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

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Speaker, I am going to try to answer the member's three questions.

The first thing that hon. members should realize is this brings a minimum of eight to nine years of stability to this industry. This industry has struggled over the years. It has had its high points; it has had its low points.

The 15% export tax is at the bottom of the cycle. The member would know that at least 50% of the time, Canada's exports to the United States are at the top end of the cycle. When we are at the top end of the cycle, there is zero tax. What happens at the bottom end of the cycle is people feel they have to produce more in order to make the same amount of profit they were making. They will produce more and that will flood the United States market. Protectionism will rear its ugly head at the bottom of the cycle. We put the export tax in at the bottom of the cycle and when it comes up to where there is some real profit in the lumber industry, there is no export tax and there is free trade.

As to the 19% for not signing, the people who are not in agreement with this, why should they benefit? Why should they not have to pay their fair share and benefit from the agreement when all of the rest of the mills are willing to pay? The mills are willing to pay. There is no discussion among them. They want this behind them. They want stability in the marketplace. We need that eight to nine years of stability in the marketplace.

The idea that the Byrd amendment is going to be changed by going to court in the United States I do not think is correct. The Byrd amendment will only be changed by the American congressmen and senators. I believe it is only Congress that can change it. It is not going to be changed by us.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I would like to thank the member for his presentation.

The member praises the agreement that Ottawa and Washington have just signed. He certainly does not mention offsetting measures, assistance for the forestry industry and workers. The Bloc Québécois is proposing an action plan, a POWA and improvements to employment insurance.

I would ask the member to briefly comment on the serious repercussions of not having measures to help the forestry industry, and of the absence of a plan to help softwood lumber sawmills and workers. Can he explain what he believes are the repercussions of all this on communities, workers and the industry?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Speaker, I come from a rural riding with a big forestry base. The consequences for the communities and workers will be very positive. First, there will be stability in the marketplace. Second, there will be the ability to export into our largest marketplace, which is the United States of America. Third, this is a very good agreement, in particular for Quebec. There will be 32 border mills in Quebec that will be completely exempt from any border measures under this agreement.

There is also built in flexibility in this agreement. At the bottom of the cycle Quebec mills can choose to pay a 5% export tax if they control their exports. There is flexibility for B.C. There is flexibility for all the provinces if they want it. We do not have a homogeneous lumber market in Canada. It is different on the east coast from on the west coast. It is different in Quebec from in Ontario. This agreement reflects the differences.

[Blair Wilson, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Mr. Speaker, today I stand to debate and discuss a unique event in Canadian history.

Never before have we as a nation snatched defeat from the jaws of victory as we have with this Canada-U.S. softwood lumber dispute. Never before have we fought a trade dispute in the courts, won case after case, and then dismissed these victories. Never before have we thrown the rule of law out the window.

Never before have we given up our leverage in negotiating before the agreement. Never before have we caved in to meet an artificial timeline of our own making and never before have we bullied our own industries to please the United States.

Never before have we had a government that has gone to bat for political expediency instead of going to bat for hardworking Canadians.

Simply put, this softwood lumber deal, this complete capitulation, is wrong.

On the eve of his re-election, the hon. member for Vancouver Kingsway said that he would be the Prime Minister's worst nightmare. By the way the member has botched this deal, I would say that his wish has definitely come true.

This agreement that the minority government has rammed down Canadian throats makes a mockery of free trade and seeds our domestic sovereignty. It creates a sliding scale export tax that, at current price levels, is actually higher than current U.S. duties. It abandons all our legal victories and gives up $1 billion to secure peace for only two short years.

It cedes our decision over domestic resource management to the United States. It caps our share of the American softwood market. It contains anti-surge provisions that cripple the ability of our forest industry to deal with unexpected circumstances, such as the rise of the pine beetle infestation in British Columbia, a problem, I might add, that is being further exacerbated by the complete lack of environmental policy by the minority Conservative government. However, that is an issue I will save for another time.

