Natural Resources Committee on Feb. 17th, 2015

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you for that.

Mr. Lindsay, you were talking about China and about China being the new China, and so on. Would you have any idea of the numbers, or amounts, or dollar amounts of exports from Canada to China that are raw logs? Do we export raw logs at all?

[David Lindsay]

Yes, we do export raw logs. I don't know if I have those numbers with me. As a percentage of our total exports, it's a very small percentage.

The Forest Products Association would obviously prefer to get the maximum value from every tree we harvest. That's our going-in principle. Nevertheless, there are some companies that decide, for their own business reasons, that they will export raw logs.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

You probably know where I'm going with this question, Mr. Lindsay. If we continue to push to increase our exports to China, with perhaps an increase in raw logs, is there a concern at all that they're turning those raw logs into pulp and paper, of course at a much lower price, and reselling back to the rest of the world, in particular North America, undercutting our own pulp and paper industry? Is that a concern? Do you think that's even possible?

[David Lindsay]

I'm not sure exactly what they're doing with each individual log, but I know there's a lot of cardboard that also goes back to China, which is also being used. The Chinese have much cheaper labour and cheaper input costs. We're in a competitive world. We need to find ways to make sure we keep our costs under control and provide greater value to the products we're selling around the world.

Raw logs, as I say, are a very small percentage of what we do. Our emphasis is on much higher value-added production.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

I think I have time for one more question here.

With the Canadian dollar finally coming back to what economists say is fair value in the wake of the collapse in oil prices, at what point does the industry regain a competitive foothold against our U.S. counterparts? What prospects are there for reopening some of the dozens of mills that have closed over the last decades?

Related to that, how long would it take with our dollar, as economists say, at fair value before market conditions improve enough to reopen some of these mills?

[David Lindsay]

Mr. Rafferty, that's an excellent question.

As the economists would say, holding all other things equal, we can do anything. The problem is that all other things are not being held equal. The Russian ruble has dropped significantly more than the Canadian dollar has. The Brazilian real has also dropped considerably, and those are two of our largest competitors. If we're just expecting the Canadian dollar differential between Canada and the United States to bring back mills, that is as false a hope as when we thought a low Canadian dollar was going to be our saviour into the future. It requires innovation, and it requires a lot of effort on all of our parts to compete in the global marketplace.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Rafferty. You are out of time.

We go now to Mr. Regan, for up to seven minutes. Go ahead, please, sir.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

I have a question for Mr. Lapointe.

How does innovative performance in terms of research and development in Canada's forestry sector compare to other countries?

[Pierre Lapointe]

Our competitors are Finland and Sweden.

When it comes to bioproducts, FPInnovations is ranked first or second compared with those two countries.

In terms of wood construction, our performance is lower than that of European countries, especially Austria. So we need to increase our expertise in this area, and that is what we are doing. We are among the top five countries when it comes to wood processing.

As for logging operations, we have lost some ground in terms of equipment manufacturers. However, we rank in the top three globally when it comes to efficiency in logging operations.

[Geoff Regan, Liberal, Halifax West, NS]

What obstacles do we need to overcome in order to improve our position?

[Pierre Lapointe]

I would say that the lack of Canadian equipment manufacturers is to blame when it comes to logging operations. That's the biggest problem. We have lost a lot of ground, both in terms of sawmills and machinery. That's one of the biggest challenges we face.

In the area of wood processing, especially high-rise construction, one of the challenges we are facing is related to partnerships with engineers, who are used to working with cement or steel. So training should be provided in that area.

Those are the major challenges we face.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much.

Mr. Lindsay, let me ask you, if I may, what the current situation is for skilled workers in Canada's forest sector.

[David Lindsay]

The challenge with skilled workers in the forest sector is similar to other sectors, whether it's construction or mining or others. There is great competition for skilled workers. While our friends in the oil patch might be going through some difficult challenges right now, we anticipate that the need for skilled workers is going to continue to grow.

We are working hard with our member companies to brand the forest products industry as an attractive place to work. We call it the greenest workforce, playing on our environmental credentials. We want to encourage young people to go into the trades.

We need skilled, semi-skilled, and unskilled employees. We need everyone from truck drivers to warehouse operators to pipefitters and pressure vessel operators. We need a whole myriad of skills. We think the governments, both federal and provincial, are our partners in the education system and the apprenticeship system, to make sure we have the right flow of workers for the growth that we're anticipating under Vision 2020.

As I said, we need 60,000 workers between now and the year 2020. That's a mid-range estimate for us. If you look at a lot of my counterparts in other associations, they have comparable numbers. While we may have a temporary shift in the marketplace because of oil prices this year, three years from now we're still going to need those workers.

[Geoff Regan, Liberal, Halifax West, NS]

One of Vision 2020's goals, of course, is that 60,000, but it's new recruits, including women, aboriginals, and new Canadians.

What percentage of the industry workforce do those groups represent now, and how have industry recruitment practices changed in view of this goal?

[David Lindsay]

I don't have the detailed numbers at my fingertips. We had a whole report done with the Conference Board on the current makeup and future projections.

Let me go back to the aboriginal numbers, if I could, which are the numbers I find most intriguing. Let's take the example of Manitoba and Saskatchewan. About 10% of the workforce in Manitoba and Saskatchewan currently are first nations, yet almost 20% of the forestry workforce in Manitoba and Saskatchewan are first nations. Our mills and our forestry operations tend to be closer to reserves and where our first nations neighbours live, so there's an opportunity for jobs and economic development.

