Bill C-24 (Historical)

Softwood Lumber Products Export Charge Act, 2006

An Act to impose a charge on the export of certain softwood lumber products to the United States and a charge on refunds of certain duty deposits paid to the United States, to authorize certain payments, to amend the Export and Import Permits Act and to amend other Acts as a consequence

The purpose of this enactment is to implement some of Canada’s obligations under the Softwood Lumber Agreement between the Government of Canada and the Government of the United States, by imposing a charge on exports of certain softwood lumber products to the United States and on refunds of certain duty deposits paid to the United States and by amending certain Acts, including the Export and Import Permits Act. The charge on exports will take effect on October 12, 2006 and will be payable by exporters of softwood lumber products. The enactment also authorizes certain payments to be made.

Softwood Lumber Products Export Charge Act, 2006

[David Emerson, Conservative, Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics]

moved that Bill C-24, An Act to impose a charge on the export of certain softwood lumber products to the United States and a charge on refunds of certain duty deposits paid to the United States, to authorize certain payments, to amend the Export and Import Permits Act and to amend other Acts as a consequence, be read the third time and passed.

Mr. Speaker, judging by last night's 12 votes on softwood lumber related matters, all members of this House are starting to suffer a little bit of softwood lumber fatigue. Hopefully, they are beginning to understand the kind of fatigue that the softwood lumber industry is experiencing after the better part of two decades of protectionist attacks and trade disputes dealing with softwood lumber.

It is a great pleasure for me to rise in the House today to begin deliberations on third reading of Bill C-24, an act to implement Canada's commitments under the softwood lumber agreement. Once again, I ask that all members of the House support this bill.

To begin, I would like to thank all members of the House and particularly those members of the House Standing Committee on International Trade for their close study of the bill and their proposed amendments.

Much has happened since this bill was first introduced in the House on September 20. On October 12, the softwood lumber agreement officially came into force. Three weeks after that Export Development Canada commenced refunds of duties to sawmills and producers in many of the more than 300 communities in Canada that are dependent on the forest industry.

This has been a much needed infusion of cash for this sector at a time of very weak lumber markets. Thanks to the accelerated process we developed through Export Development Canada, over 93% of lumber companies participating in the accelerated refund mechanism have now received their refunds.

That is more than $3 billion disbursed ahead of schedule and Export Development Canada will clean up the balance of those refunds in the next few weeks. Considering what this money represents for forestry workers and communities, this is a critical period because this industry is facing some very tough times. Lumber prices are in a cyclical low as a result of weaknesses in the U.S. housing market. Energy costs are up and the exchange rate advantage enjoyed a few years ago has now been erased by the strong Canadian dollar.

Cash provided by the agreement will help lumber producers reinvest in their enterprises, improving efficiency and helping to weather that downturn in lumber prices. What is more important, it will let them do so in a more stable, more predictable trade environment, an environment where the rules are clear and where for the first time in years we are not dragging the dead weight of litigation and the crippling attacks of U.S. protectionists.

We cannot overestimate the importance of a stable environment to our lumber industry and now Canadian companies are investing again. They are buying U.S. companies. They are investing in technology. They are assuming the mantle of global leadership in an industry where Canada has historically been a world leader.

What do I mean by stability and certainty? We are talking about seven to nine years, the life of this agreement, during which Canadian forest policies are going to be protected from further protectionist attacks by U.S. interests. If there is a moratorium on trade actions, it would give our industry a sustained period to begin to rebuild and to plan their future.

We have an agreement which provides mechanisms for improving and strengthening the trade framework. We will be improving it through improved operating rules. There is an opportunity to examine exit ramps for further regions in Canada to come out from under some of the remaining restrictions in the softwood lumber agreement.

We have a provision for an examination of the coastal industry in British Columbia which, as members will know, has been in decline for 10 to 15 years now. We will now work with the province of B.C., with the industry, and with our U.S. counterparts to ensure that the softwood lumber agreement evolves and provincial policy and Canadian policy evolves in such a way as to breathe new life into the coastal industry in British Columbia.

We will have an opportunity through this agreement to look at the value added sector and what we can do to improve conditions for the growth of the value added sector here in Canada.

We have a dispute resolution mechanism which is a non-NAFTA dispute resolution mechanism. It will provide for quick, clear, transparent and fairly immediate resolution of disputes arising from this agreement.

In weak markets, which occur regularly in the lumber business, as anyone familiar with this industry knows, we do have a framework which is flexible. We have opportunities for provinces to choose how they wish to manage and react to markets when prices are below certain threshold levels. We have retention of revenues. When we have an export tax in place, those moneys stay here in Canada and the largest portion will be returned to the provinces from where the tax was collected.

When we think about the agreement and members of the House make a decision on how to vote on the agreement, we should think long and hard about the alternative. Our lumber producers have spent the better part of the last two decades engaged in costly and drawn out legal battles with the United States. They know that winning the battle is not the same as winning the war. Our victories in a number of trade courts, both with the NAFTA and the World Trade Organization, were helpful in setting the stage for a negotiated settlement.