This deal exposes Canadian firms to needless uncertainty by agreeing to a monthly measurement for surge protection when U.S. demand is highly variable on a monthly basis. It encourages other sectors and other U.S. companies to seek political decisions to gain protection from Canadian industries, all but guaranteeing more disputes in the future.

Even American lawyers think Canada got suckered. Canada's so-called new government took the terms of our surrender and now Canadians will have to pay the price.

How did we get to this point? In May 2002, the Government of the United States imposed a countervailing and anti-dumping duty of 27% on Canadian softwood imports. Canada's Liberal government challenged this swiftly and comprehensively. It brought forward cases under the North American Free Trade Agreement, the World Trade Organization and the United States' own court of international trade.

The NAFTA panel struck down the United States' injury determination in September 2003, again in April 2004 and then again in August 2004. These legal victories brought the duties down from 27% to 20% on December 20, 2004, and then from 20% down to 11% on December 12, 2005, steadily relieving pressure on our lumber industry and its workers.

We proved that our lumber industries are not subsidized, do not cause injury, do not threaten injury and do not dump their products in the U.S. markets.

This past March, a NAFTA binational panel decided definitively that Canadian softwood lumber is not subsidized. That panel's decision was to take effect on April 28. The United States had to either comply with this ruling and drop its duty to 2% or file an extraordinary challenge on April 27. The United States used its last legal trick. It in fact did file an extraordinary challenge, allowing it to continue to force Canadians to pay $40 million a month in illegal duties.

However, far from being just another legal stalling tactic, this would have been its last tactic. NAFTA's strict timelines for challenges required a decision no later than August 10, and not even the Americans thought it would go in their own favour. Once that decision had been made, it would not be appealable. Five years of litigation were about to pay off. No more tricks were left in the book, except one. In January, the Conservative Party came to power and determined to end the softwood lumber dispute no matter what it would cost the industry.

In April, the minority Conservative government, eager to get any type of deal together no matter how bad it would be for Canada, hastily agreed to a two page deal with Washington, signing it before the provinces or the industry had time to analyze its effect.

What happened next was a naked betrayal of Canadian lumber producers. The Prime Minister, eager to please his new buddy, George W. Bush, agreed to a U.S. request to suspend our challenge, wiping away years of legal victory. The Prime Minister gave up our biggest bargaining chip for absolutely nothing. Compounding this error, the minority Conservative government then announced that it wanted a final text by June 15 so it could get legislation through the House before the summer break.

If we want to get concessions in negotiation, we do not give away our bargaining chip and we do not announce our own artificial deadline. Industry representatives call these blunders amateur hour at the negotiating table and amateur hour it was. To meet its self-imposed deadline, the minority Conservative government gave up a lot and got nothing in return. It gave up $1 billion in illegal duties. It agreed to a convoluted set of export taxes and quotas. It agreed to end litigation, litigation that we were winning. It lost control of our very own forest industry and it got no concessions in return.

The deal was botched by the member for Vancouver Kingsway and it was botched badly. Now our forestry industry and our forestry workers in Canadian communities from coast to coast to coast will have to pay the price of the minister's blunders.

Over 360,000 Canadians are employed in the softwood industry. Canada has a well-earned international reputation for the quality of our products. It is not, however, been an easy time for our forestry industry. It is already facing pressures from our higher Canadian dollar, higher energy prices, lower housing starts in the United States and shrinking demand for global newsprint. This botched deal will only worsen their plight.

Industry associates warned us months ago that this deal was not commercially viable. The Ontario Forest Industry Association estimates that it could cause as much as a 10% industry job loss. The Bank of Montreal expects shutdowns of both lumber and pulp and paper facilities. The Free Trade Lumber Council warns that sawmills dependent on exports are particularly vulnerable. The Independent Lumber Remanufacturing Association warns that this deal would all but destroy their sectors.

The minority Conservative government continues to bully our industries into submission. The Prime Minister has backed softwood industry representatives into a corner and left them with no choice but to concede to this flawed deal. It has gone so far as to promise to slap a new 19% penalty tax on duty refunds going to Canadian producers who refuse to sign on to the deal and then to delay those payments for two years. These bullying tactics may work inside the Conservative caucus but they will not fly in the forestry sector.

