8 broad range of environmental groups indicates the bills' conservation purpose and effect. We note, however, that some supporters of these bills have stressed another purpose and likely effect of the bills: the creation of log processing jobs. In the United States' complaint against Canadian restrictions on the exportation of unprocessed salmon and herring," the United States argued, and the GATT panel ruled, that measures must be "primarily aimed" at conservation to be within the meaning of Article XX(g); merely being "related" to conservation (as Canada had argued) was insufficient. Obviously we cannot anticipate with certainty how any GATT panel would rule, in response to a hypothetical challenge under Article XXIII. However, the argument that the bills are primarily aimed at conservation is certainly reasonable. (Why else would so many environmental groups so strongly support them?) We note that previous legislation limiting exports of timber has been discussed largely in terms of conservation, and continued focus on this objective would strengthen the argument for GATT legality. Moreover, politicians, by nature, are likely to stress any job-generating effects of a legislative initiative; therefore, such statements should not be viewed as dispositive. Article XX (i) Article XX (j) provides an exception (subject to the above-described requirements) for measures- (E) ssential to the acquisition or distribution of products The S. 754 and S. 755 fulfill some, but perhaps not all, of these criteria. Timber does appear to be in short supply. However, some might query whether export restrictions are "essential" to the acquisition or distribution of timber. Moreover, the bills do not contain a provision terminating or reducing the restrictions at such time that timber is no longer in short supply. (This per se would not be dispositive, of course, since the bills could be repealed if and when the short supply conditions no longer pertained.) 25 Canada Measures Affecting Exports of Unprocessed Herring and Salmon at 22 (Nov. 4, 1987). Conclusion Canada The enactment of S. 754 and/or S. 755 would not necessarily precipitate a challenge to their GATT legality under Article XXIII. The countries that would be most directly, commercially affected probably would be Canada and Japan. has its own log export bans; and Japan still has significant import restrictions on rice (which it would presumably seek to justify under a GATT exception). Therefore, the two countries most affected by the restrictions seem unlikely to mount a challenge. However, particularly with the United States pushing hard for trade liberalization in the ongoing Uruguay Round multilateral trade negotiations, a challenge remains possible. In the event of a hypothetical challenge, the United States would have a reasonable chance of prevailing in a GATT panel. With respect to S. 754, the U.S. could rely on the grandfather provision of the Protocol of Provisional Application, with reasonable likelihood of success. With respect to both bills, the U.S. would have credible arguments that both bills are covered by Article XI:2(a) and/or Article XX (g). The outcome of a possible GATT challenge cannot be predicted with certainty. In our view, however, the United States would have a reasonably good chance of defending S. 754 and S. 755 successfully, if their enactment and application were challenged in the GATT. Senator SARBANES. All right, thank you, sir. Mr. Caffall. STATEMENT OF DOUGLAS CAFFALL, PRESIDENT, CAFFALL BROS. FOREST PRODUCTS, INC. Mr. DOUGLAS CAFFALL. Mr. Chairman, thank you for the opportunity to appear before this Committee this morning. I ask that my written statement be submitted for the record and I'll summarize my remarks. Senator SARBANES. The full statement will be included in the record. Mr. DOUGLAS CAFFALL. Mr. Chairman and members of the Committee, I'm Doug Caffall, President of the Caffall Brothers Forest Products, Incorporated, a third generation wood products company headquartered in Wilsonville, Oregon, with sawmill operations in Oregon, Washington and Idaho, employing 150 individuals. Our business consists of exports of logs to the Pacific Rim countries and the processing of other forest products for the domestic market. I appear before you this morning also as a spokesman for the timber and trade interests of two leading forest products trade associations-Washington Citizens for World Trade, headquartered in Seattle, and Pacific Rim Trade Associated, based in Portland. Mr. Chairman, our Association strongly oppose the bills before you today because they will create costly subsidies for some mill owners in the Northwest at the expense of Northwest communities who depend on free flow of trade in forest products. We also believe that these bills are simply bad public policy. U.S. trade policy should not be fragmented by hasty attempts to subsidize the operation of just one segment of an industry in the Northwest. Many companies, such as mine, now compete effectively in the international lumber market. Restrictions on log exports, artificially depressed timber prices can provide subsidized timber to my domestic competitors. If exports are restricted, my company will have to compete against their subsidized operations. Also, log export restrictions threaten U.S. trade policy goals such as promotion of agricultural exports, coherent Federal controls of timber policies and elimination of trade barriers. It is difficult to understand why the United States would risk the serious trade policy consequences of log export restrictions just to bail out a select group of mill owners. We hear all the time that the United States needs to export more. Personally, it makes no sense to tell successful exporters like myself that we can no longer export while at the same time subsidizing companies who have not done anything to help develop the export market. Timber supply crunch in the Northwest is a regional problem that is currently being addressed by industry and public officials. I personally do not believe that the long-term solution to the region al problem of forest management and timber supply can be sold by a very bloody fight in Congress over log export restrictions. I also wish to speak on S. 754 and the practice of so- called third party or indirect substitution. Substitution regulations allow a company to sell some of the timber purchased in a Federal timber stand to a domestic mill, which may be owned by a forest products company that also exports private timber. Let me use Caffall Brothers to illustrate my point. To run our operations in Oregon, we must buy logs from more than 80 individuals and companies. Although some of this volume comes from private-owned sources, the majority is non-export public timber. Under the terms of S. 754, however, we would be prohibited from buying any public timber for use in our domestic mills simply because we also export unprocessed logs. We would be forced to rely completely on private timber and would have to decrease our production by at least 50 percent and eliminate up to 45 jobs. This legislation won't help companies that are adversely affected by reduction in the Federal harvest. It could hurt Northwest mills that depend on timber acquired under substitution regulations. Some of these, including Caffall Brothers, may be shut down if S. 754 is enacted. The current regulations serve their intended purpose, giving nonexport firms preferential access to Federal timber sales. The original purchaser can either process logs or sell them to another domestic mill better suited to manufacture them. Mr. Chairman, why shouldn't a purchaser of Federal logs be allowed to sell the logs he cannot process efficiently so long as they are processed domestically? Mr. Chairman, I ask this Committee to compare the negative impacts of both these bills with the questionable value of log export restrictions. On behalf of Washington Citizens for World Trade and the Pacific Rim Trade Associations, I sincerely urge you to oppose S. 754 and S. 755. [The complete prepared statement of Douglas Caffall follows:] TESTIMONY OF DOUGLAS CAFFALL BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS SUBCOMMITTEE ON INTERNATIONAL FINANCE AND MONETARY POLICY ON S. 754 AND S. 755 NOVEMBER 7, 1989 Mr. Chairman and members of the Committee, I am Douglas Caffall, President of Caffall Brothers Forest Products, Inc., a third-generation wood products company headquartered in Wilsonville, Oregon, with sawmill operations in Oregon, Washington and Idaho, employing 150 individuals. Our business consists of the export of logs to Pacific Rim countries, and the processing of other forest products for the domestic market. - - Our company, started by my grandfather in the 1930's, has been a supplier of logs and lumber to Far Eastern countries particularly Japan • since that time, and is considered today one of the more successful mid-sized companies engaged in the forest products export trade. I appear before you this morning as a representative not only of Caffall Brothers Forest Products, but also as a spokesman for the timber and trade interests of two leading forest products trade associations Washington Citizens for World Trade, headquartered in Seattle, and Pacific Rim Trade Association, based in Portland. |