, the definition of "subsidy" in U.S. trade law would be changed to include government stumpage practices like Canada's. This definition change will enable U.S. industry to file a new anti-subsidy petition with a far better chance of success.

This bill is not intended to dictate to the Canadians or impose unilateral sanctions. I continue to believe that a bilateral agreement is the best course of action. But the Canadians have to know that Congress is serious about this problem. If a negotiated settlement is not forthcoming, Congress will step in and resolve the problem legislatively.

My bill is co-sponsored by more than 40 members of the House of Representatives, including Democrats and Republicans from every major timber-producting region of the country.

The Committee has before it two other bills also designed to address the Canadian lumber problem. Each bill takes a somewhat different approach, and each has its own merits, and I would like to briefly address the other two major proposals.

H.R. 1088 has been introduced by my colleague from Oregon, Jim Weaver. Basically, this bill would immediately reduce the Canadian's share of the U.S. lumber and wood products market to the 1970-79 historical average, and maintain this limitation for a period of five years. The impact of the Weaver bill would be to reduce Canadian imports from roughly 31 percent to 22 percent of the U.S. market. While I may not agree with everything in H.R. 1088, the bill has gone a long way toward highlighting the urgency of this issue, and has signficant support among certain segments of the wood products industry.

H.R. 2451, introduced by the Chairman, is similar in many respects to my legislation. As it applies to wood products, the bill would redefine "subsidy" in our trade laws to specifically include below maket cost timber removal rights. If a foreign government provides timber at a subsidized rate to its manufacturers, the Chairman's proposal would allow U.S. industry to petition for relief before the International Trade Commission and the International Trade Administration. The Gibbons bill takes a general approach to resource subsidies, while my bill is product-specific to timber. But when it comes to wood products, they have the same purpose-to end Canadian subsidies.

In closing, Mr. Chairman, let me again stress that my legislation, H.R. 1648, is not "protectionist." The bill relies on bilateral negotiations, and will in fact accelerate the current talks. As Chairman of the House Subcommittee on International Economic Policy and Trade, I am strongly committed to developing free and open international trade practices whenever possible. What the Canadians are doing in the area of wood products is not free trade, however, and my bill will address this serious problem.

The real question posed by my bill is this: Are the Provinces subsidizing their industry to the extent that it gives them an unfair advantage in our domestic market? If so, the subsidy must end, or at least a countervailing duty should be imposed. If not, we have only ourselves to blame for not being competitive with our neighbors to the north.

Chairman GIBBONS. Thank you, Mr. Bonker, and I want to commend you for the excellent work you have done working to make exports from American industry and American farms and factories more readily available to purchasers.

You have done an excellent job, and I have enjoyed working with you.

Our next witness is Hon. James Weaver of Oregon.
Mr. Weaver.

STATEMENT OF HON. JAMES WEAVER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON

Mr. WEAVER. Thank you, Mr. Chairman.

Mr. Chairman, I want to commend you not only for holding these hearings and thank the members of the Subcommittee for their concern, but to commend you as well for the bill you have introduced. I support it.

I want to commend Congressman Bonker for the bill he has introduced. I am a cosponsor of that bill. These are carefully thoughtout bills.

I have the greatest optimism that some form of that legislation will be enacted.

But Mr. Chairman, my role in this issue is to be the Isaiah, to warn of the coming debacle.

Our primary industries in this Nation are eroding before our very eyes. The rest of us are making our livings passing paper among ourselves, but we are standing on a vacuum because our primary industries-agriculture, steel, textiles, timber-the industries that are the foundation of our economy are like a house of cards.

If they collapse-and they are indeed collapsing-we will collapse into that void on top of them.

Our timber industry is fighting for survival. In 1979, there were 818 mills operating in the West. Today, there are 650 mills, and it is getting worse every day. Eight mills closed in my district not long ago in one week.

Some of the mills that have closed are owned by giant corporations. These mills, which never have closed even in the deepest recession, now are closed, many of them permanently. Some of the mills that closed now are being reopened only by obtaining concessions from labor and the communities in which they are located. Wages are being slashed and property taxes to the local communities and counties cut in half. I understand that, because they have to meet the competition from Canada. And Canada is mowing down its forests. Desperate in their need for dollars, the Canadians are dumping this enormous amount of lumber onto our markets, driving the price down for both ourselves and them.

We would be doing Canada a favor, if they only understood it, by limiting their imports into our country so we both could make livings. If not, we all are heading for a complete depression and collapse of our economy. It is unavoidable unless we do something about it.