The minority Conservative government has abandoned our lumber industry by refusing to provide loan guarantees for the duties that are rightfully ours. The government has tried to divide Canadians, pretending that there is no other solution.

However, there is a better way. Canada can say no to this botched deal and do what we should have done from the start, which is to see our NAFTA challenges through to the end. We should immediately implement an aid package that, first, will invest in improving industry's competitiveness; two, will invest in the skills of our workforce; and three, will work to develop new overseas markets for our wood products.

We all must remember that it is not just Canadian producers, but American consumers who lose from these illegal duties as well, because they are the ones who will have to pay higher prices for their homes. We should continue our effort to build political alliances of lumber consumers in the U.S. against these illegal duties.

Indeed, before the minority Conservative government caved in we had already secured the support of 150 congressmen and congresswomen to oppose the restrictions on softwood imports.

The Liberal Party cannot support this deal in good conscience, not when there is a better way. It is our duty as the official opposition to stand up for the interests of Canadian lumber producers and the interests of 360,000 hardworking men and women who are employed in this sector of our economy.

The Liberal Party of Canada stands opposed to the minority Conservative government's humiliating surrender and it opposes this botched softwood lumber deal.

[Helena Guergis, Conservative, Parliamentary Secretary to the Minister of International Trade]

Mr. Speaker, I am not sure where to begin with all this misinformation that is coming from the hon. member but I will do my best.

First, let us remind him that we have two national governments, both Canada and the United States, that are both supporting this deal. All of our major softwood lumber producing provinces, including the province of British Columbia where the hon. member comes from, are supporting this deal. The premier of B.C. is supporting this deal. I have a letter from one of the hon. member's constituents who says, “As one of the larger independent sawmills in your constituency, we urge you to support the upcoming bill on the softwood lumber agreement”.

I also have to point out that today the BC Lumber Trade Council underlined the importance of its ongoing work with the Government of Canada to implement the terms and conditions of the agreement. It said:

We are pleased with the progress made to date and the responsive efforts of [the Minister of International Trade] and his officials in making this important agreement a reality.

The hon. member has chosen to ignore the industry. Ninety per cent of the industry in Canada is supporting this deal.

He made the comment that there would be a 19% charge for those who choose not to support the deal. I would remind members that it is 90% of the industry that is supporting this deal. I also must tell the hon. member that it was the industry that asked for that 19%. They wanted a level playing field. All the industry in Canada will have 81% of their money returned and 100% of the industry will benefit from seven to nine years of stability and predictability within the industry, which is what they have asked for.

Would the hon. member please tell us why he has chosen to ignore the premier, his constituents, the industry and even B.C.'s forest minister, Rich Coleman, who is urging all federal members to put aside their politics and support this deal?

[Blair Wilson, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Mr. Speaker, the hon. member has some of the facts wrong so I will correct her and then raise another question.

When we take a look at this deal, why is Canada caving in at the negotiating table at this point in time? Every case that we have taken before the Americans we have won.

I have received letters from a lot of businessmen and businesswomen in my community who say that in business if they have a dispute and they are winning in the courts they will not go to the negotiating table and cave in and leave $1 billion on the table.

It would not be so bad if it were just $1 billion on the table that was going somewhere, but the way it breaks down, $500 million will be used by the U.S. lumber lobby group against Canadian industries. Why would we be bankrolling our competition? To make matters worse, $450 million of the $1 billion will go directly to George W. Bush to decide on which way he wants to use the money for other republican means.

If we take a look at just that one point alone we cannot agree with this deal, let alone the fact of the surge mechanisms and the increase in Canadian taxes that will be put on. It does not take an accountant to know the difference between a 15% tax and a 10.8% duty. The 15% tax will cripple our industry.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Mr. Speaker, the hon. member opposite has described the history of how the government has betrayed the softwood lumber industry and how it has sold out Canadian communities. We have heard in great detail in many debates in this House about its sorry record. We know about all the money that was levied illegally against Canadian firms and now some of that money is coming back to these firms.