However, litigation was never intended to be an end game. The government has not seen it that way. The last government did not see it that way, and the vast majority in the industry never saw litigation as a route to the final solution in softwood lumber. It was always intended to give Canada a strong basis for negotiations. Taken to the limit, litigation has proven to be a sinkhole into which we can pour hundreds of millions of Canadian dollars. It is a ticket to affluence and opulence for U.S. trade lawyers, but it is not a ticket to full free trade in lumber.

Some have suggested that Canada should have held out for the ultimate win in litigation, which they claimed would come some time in 2007 or beyond. Every member in the House must recognize that legal victory is never certain. On any given case, it is never certain. Every member must recognize that the United States, or its softwood lumber lobby, could simply file a new case the very next day.

There is little to prevent the U.S. from changing its laws to erase the basis for our legal victories. Only an agreement, such as the one we have reached, can prevent new cases and a new dispute from erupting immediately. In weak lumber markets, such as we have now, that is the time when Canada is most vulnerable to the most egregious, painful and destructive attacks by U.S. protectionists.

The NAFTA is a good trade agreement, but it was never devised to avoid trade disputes and trade litigation, whether originating on the U.S. side or the Canadian side. Those who reject a negotiated softwood lumber agreement are basically arguing for a sustained attack on U.S. trade law. That would be a war of attrition and I do not think it would be a war that we could win with the emerging and growing protectionist sentiments in the U.S. It is a war that would be fought on the backs of Canadian companies and Canadian workers. In the end, the legal victories would be empiric victories, the pain would far exceed the gain.

That is why the government took action, and it started right at the top. When our Prime Minister met with President Bush in Cancun earlier this year, they decided that resolving this dispute was fundamental to the Canada-U.S. trade relationship overall.

Together with the active involvement of industry and the provinces, we negotiated an agreement that is good for lumber communities and good for Canada. This agreement eliminates punitive U.S. duties. It ends costly litigation. It takes our lumber producers out of the courts and puts them back where they belong, growing their businesses and contributing to their communities.

For the next seven to nine years no border measures will be imposed when lumber prices are above $355 U.S. for a thousand board feet. When prices drop below this threshold level, the agreement provides provinces with flexibility to choose the border measures most beneficial to their economic situation. All export charge revenues collected by the Government of Canada through these border measures will stay in Canada. The agreement returns more than $5 billion Canadian to the industry. That is a much needed infusion of capital for an industry and the workers who rely on the lumber industry.

Make no mistake about it, if we turn our backs on this negotiated softwood lumber agreement, that some members continue to advocate, that would mean a return to the courts. It would mean greater job losses for the people and communities that depend on softwood lumber.

Ask the major lumber producing provinces that joined the overwhelming majority in industry in supporting this agreement, ask the producing companies, and ask the workers, if they really want to continue with a softwood lumber trade war at a time like this when markets are weak and protectionist pressures are strong and growing in the United States. Ask them if they would like to go back to paying U.S. duties. Ask them if they want to take on new legal attacks, new cases, and new duties, and further fill the pockets and the coffers of U.S. law firms. Ask them if they want to follow the opponents of a negotiated settlement like lemmings off another cliff in an act of collective economic suicide.

Our lumber communities have suffered long enough. They need the stability and the resources that this agreement provides. This agreement is the best way forward for our softwood lumber industry and the over 300,000 Canadians who rely on it. It does not solve every problem, but it does provide the framework for resolving outstanding problems. We will work with provinces, with industry, and with communities to build a great future for a great industry. I ask members to support Bill C-24.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I have three questions which I will put to the minister and I will try to make them succinct.

Canfor was one of the first companies, and maybe the only company, that felt that the chapter 11 claim, in the context of the softwood lumber tariffs and the anti-dumping framework, essentially stated that its assets were unduly attacked with an unfair process. The minister may not be able to comment on this, but I am wondering how the minister can reconcile that with his position here today.

Second, at what price per thousand board feet do companies break even in terms of what companies would have been paying under the current tariff versus the new export tax where the companies could end up paying more export tax than they would have paid in terms of the U.S. tariff? What price is that? Are we there today or are we expected to be there at some point?

My third question is with respect to the concept of zeroing within the framework of anti-dumping. It is a complicated arrangement. I know the Minister of International Trade is very well versed in this. I wonder if he would comment on the concept of zeroing and whether he thinks it is a fair practice.

[David Emerson, Conservative, Vancouver Kingsway, BC]

Mr. Speaker, the hon. member asks some good questions.

On the chapter 11 issue, as the member knows I was the CEO at Canfor at the time Canfor launched a chapter 11 case. I can tell him from first-hand knowledge that the chapter 11 case that Canfor launched at that time was launched as a way of bringing further pressure on the U.S. government to bring about a negotiated settlement of the softwood lumber agreement.

We felt there was a strong case at the time, but again, it was always intended that the course of bringing litigation to a conclusion was a long, complex and very expensive project, and ultimately we would have to go to the negotiating table to bring about a satisfactory resolution. The chapter 11 issue should be seen in that context.

