Thank you very much.
I'd like to begin by thanking you and the balance of the committee for the opportunity to appear here on behalf of the Maritime Lumber Bureau.
The MLB was founded in 1938 and for the past 75-plus years has represented the market access interests of our members who are located throughout the four Atlantic provinces. There are numerous areas in which we believe the Atlantic region is unique as compared to the rest of Canada, but one of those particular areas is that the provinces are members of the MLB and we are partners on most activities. Through the provincial memberships, the services provided by the Maritime Lumber Bureau are generally available to many producers in the Atlantic region.
Because the principal area of the MLB's representation is focused on producers of softwood lumber, my comments will be particularly representative of that sector. On occasion, I may reference the entire forest products sector in the Atlantic region, because, as you well know, all sectors are linked, but the focus of my remarks will be softwood lumber producers.
I will also focus directly on two of the three themes in your area of study: sector and market diversification, and regional economic development.
Your third area of study, strategic innovation, is supported by the Maritime Lumber Bureau and the provincial governments in the Atlantic region, but the proprietary projects are best outlined by the individual companies or the province-specific forestry associations.
I will begin with a few comments on regional economic development. I believe that you were all provided with two slides earlier today. The first is a bar chart produced by the Forest Products Association of Canada. It demonstrates the Atlantic region's dependency on the forest sector. New Brunswick is second only to British Columbia in the sector's contribution to the provincial GDP. British Columbia contributes 3.5% and New Brunswick, 2.3%. The contribution of Nova Scotia is only two-tenths of a per cent behind Alberta's, and is equal to Ontario's.
To put this into context, according to StatsCan, the population of British Columbia is 83.7% greater than that of New Brunswick. Alberta's population is 77.1% greater than that of Nova Scotia, and Ontario's is 93% greater. I raise this fact because it's imperative that our elected representatives understand that we are not in a competition to determine who is most important. However, it's critical to demonstrate that the health of the forest products sector is essential to national and regional economies in Canada.
The forest products sector is a significant contributor to the economy in the Atlantic region. It is one of the largest employers of technology in Canada, indeed, in the Atlantic region. It's also a major employer, with over 600,000 individuals across the country. I would be remiss if I did not read into the record some factual information on employment relative to the wood products industry in Atlantic Canada.
According to NRCan, in 2012 the industry employed roughly 27,000 people directly and indirectly, and the breakdown is as follows. In New Brunswick it's 11,900 directly and 4,165 indirectly. In Nova Scotia it's 5,400 directly and 1,890 indirectly. In Newfoundland and Labrador it's 1,900 directly and 665 indirectly, and in P.E.I. it's 600 directly and 210 indirectly. That totals 26,730.
It is a generally accepted principle that over 70% of these jobs are located in rural areas and support 3.1 additional jobs in the local service stations, banks, restaurants, etc. If you accept that across the country there were 85,400 forest industry jobs lost between 2006 and 2009 and that the Atlantic region represents approximately 4.5% of the Canadian total employees, then the sector in the Atlantic region directly employed approximately 3,800 fewer people in 2014 than it did in 2006. This has resulted in a shortage of skilled labour and woods workers.
The labour shortage is a major challenge in securing a positive future for the sector in Atlantic Canada. The map that has been distributed to you demonstrates the impact of market conditions on the sawmilling sector in the Atlantic region. The map marks the number of active sawmills in the region in 2006, 2009, and 2012. The MLB had a sawmill membership base of 140 mills in 2003. When the bottom fell out of the U.S. market in 2006, our sawmill membership base dropped to about 52 sawmills. Counties within the region lost their entire population of sawmills, and with it the related numbers of employees.
The region's production has recovered by 47% from 2009 to 2014, although the number of producing facilities has levelled out at approximately 62. Although production may increase slightly if there is available wood supply, we do not envision any increase in the number of operating sawmills. The likelihood of a full recovery to 2006 production levels and the region's prevailing views on the future of the 2006-2015 softwood lumber agreement are directly related to the competitive position of softwood lumber producers within the region and with other producers of like products in North America.