Does the hon. member have a view on why the federal government did not stipulate that this money should have gone back, not to the corporations but to the communities that were so hard hit by the U.S. tariffs that were imposed on them, the communities that lost jobs when saw mills closed and that have paid the price by this lack of support from the federal government?

[Blair Wilson, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Mr. Speaker, I think there are two points here that we have to take into consideration. One is the speed at which this deal was rammed through Canada.

The softwood agreement was a two page framework agreement when it first came forward. In that initial two page framework agreement, the $1 billion that was being left on the table, half of that money was supposedly going to be put into a fund that was going to be overseen jointly by the Americans and by Canada as to where that money was going to go to help our industry on both sides of the border.

Then when we got the rushed final version of the deal, we find that that completely disappears and the $500 million goes right into the Americans' pockets. I think it points to the fact of how rushed this deal was.

The other issue that the member raises as well is the support for our industry. It is the support in our lumber industry with respect to the pine beetle infestation in British Columbia. We learned yesterday that this new minority Conservative government has just cut $11.7 million for pine beetle research in British Columbia out of the 2002 funds. If this Conservative government cared so much about British Columbia, why is it cutting $11.7 million that we could use?

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, today I will speak about the softwood lumber agreement, an agreement signed by Ottawa and Washington.

The agreement reached by the Canadian and American governments is not the agreement of the century. I am certain that several MPs have had the opportunity in the past few months to meet members of the forestry industry who told them that an agreement had to be signed because they were on the brink of disaster. What must be understood is that the industry had no choice. The agreement concluded on July 1 was not a good agreement, but the forestry industry could not afford to wait any longer.

If the Bloc Québécois supports this agreement, it is because it is acting responsibly towards the thousands of sawmill workers. However, as a result of consultations in the past few months with the industry concerned, we have come to realize that the structural crisis of the softwood lumber industry cannot be remedied by the softwood lumber agreement alone.

Both the Liberal and the Conservative governments caused incredible harm by not supporting the softwood lumber industry in recent years. No company can emerge from a four-year trade crisis and hope that all will return to normal. It is even worse when an entire sector of the economy is in trouble.

Over the past four years, a number of companies working in the forest industry have closed their doors, and this deal does nothing to ensure the sustainability and survival of the industry. The industry is still in bad shape, so it is up to the government to implement a series of measures to help forestry companies that are facing serious difficulties.

During the dispute, that is, since 2002, 17,000 jobs were lost in Quebec. As you may know, in Quebec, forestry is the main employer in 260 communities. In 134 of them, 100% of jobs are in forestry. Consequently, it is important to ensure the viability of this industry.

Quebec is the second-largest exporter of softwood lumber to the United States. Fifty per cent of the province's lumber is exported south of the border. Now that important measures have been implemented with respect to softwood lumber, particularly with respect to quotas, a lot of companies have begun to rationalize their workforce in light of the agreement. I say “quotas” because it seems that Quebec will choose one of two options—either option A, a tax percentage, or option B, fixed quotas.

This is therefore a worrisome situation for thousands of workers. Given the growing supply of wood from China and new conditions in the industry, many companies will have to lay a lot of people off over the next few months.

Over the past few years, this crisis has had a dramatic impact on some communities in my riding, Chicoutimi—Le Fjord. One of the largest forestry cooperatives in Quebec, located in Laterrière, went bankrupt in December 2004. The bankruptcy indirectly impacted on many sawmills in Saguenay—Lac-Saint-Jean. Some shut down for a few weeks, while others closed their doors for good. That is what happened with the Produits forestiers Saguenay sawmill in La Baie. In March, it decided to close the mill a year earlier than planned for economic reasons.

In addition, since the softwood lumber agreement was reached July 1, several sawmills in Saguenay—Lac-Saint-Jean have continued to have financial difficulties.