In terms of the break-even tariff, members will know that at the time this agreement came into force, the U.S. tariff was close to 11%. In this market, where lumber prices are under $300, we are in a world where we would be paying an export tax of 15%.

The context that all members must understand is that the 11% was under administrative review. It was already scheduled to rise to over 14% later this year. I can tell members that dumping margins, which are unique in this latest lumber dispute, grow dramatically in weak markets, so we have to expect that the U.S. duties would have climbed significantly. Even when we finally would have won, and we probably would have won through litigation on the current cases, there would have been new cases launched. I can tell members that in the current environment the likelihood of American success in the next legal round would have been greatly elevated.

Again, we must remember that the 15% duty we are charging as an export levy is almost like another form of stumpage, except that it is much more focused and is only on lumber that goes to the U.S. market, as opposed to raising the price of timber across the board, which would have rendered pulp and paper and OSB less competitive. It would have been very damaging. But that money stays here in Canada for the betterment of Canadians and that is a very important distinction.

On the matter of zeroing, as the hon. member knows, we have had cases at the WTO and zeroing has been ruled ultra vires, so to speak, of WTO rules, but there are a number of different ways that de facto zeroing still applies in dumping cases. I am no big fan of zeroing. That has been my view for a long time.

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

Mr. Speaker, I rise today to comment following the minister's speech because it is important that everyone in Canada and Quebec learn a history lesson from this negotiation.

We must remember that the Canadian government dragged the entire forest industry into a fight against the Americans because of a court case. In the end, we were forced to accept an agreement that was less than satisfactory. We have been in regular direct contact with the forest industry, which asked us to support this agreement. Given the outcome of the negotiations, it was the best choice.

In order for us to learn from this lesson, I would like to know what the minister plans to do to monitor the implementation of this agreement. Will the monitoring committees provided for in the agreement really be established? I would also like to know if he is aware that the forest industry still needs another plan to help it get through the very difficult period it is now experiencing. I think that the money we are getting back from the Americans will do nothing more than help the industry keep its head above water. It needs much more than that.

I know that businesses in my riding, especially those that use American wood, will be exempt from duties. They are happy with that. However, the entire industry is going through a very difficult time because of the drop in prices.

I would therefore like the minister to tell us how he intends to ensure follow-up. I would also like to know how he plans to support the industry's recovery, not just by getting money back from the Americans, but by offering other forms of assistance from the federal government.

[David Emerson, Conservative, Vancouver Kingsway, BC]

Mr. Speaker, we are in fact putting in place some of the committees that have been specified directly in the softwood lumber agreement. We are beginning to develop agendas. We are preparing to appoint appropriate individuals who can ensure that the agreement is administered and evolves in the most positive and constructive way for the Canadian industry.

I am also looking at appointing an advisory committee to me as the minister, which would help to advise me and thereby the government on how we ensure the longer term evolution of the softwood lumber agreement and the softwood lumber industry from a Canadian perspective.

The member quite rightly points out that the softwood lumber industry in Canada, and indeed in North America, has been going through some very difficult times.

We now have the pine beetle in British Columbia, which is causing an acceleration of the annual allowable cut and therefore a substantial increase in lumber production in that part of the world. However, 10 years out, there is going to be a very serious reduction in the annual allowable cut in British Columbia as a result of the beetle-infected wood having been harvested and the difficult sustainability issues that will face forest management in B.C.

Quebec and Ontario have been experiencing and managing reductions in the annual allowable cut in recent years. That is going to continue for a longer time.

In Quebec there are some very specific issues that need to be dealt with. Labour mobility out of some of the smaller lumber dependent communities in Quebec is not what it is in other parts of Canada. There are some very specific issues in the province of Quebec that need to be dealt with.

I know that both of my colleagues, the Minister of Finance and the Minister of Natural Resources, are looking at tax and other measures which can be helpful in ensuring the strong evolution of the industry. We want to ensure that we do become the world's greatest lumber producer and the most technologically sophisticated lumber producer as we go forward.

[Dawn Black, NDP, New Westminster—Coquitlam, BC]

Mr. Speaker, I listened to the minister very carefully today on his presentation at third reading on the softwood deal. It took me back a few years to a previous Conservative government that negotiated a free trade deal with the U.S. The government at that time told Canadians that the free trade deal would end all of these kinds of disputes with the U.S. on trade. Sadly, that certainly has not been the case, as has been pointed out with this softwood sellout to the U.S.

My question for the minister is specifically about how this deal he has negotiated with the Americans will impact on other trade sectors and other Canadian industrial sectors that trade with the U.S. What now is to prevent any American industry attacking Canadian trade in the same way that the lumber industry has in the U.S.?

What does that say about the trade deals we have negotiated and the dispute mechanisms that are in place, where we actually have won at every level? Yet we have negated any kind of faith in the trade deals we have signed with the U.S. How does the minister respond to that in terms of other industrial sectors and their vulnerability now to this kind of tactic from Americans?