This is a good segue to the second theme you asked me to speak on today, which is sector and market diversification. The downside of single market dependency has been exemplified by the impact on the Atlantic region's producers, and the economy in general, first in 1993, when the EU market was lost owing to phytosanitary barriers to trade, and again in 2006, when the U.S. market collapsed, owing to several economic factors, but directly related to the loss of housing starts due to the subprime mortgage crisis and the strength of the Canadian dollar at that time.
The effects of the U.S. market collapse on the Atlantic sawmilling region can be observed in the map referenced earlier. In 2004, Atlantic Canada shipped an all-time high of 1,836,837,000 foot board measure to the United States. This was 80.3% of total production. In 2009, this volume dropped off to approximately 700 million foot board measure, a 1.1 billion board foot or 62% decline, and today we ship to the U.S. approximately 72% of our total production, which is now 1.5 billion.
Recognizing the necessity of market diversification as a protection against single market forces, the region has invested in increased domestic consumption of locally produced wood products. The Atlantic Wood WORKS! project is industry-led and funded with additional federal and provincial funding of a project focused on expanding the use of wood in non-residential construction and increasing the permissible building height for wooden structures from four to six storeys. I note in the information you provided that you had hoped we'd talk to up to 10 storeys, but we have to get six in our building code first, and then we'll go to 10. We've also invested in export studies targeting non-traditional market opportunities where the region is well placed geographically to supply the demand, again on a competitive basis.
The Atlantic Wood WORKS! project completes a national presence of the Canadian Wood Council's Wood WORKS! initiative. It has offices in B.C., Alberta, Ontario, Quebec, and now Atlantic Canada. The project targets architects, engineers, and influencers to ensure that where wood can be specified within the limitations of the building code of Canada and the provisions of alternative solutions, it is.
Our deliverable since the project was conceived in 2011 has been an increase of 2% in domestic consumption as a percentage of total production. We have met or exceeded this target. It is important that any increase in wood use in the Atlantic region benefits producers of the products within the region. As we have just completed our fourth year of operations, this is a project that has already demonstrated returns on the modest investment.
Finally, we were asked to comment on the renewal of the Canada-U.S. softwood lumber agreement. In my opening remarks I mentioned that there are several areas where Atlantic Canada is unique compared with the rest of Canada.
In Canada 93% of timber is owned principally by the provincial governments, and stumpage is set by the governments using various administrative formulas. It is the difference in timber ownership that has set Atlantic Canada apart from the treatment of the rest of Canada in each of the trade disputes, negotiation and litigation, from 1986 to the current agreement—29 years. In the Maritimes, based on current data, approximately 67% of all softwood lumber production is generated from private land.
Since 1987 the Atlantic region has been excluded from any trade remedy imposed against the rest of Canada through either litigation or negotiated settlement in the ongoing softwood lumber wars. As stated previously, this is largely owing to the unique circumstances relative to land ownership in the region.
Should the softwood lumber agreement expire on October 12 and be followed by litigation or a different negotiated settlement, the Maritime Lumber Bureau has a stated objective of securing exclusion for Atlantic Canada from managed trade, which is defined as any measure imposed by agreement or litigation that results in quotas, taxes, and duties, while at the same time ensuring the competitiveness of the Atlantic region's softwood lumber industry. Owing to the large volumes of private land-supplied raw material for the production of softwood lumber, Atlantic Canada has the highest wood costs in the country. Our ability to be competitive and continue to contribute to the economic well-being of the region is one of the greatest challenges in determining the renewal of our region's forest sector.
Despite the numerous challenges that have emerged during the last decade, the forest sector in the Atlantic region has demonstrated that ours is not a sunset industry. We have accepted numerous challenges and we have emerged, after a great deal of industrial rationalization, as a sunrise sector. Much work remains, particularly in the area of competitiveness and market diversification.
I'd like to close, though, with a quote from Winston Churchill, “There is nothing wrong in change, if it is in the right direction.”
Thank you for the invitation to appear before this committee.