To cite only a few examples, in early September, the Bowater mill at Saint-Félicien was forced to lay off 140 employees for an indefinite period. As well, one million dollars are needed to get the Coopérative forestière de Girardville back on its feet. For its part, the PFS mill at Petit-Saguenay has just reopened its doors after being closed for a month, two weeks more than initially planned. In addition, because of current market difficulties, the mill has decided to do away with a second shift. These are just some examples. However, a great many mills, such as the PH Lemay mill and the Péribonka mill have been affected by the crisis during the past few months.

The softwood lumber crisis has caused the loss of 3,000 jobs—yes, I said 3,000 direct jobs—in Saguenay—Lac-Saint-Jean, and the situation is getting worse.

I would simply like to give one last example to illustrate the general situation. Three weeks ago, the sawmills at Saint-Félicien and Dolbeau-Mistassini shut down for an indefinite period in order to reduce financial losses. As a result, the company was forced to lay off some 350 employees of the two mills. One of the spokesmen for the mills made the following comment, which sums up the situation very well:

We are going through an unprecedented crisis and it is difficult to meet the conditions for profitability. Like all the other forestry companies, we have no choice but to reorganize our activities or mills in order to remain competitive.

That comment sums up the situation concerning the softwood lumber crisis.

The root cause of the problem is still there. The situation will continue to get worse if measures are not introduced quickly. The problem is aggravated in the regions outside the large centres and we cannot close our eyes to this problem.

There are many reasons why the socio-economic problems are worse in the regions. The main reason is that the forest industry plays such a major role in many communities. For workers in the regions, the forestry crisis, combined with cuts to employment insurance in recent years, has worsened the economic situation. Many employees affected by this dispute have been left without income and have been forced to leave the region.

Between 1994 and 2004, cuts to employment insurance resulted in a direct and indirect loss of $875 million for the entire Saguenay—Lac-Saint-Jean region. This was due to the numerous cuts in the employment insurance program.

When we look at data for my riding of Chicoutimi—Le Fjord in particular, based on the cuts to employment insurance in the past few years, we can say that the population was directly denied some $221 million during those years.

We are proposing other measures to this government, namely the implementation of POWA, an income support program for workers who were part of massive layoffs.

In closing, I also want to point out that Bill C-24 does not resolve the structural problems of the market. In the coming months, measures will have to be implemented to prevent the forestry sector from collapsing. It is important that all stakeholders take action to maintain and consolidate the forest industry because many jobs in the resource regions depend on this sector of activity.

To that end, the Lac-Saint-Jean-Est RCM passed a resolution on September 19. I will close by urging the federal government to provide more support to the forest industry. I hope the government will implement measures that will help forestry workers and the industry.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Mr. Speaker, I have a question to put to my colleague, the member for Chicoutimi—Le Fjord. Today a good number of Bloc Québécois members have talked about the tensions and grief caused by these negotiations, and the fact that this is a bad agreement causing many problems. My colleague comes from a region similar to mine, a place where people work very hard in the forests.

I will ask my colleague a question about sovereignty in these negotiations between Canada and the United States. I am going to speak in English since the copy I have of the agreement is only in English.

Article XVII, the anti-circumvention section, is very important. For the people who listening and watching understand, under the statutes, the federal government cannot impose any type of administration or delegation of duties to the provinces on how they manage their forestry industry. Yet in article XVII paragraph 1 it says that neither party shall take action that circumvents or offsets the commitments set out in this agreement. Paragraph 2 is very interesting. It states that any change in a provincial timber pricing or forest management system, as it existed on April 27, 2006.

Suddenly we have a clause built into the agreement that even the federal Government of Canada does not have, which is to look at the practices of a province and if they are in disagreement with that practice, it can demand the province to change it. If it does not change it, then suddenly we are on the wrong side of the deal.

So we can easily break the agreement. This is a matter involving the sovereignty of Quebec, of Ontario and of the other provinces, the sovereignty that enables the provinces to manage forest activities on their territory as they see fit.