During hearings of the subcommittee that I chair, the Interior Subcommittee on General Oversight, Northwest Power and Forest Management, industry witnesses unanimously said the problem was Canadian imports, and unanimously supported either the kinds of bills that the Chairman and Congressman Bonker have introduced, or the bill that myself, Congressman Larry Craig and Beryl Anthony introduced. My approach is to put a quota on Canadian imports of their historical market share. We took the average market share of the 15-year period between 1965-79, and said that is their quota, because they have far exceeded it now, and it has been going up and up every year.

The Canadians have helped us in the past. At times of huge, booming housing markets in this Nation, the Canadians have come in and sold us lumber that we were unable to produce ourselves to meet our markets. And we thank our friends in Canada for this. I would like to see that happen again. And it could happen again. But today, the Canadians are driving both themselves and ourselves out of business.

So I prefer the quota approach, Mr. Chairman, but again, I commend you and Congressman Bonker for the bills that you have introduced, and I say that something must pass, something must be done now, or we are not going to have primary industries in this country anymore. And if we do not have primary industries, Mr. Chairman, we are not going to have insurance people, we are not going to have stockbrokers, we are not going to have anybody else. Thank you.

[The prepared statement follows:]

STATEMENT OF HON. JIM WEAVER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON

I want to thank the Chairman and the Subcommittee for the opportunity to testify this morning. Subsidized imports of softwood lumber and other wood products from Canada are shaking an already depressed industry to its foundation. We might have expected the industry to celebrate last year's record demand for lumber in the United States. But there is no joy in Timbertown.

On the contrary, our industry is fighting for survival. In 1979 there were 818 mills operating in the western United States. By the end of 1984 only 650 mills remained. And it is getting worse. In just one week in February, eight mills in Oregon closed their doors eliminating nearly 2000 jobs.

While each of us may take a slightly different approach to the problem, I believe we share a common interest in protecting our basic industries-in this case lumber-from unfair foreign competition.

On December 18, 1984, I chaired a field hearing of my Subcommittee on Mining, Forest Management and the Bonneville Power Administration in Portland, Oregon to examine the effects of lumber imports from Canada on the management of our national forests and on our timber industry.

In addition to Region 6 Forester Jeff Sirmon and his staff, more than 25 witnesses from labor and industry in the Northwest testified at the hearing. The labor and industry witnesses were united in their assessment that softwood lumber imports from Canada were wreaking havoc on our wood products industry. Some of the witnesses also identified problems associated with imports of shake and shingles and siding.

Between 1978 and 1982, U.S. softwood lumber consumption and production both fell by nearly one-third. Meanwhile, imports of Canadian softwood lumber have risen dramatically. From a low of 19% in 1975, Canadian imports now account for more than 30% of the softwood lumber used in the United States. I have attached a graph which shows the relationship between U.S. production and imports from Canada over the past two decades.

The regional impact is even more dramatic. In New England, nearly 65% of the softwood lumber comes from Canada; in the South, Canadians account for more than 25% percent of the total, with some localities approaching 60%.

I believe we have an obligation to take every necessary step to protect the American workers and communities that depend on the wood products industry. I value very highly our good neighbor relationship with Canada. In the past, when demand exceeded our industry's capacity to supply wood products, Canadian mills helped meet the shortfall. I sincerely hope the industry will again reach that point.

In the meantime, we cannot afford to export our workers' jobs, nor can our communities afford the cost in human suffering caused by curtailments, shutdowns and closures of our mills.

Most of the witnesses at the December hearing supported Government to Government negotiations between the U.S. and Canada to reach a voluntary agreement limiting imports of lumber into the United States. They were unanimous, however, in endorsing legislation unilaterally to limit such imports if attempts to negotiate a

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voluntary agreement were unsuccessful. It appears, Mr. Chairman, that those efforts are not succeeding.

U.S. and Canadian officials met in Ottawa on February 26 to discuss issues related to wood products trade. While the talks were characterized as "constructive," little progress was made. A second meeting on April 24 was similarly unproductive. In the meantime, President Reagan has reaffirmed his committment to eliminating trade restrictions between the U.S. and Canada. I would remind the President, however, that free trade must also be fair trade.

After my December hearing, Congressmen Larry Craig and Beryl Anthony joined me in introducing legislation to limit imports of Canadian softwood lumber, siding, shake and shingles, and particleboard to each items historic market share. That market share is based on Canada's average percentage of U.S. consumption between 1965 and 1979. For lumber, this amounts to a 20% limitation.

Our bill, H.R. 1088, which has been co-sponsored by 30 other Members of Congress from around the country, was reported unanimously by the full Interior Committee on March 20.

I commend you once again, Mr. Chairman, for calling these hearings today. Our workers and our communities cannot afford to wait any longer. It is imperative that this Congress act, and act quickly, to ensure that our lumber and other basic resource industries are not swept away in a tidal wave of subsidized imports.