[David Emerson, Conservative, Vancouver Kingsway, BC]

Mr. Speaker, I have to say right off the bat that the NDP has always been critical of NAFTA. Indeed, I think that party is critical of free trade generally. I want to go on the record as stating very clearly and firmly that without trade liberalization, without NAFTA, Canada would be a very substantially poorer country today. Jobs depend on it. Our wealth creation depends on it. Our social programs depend on it. Our country depends on it. We are a small population economy spread across a massive land area. If we do not have good, liberal international trade, we are in serious trouble.

In terms of how this agreement affects other sectors, it is clear to me, and it was part of our thinking right through this piece, that the longer the softwood lumber dispute was prolonged the more it was contaminating our relationship with the United States across a host of issues. In fact, the environment was so badly poisoned that it could have led to much more serious cases developing.

Now that we have the softwood lumber case dealt with in a way that is very advantageous to Canada, we are in very good shape in terms of other sectors. We are also in very good shape in terms of a more positive pro-Canadian evolution of NAFTA that is beneficial to Canada .

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am pleased to participate in this debate on the softwood lumber products export charge act, 2006.

I appreciate the minister's forthright comments on my earlier questions. I must say that I was a big cheerleader when Canfor launched its chapter 11 claim under NAFTA to say that the assets of Canfor had been wrongly put at risk and jeopardized because of an unfair process in the United States to come up with the lumber tariff. The reality is, in a nutshell, that this is what a chapter 11 filing does. I appreciate the minister's remark that this was to keep pressure on the United States, but nonetheless I believe it is an illusion to think that this agreement is going to find us any sort of peace.

In 1996, for example, there was the softwood lumber III round of negotiations, in which we agreed on managed trade for a five year period. When that ended, the U.S. launched softwood lumber IV. I know the argument is that if we keep litigating they can keep launching a countervailing duty file, but frankly at some point it comes down to being on the right side, and it has been shown that the Canadian softwood lumber industry does not subsidize its softwood lumber.

If we go back to softwood lumber I, the U.S. may have had a case. Our lumber was not priced as well as it could have been in terms of the market, but governments caught on to that and made changes in their stumpage and royalties. We know that today it has nothing to do with subsidies and everything to do with market share. As soon as our market share gets beyond 30%, the U.S. launches another countervailing duty file.

In my judgment, the problem in this case is that while many in the forest industry have said they would rather accept this deal, I think they are doing it under duress because the Conservative government told them that if they did not agree to this deal it was not going to support them any longer. We know that the forest industry in Canada could not possibly continue the countervailing duty process and fight what has been proven time and time again to be a lie, the lie that our softwood lumber in Canada is subsidized.

The industry could not continue this fight without the support of the federal government. That is why our Liberal government had proposed a package to help the industry with bridge financing and a whole range of issues to get over this hurdle and to keep fighting. Why would we cut a deal when we are winning at every stage?

I beg to differ with the minister. This has set a terrible precedent. I do not think it positions us that well with respect to the U.S. market in other areas. If I were in the steel industry or any other industry in the United States, I would tell myself that if Canada had to cut a deal on softwood lumber when it was winning at every conceivable stage and when objective panels comprised of Americans and Canadians were saying that Canadian softwood lumber was not subsidized, then the Americans should have an easy time on other products. I do not think it positions us very well.

I am not suggesting that this is an easy file. This is a very difficult file, but on balance I believe very strongly that the government should not have negotiated a deal. I do not think it is going to work in our interests in the long run.

We even have had confirmed by the minister that the way softwood lumber pricing is going at $300 for 1,000 board feet, the effect today would be that Canadian softwood lumber producers would actually be paying more under this deal, so we are going to be voting on this deal, finally, to say that our industry should actually end up paying more in terms of an export tax than it is paying in U.S. tariffs. While I understand what the minister is saying in that there are other pressures to review the U.S. tariff, et cetera, it is not money in the bank where I come from. That is something that might have happened or could have happened. Right now we know the effect is that our Canadian lumber producers are going to be paying more.

The sliding scale, where the export tax goes up when the pricing comes down, works very advantageously for U.S. softwood lumber producers. When the pricing goes down, they want less competition in the market. I am not sure that helps the Canadian softwood lumber producers. When the pricing is tanked, they do not want to have to pay more in export taxes. They want to increase their market share.

The industry is under duress and needs the support of the federal government. It did that this might be a good deal, but when the alternative was they would not get any support from the federal government, I think they knew it was all over. They had to cave in like the government caved in and support the agreement, although not all companies or all associations in Canada have said that. I believe they see the longer term implications of this deal.

We need to understand that the U.S. lumber producers are essentially saying this. Because they have a different system in the United States where the vast majority of their forest land is privately held, where in Canada it is just the reverse and most of our forest land is owned by the Crown, and because they auction a lot of their timber and we auction only a small percentage, their system is right and our system is wrong. I dispute that. We do have a different system. Our system of pricing timber has evolved over many decades in Canada.

