Finance Committee on March 12th, 2008

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting to order.

We want to pursue our study on direct assistance measures and fiscal environment for the forestry and manufacturing sectors. We have some witnesses before us this afternoon from four different groups: from the City of Thunder Bay, the Quebec Forest Industry Council, the United Steelworkers, and the Communications, Energy and Paperworkers Union of Canada. Those are the four.

We also have one further, an individual from Thunder Bay. There seems to be a bit of a communication breakdown. We don't know exactly how that happened; we'll follow it through. We have an individual who has travelled from Thunder Bay, who was, in his words, asked to present.

I'm asking the committee whether they would prefer to handle this by way of offering a five-minute presentation from this individual and allowing him to join the panel, or not. It would take unanimous consent. That's the only way I'd permit it, so I'll put it to the committee at this point.

If there are any objections, speak now or hold your peace.

[Some hon. members]

Agreed.

[The Chair, Conservative, Rob Merrifield]

Are we all good?

Okay. Then we'll ask the individual to step to the table.

We won't take much time, because we only have an hour; it's going to be very fast. I would ask the presenters to please keep your comments as tight as possible, and we'll get everybody in.

We'll start with Mayor Lynn Peterson, for the Northwest Forestry Coalition. The floor is yours, Lynn. Take it away.

[Mayor Lynn Peterson, Mayor, Northwest Forestry Coalition, City of Thunder Bay]

I'm Lynn Peterson, the Mayor of Thunder Bay. Thank you very much for the opportunity to discuss the impact on forestry and manufacturing in my community.

Forestry is the lifeblood of every community across northern Ontario, and Thunder Bay is no exception. In Thunder Bay, our sawmills and pulp and paper operations collectively accounted for--that's the past tense--almost $2.5 billion of annual sales in Ontario's forest products sector. Our output of forest-based products accounted for almost 6% of Canada's total output, and our sawmills in Thunder Bay and region accounted for almost 50% of the total Ontario softwood lumber exported to the United States. That translated to 4,127 sawmill and pulp and paper jobs in Thunder Bay, with about a $400-million payroll.

When we consider the fact that the forest industry represents over 60% of Canada's trade surplus, the Thunder Bay stats underscore the importance of this industry and the major contribution my community made to the national GDP. Unfortunately, the forest industry is in crisis, as we all know. The impact on Thunder Bay has resulted in the loss of 2,400 jobs, which means that 2,400 families are facing uncertain times, where at least one person is under-employed, unemployed, or working elsewhere to make ends meet. Many of them go to Alberta.

When we experience this type of job loss in our community it affects us on many levels. As families leave the city it impacts our business sector, erodes the property tax base, and leaves us with a human resource deficit due to the exodus of highly skilled tradespeople.

While the industry is facing challenging times--and my notes say I am confident, but I am not--it is imperative that the forest industry gets back to being a stable and prosperous sector. It is by no means a sunset industry, and I get extremely upset when people think it's a dying industry. Forestry is a growing industry everywhere but in Canada. Canada's forest industry could and should be a world leader. Boreal forest covers 35% of Canada's total mass, with 18 million hectares of that in my backyard. We have the water and energy to produce forest products, and we have the skilled labour.

We have another thing that no other country can say it has: our industry is a good steward of the environment. You can look at the United Nations for those answers. What we lack is the ability to compete on the global market. There are a number of reports out there, such as the ones you heard at the natural resources committee the other day. You will hear from the gentleman from labour this afternoon. The fact of the matter is that a lot of things need to be done to create a world-class business climate for the forestry industry in Ontario.

I also understand that the federal and provincial governments are still in the negotiation phase on the distribution of the $1 billion national community development trust fund. I think the first priority should be to create a climate that will allow forestry workers to go back to work. Then the remaining money.... I have no idea what is being negotiated at this point and how this going to roll out. The forest industry needs to be stabilized. The government needs to provide mechanisms to make the industry able to compete in the global market and get people back to work.

