N.B. fixes to wood pricing system not enough to satisfy U.S.

New Brunswick's attempts to fix its system for calculating private woodlot sales to sawmills have failed to persuade the U.S. government that the province has a free market in timber pricing.

Last year, Kim Adair-MacPherson, the auditor-general at the time, said the province had made "significant improvements" to address one of the U.S. rationales for slapping countervailing duties on New Brunswick wood.

At the time, the Higgs government hoped this might spell relief for New Brunswick exporters.

But the recent U.S. ruling upholding softwood duties says the province still doesn't have a market-based pricing system because the Crown wood supply and a handful of major industrial buyers continue to dominate.

The U.S. Commerce Department calls it an "oligopsony," a market where a small number of large buyers can influence the price paid for a commodity. 

It says with the province acting as the largest supplier of wood through Crown land licences, prices paid by mills to private woodlots can't help but be pushed downward.

"Oligopsonistic conditions continue to exist in New Brunswick that contribute to the distortion of the market for private-origin standing timber in the province," says last month's U.S. ruling, which reaffirmed punishing duties on New Brunswick wood sold south of the border.

Adair-MacPherson's 2020 audit citing a better process for counting private wood sales represented a potential lifeline to the forest industry and amounted to an update of a 2008 finding by her predecessor.

That earlier audit said data on sales were often incomplete and sample sizes were sometimes too small, making it difficult to assess whether the Crown royalty rate reflected market conditions.

It also said a small number of mills "directly or indirectly control so much of the source of the timber supply in New Brunswick means that the market is not truly an open market."

That meant it was impossible "to be confident that the prices paid in the market are in fact fair market value," it said.

The U.S. timber industry seized on the wording of the 2008 audit to persuade Washington to end New Brunswick's exemption from duties on timber heading to U.S. buyers.

The U.S. views Canadian wood as overly subsidized, making it cheaper than American wood. The duties charged to U.S. buyers are designed to to level the playing field. 

Adair-MacPherson's 2020 audit said the province had improved how it measures wood sales from private woodlots by using larger samples, adopting third-party verification and making participation in the survey mandatory.