I would like to know this from the minister. What happens if we move to this softwood lumber deal and many of the provinces move more aggressively to auctioning timber and the price becomes lower than the Crown pricing? That is a possibility. I have talked to many companies. I have also seen companies in the Prince George region where they have a mix of private timber and Crown timber. The private timber they get through the small business auctions is priced lower than the stumpage that is charged by the British Columbia government.

Therefore, there is no guarantee whatsoever that if we move to more of an auction based system, the delivered cost of wood will be lower. In fact, the pricing could increase and go the other way.

What will the U.S. lumber producers do then when they find that the delivered wood costs in Canada are declining because of more auctioned timber? Will that be the panacea they look for then?

A study was done a few years ago by an independent consulting group. It came to the conclusion that Canada's forest industry was 40% more productive than the U.S. forest industry. That was on the basis of total factor productivity. Admittedly that cuts across different parts of the forest industry, pulp and paper, lumber, panels, et cetera. In fairness the lumber sector was not quite as productive as the rest, but on average it still did very well. It was more productive than the U.S. sawmilling industry. On a total factor productivity basis, the Canadian forest industry is 40% more productive than the United States. That total factor productivity is a way of looking at how the industry applies labour, technology, person power, et cetera.

All one has to do is go to Prince George, British Columbia and see some of the sawmills there. They are some of the most efficient sawmills in the world. In fact, U.S. sawmill owners and operators come to Canada and they are given tours of these sawmills in the Prince George area. They are some of the best and most productive sawmills in the world. Therefore, it is not surprising that we can sell a lot of softwood lumber into the United States.

We also have a great resource. We have a colder climate that produces a better product. There are more rings. The wood does not warp or wane as much as on some of these southern plantations in the United States. If one goes to the southern United States to a construction site and asks a carpenter or building contractor what he prefers, U.S. southern yellow pine or spruce pine fir from British Columbia, he will say that he prefers the SPF from B.C. because it is a better quality product.

We know we have a comparative advantage in softwood lumber, yet we are caving in and making a deal. We are acknowledging the lie that softwood lumber in Canada is subsidized. That was the term used by the Free Trade Lumber Council, and it is an absolute truth. We have a very productive industry.

If senators or congressmen or congresswomen in Montana, or Washington state, or Oregon state or Wyoming have sawmills in their areas that might go bankrupt, what do they do? They will pull out all the stops. They will not allow the sawmills to go down because the market is being penetrated by Canadian softwood lumber, which is a better quality product and is priced the same because it is a commodity market. If the margins are good in Canada, more lumber will go there. That just makes economic sense.

This is not a matter for the Canadian government or Canadian producers. Something else should be found for those sawmills that are not as competitive as Canada's sawmills. Pittsburgh was converted into a high tech centre because its commodity based steel mills could not compete on the same scale with the Japanese and the Taiwanese. It became a niche player in the steel industry. That may not be possible with the few sawmills scattered around Montana, or Washington state or Oregon.

Why push the problems up to us? Can we not acknowledge that Canada has a comparative advantage in softwood lumber? I am prepared to concede that perhaps the U.S. has a comparative advantage over us in high tech and some other sectors. Can the U.S. not accept the fact that we have a comparative advantage in softwood lumber? The U.S. industry either cannot or will not accept this fact because U.S. senators and congressmen and congresswomen are trying to prop up inefficient mills. They have the power through Congress and through the Senate to start these protectionist movements. We need a better way to resolve disputes.

The minister has had a long history and a distinguished career in the forest products industry. He knows if someone wants to put up a sawmill, or an OSB mill, or an MDF mill, or a plywood plant, or a pulp mill or a newsprint operation in the U.S. south, that the individual will be offered just about everything to make the deal come true. State and local governments will offer sales tax abatements, tax holidays, property tax abatements and deals on energy. The capital costs of putting up a mill in the United States are about 20% less than the cost of putting up a comparable mill in Canada. Why? I have listed some of the incentives or subsidies, but there are others such as tax free bonds, cheap industrial land, cogeneration agreements, et cetera.

These deals are not limited to the forest products sector. The minister would know full well from his days in the industry portfolio that U.S. state and local governments offered somewhere in the range of 40% to 50% in subsidies for the capital costs of starting up or expanding an auto plant.

I am talking now about the hypocrisy of the United States producers and government supporting those producers when it comes to dealing with subsidies. As I said, people can get almost any kind of subsidy they want if they want to put a new mill in the United States, if they wanted to put up an auto plant or expand.

What about agricultural subsidies? My colleagues in rural sectors will know all about that. The Americans are probably one of the champions of agricultural subsidies, maybe a close second to Europe. They even call them subsidies.

The USDA Forest Service auctions off land and forestry resources. In the past some of those sales were done through auction. In some cases companies bid on that timber and years later they were unable to complete the deal because the price of 2x4 lumber had gone down. If they harvested the wood at that price, it would have been a very difficult economic situation for them. I think they have to go the White House to get this rescinded, and it has been done. The U.S. government notes that the price was bid 10 years ago, but since the economics have changed, it lets them off the hook. That is not an auction system when someone is let off the hook.