The same thing needs to be said about the manufacturing sector. It also needs to be able to compete in the global market. This can be achieved by implementing Canadian content legislation. Canada is one of the few countries in the world that does not have local content policy in place for all infrastructure jobs, using public funds. This means Canadian manufacturers are at a distinct disadvantage when pursuing contracts in other nations, and they have no particular advantage at home.

The hard reality is there's very little preventing foreign suppliers from winning Canadian contracts, using Canadian tax dollars, and then taking the work offshore to benefit regions in other countries. Canadian manufacturers deserve to compete on an equal footing in the global marketplace. Canadian businesses, communities, and citizens deserve to enjoy some economic benefit from public projects funded by their own tax dollars. The Canadian government needs to recognize the greater contribution made to the local economy by local businesses by implementing a mechanism to give in-country enterprises the same consideration enjoyed by foreign businesses.

I think it's interesting that a recent study conducted by the Toronto Transit Commission to determine the number of components available in Canada for the recent streetcar request for proposals concluded that only 25% of the streetcar components were accessible in this country. I believe we need to look at what opportunities exist in Canada to bring that total to 60% and require that the final assembly be done in Canada to ensure that we can say our products are truly made in Canada.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you, Ms. Peterson.

We'll now proceed to Mr. Guy Chevrette.

[Guy Chevrette, President and Chief Executive Director, Director of Communications, Quebec Forest Industry Council]

Good afternoon.

I am going to give you a brief description of our industry. In Quebec, it has annual turnover of $13 billion, and involves 200,000 direct or indirect jobs, 360 factories and 250 municipalities, about 150 of which depend solely on forestry. This gives you an idea of the importance of the forestry industry in Quebec.

The crisis has resulted in our losing 20,000 jobs to date. In terms of capitalization, companies have lost $7.5 billion since the crisis started. You need only look at the stock exchange figures every morning to see what share values are. You will realize that $7 billion is not an exaggeration.

Certainly there are structural problems that the federal government can't do anything about. That is the responsibility of the government of Quebec. However, the federal government can certainly help to deal with the cyclical crisis. I would like to point out that the plan for $1 billion, spread out over three years, for all manufacturing and forestry industries, is obviously inadequate. This is simply not meaningful assistance. Even the allocation of funds seems to us to be incorrect. It fails to take into account particular industries in particular provinces. It is based on population size, and so some populations may benefit proportionately more from these funds than others, and that is not fair. This is the case for Quebec's forestry industry, for example; it is receiving only a trifling amount when compared which what it might actually have been given.

As well, it would be wise to make the objectives of the program known. It is very nebulous. The objective we have heard about to date can be more or less summarized as helping communities. We have absolutely nothing against that idea, and I want to reassure the Mayor who is sitting beside me, but we believe that in order to stabilize the industry, to be prepared to start back up when the American crisis has been resolved, we are really going to have to have some help.

What are we proposing be done? First, neither our union colleagues nor you will be surprised to hear that we are not insisting that measures be taken that would jeopardize the softwood lumber agreement. In Quebec, we have taken a position on that subject: we want the softwood lumber agreement to be able to last for seven years rather than three years or five years, if necessary. We hope that it will be kept in place, for one very understandable reason: stability. We have cooperated with the government, and I think it will back us up on that. Quebec voted in favour of the agreement and is hoping that it will last as long as possible.

That being said, obviously there are measures that do not jeopardize the agreement. We want to talk a bit, and tell you, for example, that POWA, the Program for Older Worker Adjustment, is important to us. We are well aware that collective agreements, and we don't disagree with this, result in layoffs on a seniority-based system. In regions referred to as remote from the major centres, we are risking losing young skilled workers. We sincerely believe that POWA should very definitely be implemented.

As well, you could offer assistance to industry associations. It costs so many cents per cubic metre. For example, our little Quebec council paid the Canadian Wood Council $800,000 this year to monitor building codes and changes to building codes. That responsibility could also be national, since it is the national economy that then depends on it. That would not be contrary to the softwood lumber agreement.