We want to continue to grow that. We need the help of both the provincial government and federal government for ongoing training.

With regard to women in the workforce, I know Catherine is quite heavily involved in the women in engineering program. A number of our companies are quite big supporters of encouraging more women to get into the technical trades.

On new Canadians, my parents are immigrants. Where they came from, the Canadian forest had a very romantic story, but they didn't think they wanted to work there. So explaining to new immigrants the wonderful opportunities of working in our forests and northern communities is both a challenge and an opportunity.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much.

Mr. O'Carroll, I'll turn to you.

There have been some news articles suggesting that there's been a breakdown in the negotiations of the Canadian Boreal Forest Agreement. Can you elaborate on the different stances that underline this breakdown or what's impeding the progress these days?

[Aran O'Carroll]

Certainly. Thank you for the question.

The Canadian Boreal Forest Agreement features almost 30 signatories, who are currently working diligently and tenaciously to implement the agreement across the country. That's about 120 people at various working group tables.

However, we have suffered setbacks. We've lost Greenpeace and Canopy from our membership. They had great frustration with the pace of implementation, a frustration that's shared by all of the signatories, actually. It is difficult work to overcome the historical differences between these communities and find common ground and collective solutions.

It's difficult and challenging work. We have had our setbacks, but as I say, we're working very tenaciously across the country and we've had some good developments that show where we're headed with the work under the CBFA.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Regan.

We will go now to the five-minute rounds, starting with Mr. Trost, followed by Ms. Block and Monsieur Caron.

Mr. Trost, go ahead, please, for up to five minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I could be wrong, but I believe it was Mr. Lindsay who not quite in passing but almost mentioned transportation issues. Most industries in Canada don't view transportation as a passing issue. I know the forestry industry doesn't. We are aware that the Canada Transportation Act is being reviewed by—good for the forestry industry—Mr. David Emerson. I'm sure you'll make more fulsome remarks to that committee when they're involved in the study. Could you give our committee a few brief notes on some of the transportation issues for the forestry industry, and some basic suggestions, maybe not as elaborate as those of Mr. Emerson, but some basic suggestions on what we could recommend that would help?

[David Lindsay]

The forest products industry has a great dependence on our transportation system in Canada. As you can just imagine most of the mills are located in northern and remote communities. Most of those communities only have one way in and one way out. Our product is a heavy, large, bulk commodity. Trucks are a possibility, but rail is a much more economical way to move our product.

We're very interested in Mr. Emerson's committee and the work he's doing. Catherine has led our transportation team in the work they've been doing. I'm going to give her an opportunity to answer some of your specific questions, but the main point to be made with respect to transportation is that about one-third of the costs of getting our product made and to our customers is consumed by transportation costs. So it's a huge component of the forest products industry. As you are from Saskatchewan you would know with potash and with all of our natural resources, getting our product from the heart of the continent to tide waters and to our customers is a challenge that's going to be with us for a long time by virtue of our geography.

Catherine can give you some specifics on what we're asking for from Mr. Emerson.

[Catherine Cobden, Executive Vice-President, Forest Products Association of Canada]

Thank you very much for the question. To build on David's theme I think the way we describe ourselves is that we are feeling unique in the shipper community with respect to our degree of captivity and our degree of reliance on the rail transportation system.

As you can appreciate we're in 200 communities in remote parts of our country and nowhere near the main lines in most cases and we're shipping to 180 countries around the world. This is a tremendous logistical challenge, so we're looking at it very comprehensively. Our recommendations will span the scope of what to do with respect to overall access issues. Is the transportation system the right size for the trade-flow shifts that we've been describing in our sector that I'm sure other sectors are seeing as well with the emergence of China, etc.?

Are the service conditions acceptable? Yes, we've had Bill C-52, but as you know that only moved the yardsticks forward so much. Certainly our members are feeling ongoing service issues, so we have recommendations specific to that.

Finally, in this duopoly situation we're facing is it appropriate for one-third or more of the cost structure to be pointed toward transportation costs? So we do have some questions for Mr. Emerson about the rate structure and that sort of thing as well. We think about it as access, service, and rates, and we have a very significant brief on specific recommendations that we'd be happy to submit to the committee if that would be of use to you.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Yes, I for one would appreciate it if you could submit that brief.

Very quickly, and anyone can take this one, it was noted that currently about 10% of the world's forest products are produced by Canada. We're losing market share. In comparison to other countries—I realize there are geographical and climate differences—what are our specific advantages and disadvantages? What can we capitalize on and what do we have to play defence on to protect the disadvantage to other countries like Brazil, as was noted?

[The Chair, Conservative, Leon Benoit]

Could we have an answer to that in less than a minute?

Who would like to tackle it? Go ahead, Mr. Lindsay.

[David Lindsay]

I won't be able to do it in a minute, Mr. Chairman, so we will give you a submission on some of the ideas we have.

We have a great environmental record. We have a good forest management planning system. We have an aligned innovation structure, with our colleagues at FPInnovations and in the academic community. Our challenges are that we have great distances, we are a big country. Our trees grow more slowly than the Brazilian trees so we need to make sure we're extracting the maximum value we can from every tree, which means we need to invest in innovation and new technologies. The workforce is a skilled workforce that we need to continue to invest in if we're going to continue to up the value chain.

So there are opportunities, but there are barriers if we don't get it right.