We know in the United States, particularly the Pacific northwest, that a lot of the pricing is speculative in nature. We read about the issues around the spotted owl. We read about many of the trends that were causing huge amounts of commercial forestry land to be taken out of production, and it may have been for very legitimate reasons. I am not arguing about the spotted owl. Maybe it needs to be protected. Maybe huge swaths of commercial timberland need to be taken out of production to protect it, but we know there is a scarcity.

In other words, the demand for timber in the U.S. Pacific northwest exceeds the supply. Therefore, if companies are in an auction system, they bid the price up because they want to have access to those timber resources in 15 years to feed their sawmills. We have never heard anyone argue that maybe the price of timber is too high in the United States. Maybe it is pricing itself out of the market. Maybe our pricing is the right.

However, the countervailing duty process does not allow us to get into questions like that. We cannot ask why in some cases the USDA Forest Service, which is a public agency, sells the rights to harvest timber at prices that are less than its costs. Under the countervailing duty process, all we can do is defend our system.

We cannot ask the U.S. government about all the subsidies it throws at U.S. producers because quite conveniently the U.S. Senate and the U.S. Congress have defined the countervailing duty process in a different way. They allege that we are subsidizing timber. It is up to us to show that we do not. We cannot tell them that they are subsidizing their softwood lumber and forest products. They do not talk about things like that. The process is quite flawed.

All of that really upsets me, but look at the anti-circumvention clause in the softwood lumber agreement. If the House supports this, then we agree that this clause is just fine. The clause says that if the U.S. feels actions are being taken, actions that might run counter to the agreement, by the Government of Canada, or the provincial or territorial governments, it can say that it is against the agreement and call for action. That could cover the whole range of forest policy initiatives of the federal and provincial and territorial governments. That is a very dangerous precedent.

The producers are being told they have to drop their lawsuits. If they drop them, in two or three years the U.S. producers can say that they do not think the softwood lumber deal works for them and that they want to scrap it. What do the companies that have dropped their lawsuits do then?

I know there is a lot of pressure from local companies in some cases to sign this deal but it is a terrible precedent. It really does not work for Canada and it does not work for our forest industry. I urge members in this House to study this carefully and defeat this bill when it comes forward.

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

Mr. Speaker, I listened carefully to my colleague's speech. I have taken part in every stage of the softwood lumber negotiations.

Let us think back to the first negotiations. A number of years ago, the then Minister of International Trade, Pierre Pettigrew, said: “We have a very good legal case. We will win this battle against the Americans and then we will truly have free trade on softwood lumber again”. However, a major problem came up along the way. The softwood lumber industry realized that the government was not prepared to support it in a satisfactory manner by providing loan guarantees. We ended up falling into the Americans' trap of dragging out the negotiations as long as possible. Even though we were winning every legal battle, the forestry industry was on its last legs. The companies asked us to support the agreement to get their money back so that they could continue to survive on the market and not disappear. It was becoming a rather paradoxical situation. We may have won a legal victory on our position, but there would be no one left in Quebec or Canada to celebrate.

Earlier my colleague made reference to the Free Trade Lumber Council, where Mr. Grenier gave some very serious advice. The weak point of the negotiation was the fact that the Liberal government at the time failed—like the current Conservative government—to adequately support these companies when it was time to do so and, in the end, we were forced to accept this very bad agreement. In any case, it is not very advantageous to Quebec and Canada.

Are we not sending a very negative message to our American neighbours and to the rest of the world that might is right? If the companies had received help through loan guarantees at the right time, today we would not be in this position of weakness where we have to support this motion. I understand that the industry asked us to do so. I believe that the way things unfolded this was the only solution. Nonetheless, could we not draw some lessons from this for the future? Before launching such offensives, we have to make sure we have the financial means to support the industrial sector concerned.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I would like to thank the member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup for his questions and comments However, I do not agree with him when he says that at this time we do not have a choice and we must support this bill. In my opinion, it is wrong to think that way. As for our Liberal government, our support for the forestry industry is long-standing.

We supported the industry through every countervailing duty action, which took a tremendous amount of work by our embassy in Washington and the department and through consultations with the industries. We had worked up a package that would support the industry with respect to loan guarantees and with respect to other initiatives, such as the need for the industry to convert their energy sources and use their biomass to develop electricity, because one of the big problems with the forest industry today is its high cost of energy.

We also put a number of initiatives in our package to help the forest industry to diversify their markets because markets are developing quite aggressively in China and India. While they have different cultures and different building codes and standards, we can make progress in selling our forest products into those markets and relieve some of the reliance on the U.S. softwood lumber market.

My colleague from the Bloc is mistaken when he says that the Liberal government did not support the forest industry. The Conservative government certainly has not. It told the industry that it had to either sign and support the softwood lumber deal or the government would cut off all support. The government put a gun to the head of the forest industry in Canada, which is why some of the companies are now saying that they do not have much choice because they cannot carry on without the support of the federal government. It was the Conservative government, not the Liberal government, that let the industry down.