I would like to talk to you very quickly about two or three other measures, but because I am being told that the time available to me has run out, I will rely on the committee members' goodwill and hope they ask me what the other five measures in my brief are.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now we have the United Steelworkers. Joe Hanlon, the floor is yours for five minutes, please.

[Joe Hanlon, President, Local 2693, United Steelworkers]

Thank you.

I would like to thank the finance committee. As said, I'm the president of the United Steelworkers Local 1-2693. I'll be directing my comments to the forest industry and the crisis that has hit. Mr. Weir will be talking about manufacturing and economics.

United Steelworkers represents about 280,000 members across Canada, 50,000 of whom work in the forest industry. Our local represents approximately 3,700 members in the forest sector in a number of communities across northern Ontario. These members work in woodlands operations, sawmills, plywood plants, wafer plants, remanufacturing plants, trucking plants, and lumberyards, to name a few.

The thing is, they used to work there. As we speak, we don't even have 700 members working. These workers and their families reside in communities that have been hit hard with the downturn, communities such as Hudson, Atikokan, Ignace, Thunder Bay, Greenstone, Nipigon, White River, and Dubreuilville, also to name a few.

We're talking about 3,000 people who are unemployed, people who have families, many of whom have lived most if not all their life in these communities. The majority of these communities are one-industry towns.

A good example is White River. In July last year, Domtar curtailed their woodlands and sawmill operations for an indefinite period, putting 240 people out of work. We're talking about 240 people who live in a community of 1,000 people. That represents 24% of the total population.

Just imagine if Ottawa announced today that 24% of the people who work in this city were going to lose their jobs. It would be mass hysteria, and there would be immediate help from all levels of government. But in northern Ontario it's just a news story for a day or two, and it's all forgotten.

One of the largest one-industry towns in Ontario is Dubreuilville, with a population of 900. Dubreuil Forest Products Ltd., which employs 340 workers, announced last week that they will call back employees who've been laid off since last November. It should be good news, but it's not. They will only be going back for about a month. The company wants to clean their inventory and then close the doors. There is no indication if and when the mill may reopen.

The people of Dubreuilville, White River, and other communities that are affected with the same fate deserve more. These are real people, real families, real communities. In many cases, these are double-income families that are dependent on the same employer to pay their bills. In many of these small communities there are no other jobs.

How can these small northern Ontario towns afford to continue to provide public services if no one can pay their taxes? How can people continue to live there and raise their families? They can't. Their EI will run out, and they'll have no other means of income. The bank will foreclose on their homes, and they'll have to use up all their savings.

It could be said that before this happens maybe they should look for work elsewhere; maybe they could go out west. Well, many have left, but there are further problems they face. The equity they've built up in their homes is gone. Their homes are worthless. You can buy a house in some northern Ontario communities with your credit card. The hard part is trying to find somebody to buy it.

Another problem is when only one family member goes out west, who will deal with the social impact of the other parent singly raising a family? Let us not forget the high cost of living out west, which is a huge challenge for someone who has had their credit rating affected because they could not pay their bills, taxes, loans, or mortgage.

Wrong or right, many workers believed they could wait out the storm. They believed the operations might reopen. They believed the provincial and federal governments would not just sit back and watch people, their families, and their communities be destroyed. They know now they were wrong.

Many have taken their severance with the hope of catching up on outstanding bills or to use it to start a new life, but reality sets in very quickly. They find out that the government wants it. They cannot pay anything off. They must use the money to feed their families, because their only means of income, EI, is cut off until their severance is used up.

Other workers are told that they can be retrained. Many are upgrading their skills, but they continue to ask, once they've received the training, where are the jobs; who's going to hire them? In the end, they still have to move if they want to work.

These are just a couple of stories in northern Ontario about job losses. These two communities lost about 600 direct forestry jobs. We are just a small local in northern Ontario. There are other steelworker locals, other unions, community leaders, and industry that can tell you similar stories. There have been thousands of jobs lost in northern Ontario, tens of thousands across Canada over the last few years.