[Denise Savoie, NDP, Victoria, BC]

Mr. Speaker, I thank the member for raising the issues of agricultural and manufacturing subsidies and the difficulty of raising substantive issues in these trade agreements. It seems that they are meant to tie the hands of government much more and to simply allow corporations a free rein.

Earlier, the minister said that the NDP was against free trade. What we are for is fair trade. This agreement seems to impose tariffs on logs processed in any way, whereas raw logs will continue to be exported to mills and processed out of the country.

I wonder if the member agrees with the minister's earlier comments that it is an agreement that would help value added industry in our communities. I have observed the opposite. I would be interested in the thoughts of the member opposite on that.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I have a couple of points on that and the first one has to do with raw logs. It is a sad commentary when right now, as we speak, roughly four to five sawmills in Washington state and Oregon are being fed with raw logs from British Columbia. Even though there is a protocol with the B.C. government and it takes the advice from the B.C. government as to what percentage and how raw logs should be exported, we know that the federal government has the final decision. It can decline to send any raw logs to the United States.

In fact, in one of the countervailing duty actions taken by the United States, the United States had the audacity to argue that because we restrict the export of raw logs that constituted a subsidy because it essentially, in its case, lowered the domestic price for logs. Whereas we know that the reason we want to restrict the export of raw logs is that we want to see more value added in Canada. I would like to see the federal government get much more aggressive with respect to limiting the export of raw logs.

With respect to the other question, I do not see how this particular agreement encourages more value added in Canada. There are some exemptions for the manufacturers but it really does not deal with those issues. It deals with 2x4s, dimension lumber, and I do not see there being any incentive. In fact, it could work the other way. Under the anti-circumvention clause, if there are any moves made to support and encourage the value added it might be attacked by the U.S. producers.

The Canadian industry has always been quite creative in trying to move up the value added chain to get exempted from the softwood lumber agreement. At one time, companies drilled holes into 2x4s to get them exempted from the softwood lumber agreement. Therefore, if they can be more creative and more imaginative to get outside of the softwood lumber agreement maybe it provides that, but I think that is very indirect incentive that was not designed but it might have some limited impact.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Speaker, we have reached the last step: we are beginning debate on third reading of the bill.

Today we are discussing Bill C-24 regarding the softwood lumber agreement settling the dispute between Canada and the United States. In practice, this bill leads us straight to the agreement between the United States and Canada.

We cannot talk about Bill C-24, particularly at this last stage, without referring to the agreement and the situation that has almost always characterized the softwood lumber sector. The softwood lumber trade with the United States can be traced back 150 years. There have been problems and disputes with the United States for a very long time. We opted for free trade even before that. Free trade would normally have covered all goods and services between the two countries so that they could trade freely with one another. However, once again, the United States complained five years ago. They began legal proceedings and imposed huge tariffs on Canadian and Quebec lumber crossing the border, claiming that it was subsidized and that dumping was occurring. They demanded countervailing and anti-dumping duties.

During that period, $5.4 billion in duties was paid to the United States. Imagine what that money could have done had it been invested in bringing procedures and processes up to date and modernizing equipment. Imagine how innovative a healthy forest industry would have enabled us to be in terms of remanufacturing. We know that Quebeckers and Canadians have great imaginations and can act fast to produce just about the best product at the best possible price for export to the United States. But the United States decided to collect crippling duties from the forest industry: $5.4 billion.

The Bloc Québécois recognized the problem years ago. It even tabled proposals and recommendations for programs in this House and in committee.

It made sense for us to ask the Liberal Party, which was in power at the time, to offer the industry loan guarantees. The United States was siphoning money away from companies, and their litigation did not hold water; it made no sense and was not logical. We knew that we were headed for a court victory. It was only a matter of time.

However, being robbed of $5.4 billion makes time move very slowly. There were tangible losses—job losses almost all over Canada. Some regions and provinces were hit harder than others—even Quebec, in some sectors. The situation demanded the effective application of loan guarantees so that companies could continue to survive in the first place, and maybe even grow despite this setback.

In fact we knew very well that they would win in court and that, one way or another, the United States would have to reimburse Quebeckers and Canadians, and the entire forestry industry.

When they were in power, the Liberals refused to assist the forestry industry and grant loan guarantees. During the election campaign—nearly a year ago, when it was in full flight—the Conservatives promised to help the forestry industry and were prepared to give loan guarantees in the event that they were elected. Some Canadians—a minority overall, if we consider the absolute number of people who voted—decided to place their trust in the Conservatives. They were soon disappointed, given the fact that the Conservatives have not kept their campaign promises, their campaign commitments.

There followed negotiations about which the House was not necessarily informed. The outcome of those negotiations was an agreement that they tried to present to us as the deal of the century, but it was the deal of the century only for one of the two parties, which is going to save a billion dollars. I am under the impression that the ideal outcome of an economic transaction is in fact that both parties be completely satisfied. We have to remember one important factor here. When we are talking about parties, we are talking about people, people who work in the industry. We are talking about the industry itself, companies, company owners, workers, everyone who works in the forestry industry. That is who the party was here in Canada and Quebec.