Today is a start, but we need to ask, where have you been for the last two or three years? The devastation that has taken place in the forest industry is not new. Government will hear from us today, but where are the public hearings to allow workers and communities to give input on the softwood lumber deal? Maybe if that was done, the government would have negotiated a good deal for Canadians and kept working families first.

We'd ask the finance committee to ensure that the federal government pay attention to these people, their families, their communities, union leaders in the forest industry, and the provincial government. We need to work together. We need to listen and move fast so that people can get back to work instead of migrating out, being retrained in limited programs where there are no jobs, and before any more lives and communities are destroyed.

Our plan for the future is that we need to look at EI. It needs to be extended or changed to ensure that it doesn't defer or eliminate benefits in regard to severance pay.

We should have taxation and regulation policies to encourage firms to develop new processes.

Training facilities should be located in forest-based communities.

Companies should have to discuss alternatives prior to shutdowns.

We should look at a jobs commissioner and at a jointly sponsored provincial and federal government fund to support forestry industry workers.

We should target job creation and protect wages and pensions.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Next we have David Coles, president of the Communications, Energy and Paperworkers Union of Canada. The floor is yours, for five minutes.

[Erin Weir, Economist, United Steelworkers]

Mr. Chair, we were told that each organization would receive up to ten minutes.

[The Chair, Conservative, Rob Merrifield]

I'm sorry. It's five to ten minutes, and our time is very, very tight. We would extend the time we have for testimony if we could, but we are against the clock of votes this evening, so we have a very tight agenda. So that's the way we're going to run it. Thank you.

Mr. Coles, the floor is yours.

[David Coles, President, Communications, Energy and Paperworkers Union of Canada]

Great. Thank you very much.

I'm Dave Coles. I am the president of the Communications, Energy and Paperworkers Union. For those who are interested, I'm a fifth-generation forestry worker.

With me is the former head of our research department and now my assistant, Keith Newman, who is also an economist and has worked in the industry for over 25 years.

We have 150,000 members--about 50,000 in the forest industry. Over the last 36 months we've lost 20,000 jobs permanently.

I would like to put it quite bluntly. This is probably the fifth, sixth, or seventh time.... Many of you are getting tired of seeing my face here.

I met with the Prime Minister and the Governor of the Bank of Canada.

What we're asking the government to do is to hold a national summit on the crisis--just to hold a summit with the key players of industry, the community, the unions, and the government, and find a solution.

We're a forest nation. It's not this government's fault, nor the one before it, nor the one before it. We don't have an economic strategy on forestry.

Go to Sweden, Finland, or Norway, and you have an economic vision of a forest industry, but not in Canada. You're a fresh government, you're new, and it's not your fault, but now you're there and you need to do something about it.

We have fundamental problems with our employment insurance scheme. It is a bridging for us. It is just a transition.

We need the Canada Pension Plan to enhance the ability of workers to leave when the industry is shut down. We need the government's finance committee to look at some form of bridging for those workers who are 50 to 55 years old and who can't make it to our pension plans.

So we would ask that the Prime Minister, the government, and the opposition parties drop the partisanship issue around a national summit and hold one. Get all of the best minds we have in the country together and find a solution.

We could say to you--and we have--give us $10 billion for the industry. But one paper machine, one new pulp mill, is $1.5 billion to $2 billion. We need a long-term solution, and it's about getting out of making toilet paper or newspaper and getting into products that actually have a real value, a convertible value to it, and provide a longevity to the industry.

I'd like to give a couple of minutes to my assistant so he can make a few remarks in French, and then we'll pass it on to the next speaker.

[Keith Newman, Director, Research, Communications, Energy and Paperworkers Union of Canada]

Thank you, Dave.

I'm going to make a few comments relating in particular to the $1 billion the government has granted, in a somewhat strange way, as Mr. Chevrette mentioned. For example, we're talking about something like $250 million for Quebec. For the entire manufacturing sector, that is not even a drop in the bucket. It is completely inadequate. We need $1 billion for the forestry sector alone, not to mention the entire manufacturing sector. As Mr. Coles said, substantial funds are going to be needed, but also a strategy. We can't just allocate money without proposing a plan, a strategy. We are going to have to decide on a niche, the key products of the future that our industry is going to have to produce, and do something to provide assistance, by providing adequate funding.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Now, with the indulgence the committee, we have allowed Mr. Rigato five minutes. The floor is yours.

[Emilio Rigato, As an Individual]

Thank you very much, Mr. Chairman. I'm glad to be here.

I want, as David said, to repeat a couple of things.

The pulp and paper industry is merely a hundred years old. For the first seventy years, up until about 1975, it enjoyed a very good life. It always had its three- to five-year cycles. They were tied to wage negotiations or inventory levels.

Canada had five manufacturers of paper machines, and paper machines in those days were $50 million. In the seventies, they were $225 million projects. So it was a pulp and paper industry with a huge manufacturing component.

Margins up until the seventies were 20%, and consumption of paper was increasing by 1% to 2% a year. Things started to change in the 1970s. The power went from the producer to the consumers, and the consumers were both the publishers, which grouped together--some 10 to 12 publishers now in all of North America buy 60% of the newspaper produced--and the consumers. They started to advocate for recycling mills and things like that.

In the seventies, business in North America, more than ever, was done north-south, but our infrastructure was east-west. So we started to see things like shipping to San Francisco from the middle of the country being three times as expensive as shipping to Japan. You could ship from central Ontario to Vancouver to Japan for less than half the price of shipping to San Francisco.

Technology was not in Canada by the 1970s. It had moved to Finland, Sweden, and Germany. A radical shift happened. We all went from North America. The paper machine suppliers disappeared in the seventies, and we went to Sweden for the technology.

Twenty-four newsprint machines were under construction in the early 1980s, almost 100% supplied by Scandinavia and Germany. The demand for fibre was huge, and it was fueled by increasing demand plus a policy that said we're going to subsidize the construction and import of some of these technologies. Stumpage came in to take advantage of that. The industry responded. There were five-year contracts. Things started to change. Some years had zero. There was more tonnage to drive down the cost. So every mill made more and more. And mills became publisher-owned.

In the 1990s, we saw fibre pressures and cost pressures. South America and China, by that time, were building more machines and faster machines. The technology is now over there. We're behind. We cannot compete.

I agree with Lynn. It's not a sunset industry, but the technology has moved offshore.

What I think we need to do is look again at the pulp and paper industry in the guise of a biofibre industry that includes paper, lumber, and products like that. The industry has to reinvent itself, and the federal government has to provide the national policy that will allow that to happen. I don't think it's a question of 100% aid. As long as oil is $60 a barrel or more, the pulp mills will survive and can compete.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I know it seems rushed, and it is, but now we'll go into the question and answer period. Any of the panel members are welcome to try to answer, but we are going to reduce the question and answer per individual from seven minutes to five minutes in the first round.

Mr. Boshcoff, you have five minutes. The floor is yours.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you very much, Mr. Chairman.

I also thank finance committee for accepting my three nominations for witnesses. That's very much appreciated. The people of Thunder Bay and northwestern Ontario certainly appreciate that.

I'll ask the three questions, and then perhaps others can also jump in.

Mr. Hanlon, the community development trust is a $1 billion program over three years, it's not $1 billion a year, as requested. But I'll ask you, and maybe Mr. Coles, if labour was consulted, seeing as it seems to be more a skills development and retraining package. How consulted were you in the design and layout of the program and the kinds of conditions you wanted to see?

Your Worship, yesterday one of your colleagues from Saskatchewan stated that forestry has earned the right for national support. So when we talk about the community development trust, it specifically eliminates communities such as yours and identifies only single-industry towns. I'm wondering what you think the threshold limit for such a program should be. And if the program is going to be delivered by the province, do you feel there's any hope for municipalities to get some access to this funding?

Mr. Rigato, your talk about biofibre created quite a splash in the natural resources committee a few weeks ago. Certainly that recommendation will be included in the natural resources committee's report to Parliament, but I'm wondering if you have any suggestions for the finance committee as to how that idea specifically can gain some national traction.