The same thing was true in the United States, but the people who were representing the entire forestry industry in Canada claimed that this was a huge win. Well the real winner is the United States, which bagged the billion dollars that stayed in the United States. That is big money. That is in fact a sweet deal for them, after illegally collecting $5.4 billion. They come out of it with a billion dollars. Mr. Speaker, if you were 100% in the right and I owed you $5.4 billion, you would not be content with $4.4 billion. You would ask me for all of the money owing.

That is what the forestry industry would have wanted. But given the time that had passed, given that the Conservatives did not want to offer loan guarantees and the Liberals had also not wanted to offer loan guarantees, those people were being strangled in their day-to-day lives, and they were not able to make any progress at all at that point. It was all they could do to keep their operations going, and especially to keep their businesses afloat. That could have meant that thousands, tens of thousands of people could have lived with their families, in their communities, in their regions, and that the economy would have functioned.

We were presented with this agreement, Certainly, to start with, everyone was unanimous in saying that it made no sense at all. What were we going to have to do? We knew very well that the government had the prerogative of signing and implementing the agreement. It did so. And then, we can be sure that discussions took place and a number of companies that were still denouncing that agreement felt obliged to accept it at a certain point.

I know that conditions are not the same in all regions. My colleague from the NDP, who is a member of the Standing Committee on International Trade, has described quite a different situation in the region he represents, British Columbia. Clearly the situation there is in no way similar to the conditions facing the people of Quebec.

I respect him, of course, when he says that the Bloc Québécois is going against nature. The Bloc Québécois feels no great enthusiasm in supporting Bill C-24. Everyone knows that because we have said so. All of my colleagues who have spoken since the start of debate on Bill C-24 have said and repeated that they are not eager to support Bill C-24. Indeed, the bill is a carbon copy of an agreement that no one really accepts. We have been forced to accept it.

Consultations and representations took place and Quebeckers, like people in other parts of Canada, recognized that it was necessary to move forward in order to—

[Diane Bourgeois]

Save what was left.

[Serge Cardin, Bloc, Sherbrooke, QC]

As my dear colleague says, clearly, it was necessary to save what was left because there was not necessarily very much left.

For that reason people were obliged to accept the agreement almost by force. Today, for several hours in the Standing Committee on International Trade, we saw my colleague from the NDP arguing like a Liberal in holy water to uphold the interests of his region. During that time the committee was full of controversy. Nevertheless, I obviously respected my colleague’s enthusiasm in wanting to move the matter forward.

The bill in its present form leaves many gaps that will probably cause problems in the implementation of the agreement. Those aspects could have been anticipated and corrected in order to allow the Canadian forest industry to develop adequately, or even better than that, because we have to make up for what has been lost.

Of course, there are still potential irritants in the bill. However, we must accept it because people have told us to do so and are asking us what we are waiting for.

I repeat also, for the benefit of my colleague from the NDP, that we give our support to Bill C-24 without enthusiasm and with some reluctance.

The downward negotiations by the minority Conservative government have clearly served to place the forest industry in danger, especially in Quebec. In addition, refunding the illegally collected money, contrary to what the Minister of Industry actually seemed to believe at one time, is neither a miraculous injection of cash nor a gift from the government. In fact, the industry’s own money is being returned to the industry, and we must never forget that, because the communities will not forget it.

It is forgivable, I think, to talk politics a little in this House, and in my opinion the Conservative Party will have to answer for this bill, this act and this agreement all across Canada in the next election. And that election is not far off. That is why we must settle this matter. It will always be possible to make improvements later.

As we all know, several committees will have to work on enacting this legislation and promoting the industry. Moreover, the modest sum of $50 million will come out of the $1 billion and be allocated for promotion. That is not much, except that the United States will have the benefit of a larger sum to develop their industry.

Once again, we would have preferred that the softwood lumber industry be part of a real free trade agreement with the United States.

Certain individuals claim that the softwood lumber issue is now settled for the next nine years. Can we really count on any promises made by the Americans? After all, they are the ones who came along and imposed antidumping and countervailing duties on Canada. Can we really hope that when it no longer suits them, they will sit down and negotiate to improve the situation and conditions for both sides? I doubt it. Anytime the Americans change their tune about the softwood lumber file, Canada and Quebec ate the ones that automatically suffer the consequences.

Thus, I do not belive that the softwood lumber sector will be left undisturbed for as long as seven or nine years. I think the next issue will arise much sooner than that. We must therefore negotiate an agreement within NAFTA, calling on the Americans to stop their protectionist activities in whichever areas and industries they like.

Once again, the Bloc Québécois will vote in favour of Bill C-24, in the hope that the forest industry and softwood lumber industry can use the money illegally taken from them and now returned to them to get back on track, become more modern, more competitive and more innovative in secondary and tertiary processing. The resulting value added, the surplus value, must be profitable to those industries once and for all, and must be paid back to the people who worked in the industry and the businesses themselves.

In closing, I hope we can improve the forest industry as quickly as possible for the benefit of the people who have dedicated their efforts, their energy and, in some cases even their lives, to the industry.