Thank you.

[Joe Hanlon]

Thank you.

I guess I'm not sure who's been consulted in regard to the $1 billion, because you can't even get answers in regard to where the money's going to go, how much each province is going to get, and how it's going to be divided among and going down to the workers.

There could have been a lot of details provided by us in regard to assisting our members. But we look at the $1 billion or more money that's needed. It could have gone into other avenues--“other avenues” being let's get people back to work. We have a very skilled workforce in northern Ontario and across Canada in the forest industry. We need to get our jobs back. We need to get these people back to work.

And once we get the training--and this is what our members back in northern Ontario are asking, because some of them are taking advantage of training programs--where are they going to get jobs? There is no job creation program, in a sense, to get these people back to work. That's what we should be focusing the energy and our money on--trying to get them back.

[The Chair, Conservative, Rob Merrifield]

The question you asked was to Mr. Rigato. Go ahead.

[Emilio Rigato]

I think the government has to show leadership in promoting the biofibre industry, and it has to do that through a national policy of technology, research, and development leadership. It should provide the light, not the paved road. I think the industry can do that. We need to leap-frog ahead 25 years and lead the way in developing biofibre-related industries, not pulp and paper.

[Mayor Lynn Peterson]

First of all, I wasn't aware it was single-industry towns, because as of yesterday—I made phone calls to the Province of Ontario—the negotiations continue. So whether or not the City of Thunder Bay will have some part of whatever this thing is at the end of the day is yet to be seen. The fact that we lost a $200 million payroll, 2,400 jobs.... If I'm going to have to say to the people in my community, “Somehow, at the federal level you don't count”, that's not going to work for me.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Okay, thank you very much.

We'll now move on to Mr. Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

On February 26 the budget was presented, and on March 3 the members of the committee decided to reconsider the situation in the manufacturing and forestry sectors because they thought it was appropriate to do their homework again. It is now March 12.

Mr. Chevrette, you talked about five additional recommendations. Could you give us some more details on that. I would also like to know what the impact would be on the forestry industry in Quebec if the federal government did not make additional investments, did not take further measures. Other witnesses might expand on the answer, for the rest of the industry.

[Guy Chevrette]

I think we have to take both short-term and medium-term measures. I pretty much agree with Mr. Coles on the medium and long term, but I also agree with Mr. Hanlon on the medium term. In any event, we have to do something in the short term, because otherwise we are not going to be ready when the economic recovery comes. For example, I was saying that we are going to be short 3,000 jobs for new graduates, and that if POWA, the Program for Older Worker Adjustment, is not in place by then, we are going to be done for. We are going to have trouble finding workers when the economic upturn comes.

As well, you are talking about tax rebate programs, but we are not making a dime. You could offer us any program you like, but it won't change anything, it isn't support. Get off that track, it's going nowhere in terms of assistance. I think, however, that you could support the certification coaching program. We want to have certified products and we are prepared to get moving on that, but as you know, certification is expensive. That program could really be very worthwhile. FERIC, PAPRICAN and FORINTEK could be given support for research. We have 700 projects in our companies in Quebec, including under CRIC and FERIC. That form of assistance would not be contrary to the softwood lumber agreement with the Americans.

Product certification programs are a long and expensive process. We can opt for lifting the tax on fuel for off-road vehicles, for example vehicles used in the forest. That is also a form of support that does not violate the softwood lumber agreement. Biomass is an approach for the future. In my opinion, it helps in finding substitutes for fossil fuel. It is an avenue that is very worthwhile for governments to explore, given all of the environmental issues on a planet-wide scale. I mentioned the industry associations aspect, and I would reiterate that. Monitoring building codes in the United States, for example, costs us $800,000. That means that proportionately, for us in Canada, this amounts to nearly $4 million. We are talking about something like 10¢ or 12¢ a cubic metre for the industry in general. That is also a form of short-term support.

There are avenues that can be explored, and we are prepared to work on committees, but there have to be some concrete results. Stop telling us you are going to help us. That is what I call saying one thing and doing another.