I would have thought that the Bloc Québécois would want to protect this sovereignty, but it is taking the opposite direction to sovereignty in their province and the country.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Speaker, I thank my colleague for his question. The softwood lumber agreement between Washington and Ottawa is obviously a bad agreement and may be regarded as a sellout. But we have to realize that the industry has run out of steam. Many representatives and workers from the industry came to meet with me in my riding since my region is very much involved in the lumber and sawmill industry. It was recommended that I—and my party—support this agreement that we considered to be a sellout. We would have liked to recover all the money the softwood lumber industry paid in antidumping duties.

We must also recognize that the Government of Quebec gave its consent. That being said, the Bloc Québécois thinks that this sellout agreement should be accompanied by compensatory measures: improved employment insurance; a support program for older workers; assistance for the industry; an economic diversification program for communities that are dependent on the forest; a special tax status for the 128,000 owners of woodlots in Quebec; the improvement of funding for Canada’s Model Forest Program, run by Forestry Canada; special tax treatment for the $4.3 billion in countervailing duties; the acceleration of equipment amortization; and a program to stimulate innovation within the forest industry and improvement of productivity.

This is what we would like, and I hope that the Conservative government will get our message. It is true that we support this sellout agreement but the government should put forward some measures: a support program for older workers, a guaranteed income support program for workers affected by mass layoffs after the closing of a plant in the softwood lumber industry—because we know there were layoffs and there will be others; the improvement of employment insurance; and help for the industry. These are measures that should be promoted.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, I am pleased to take part in the debate on the softwood lumber deal.

I feel for those members who have sawmills in their ridings and the companies tell them it is a rotten deal, but they have on to sign it. The reality is the industry has been coerced and pressured into supporting this deal. They have been coerced because the Conservative government has said that it would cut off support to the lumber industry. What kind of a deal is that? What kind of support is that for the lumber industry?

There are two issues here. First, why would we cut a deal? Second, if we have cut a deal, is this a good deal? I will deal with the first question.

When the Conservative Party was in opposition, how many times did we hear it ask why we would cut a deal when we had been winning all the objective panels under the NAFTA. Now the Conservatives are saying that we have to cut a deal because it is in our best interests.

First, it is contrary to the NAFTA. NAFTA is meant to provide free and fair trade. Does it do that? Of course it does not. Also, the most important thing is that it perpetuates a lie. This point was made very clearly and very well by the Free Trade Lumber Council. The lie is that we subsidize softwood lumber in Canada. That has been shown time and time again by lumber one, two, three and four. Every objective panel, panels which have Americans sitting on them, have said that we are not subsidizing lumber in Canada.

Also, we have prevailed in every NAFTA panel, an objective review, and these panels have concluded consistently that we do not subsidize our lumber in Canada. Canada has followed the dispute settlement mechanisms that are laid out between Canada, the United States and Mexico.

The other thing that is terrible about this deal is that it sets a horrible precedent. That is where we as parliamentarians, notwithstanding what the industry or communities might say, are charged to deal with the national interests of Canada. If the U.S. can win this dispute, where we have consistently shown there is no subsidy, what does that mean for other products, for other sectors? The Americans will look upon this and say that if they can cut a deal on softwood lumber, they can cut a deal on plastics or on steel because with lumber the Canadians were well ahead. They have proved the case time and time again.

This is a horrible precedent. This is a sad day for Canada. It is another way in which the Conservative government has capitulated to the U.S. interests and to their love affair with the Republicans south of the border.

If we cut a deal, which it looks like the government has and it is the wrong approach to take, how good is it or how bad is it? First, how often did we hear the Conservative Party, when in opposition, ask us why would we not fight for $5.3 billion in the tariffs to be recovered by the Canadian producers. Conservatives would argue that we should not leave anything on the table. Now they are leaving $1 billion on the table.

I do not know how the Conservative members can now argue that the industry minister at the time knew the deal and conclude that this is a better deal. The minister then would have been sworn to cabinet confidentiality, so I am not sure they would know the details of the deal. Even if it is a slightly better deal, who knows, it is still a bad deal because there was no deal concluded by our Liberal government. There were discussions, but the Conservative government is proceeding with this.

The deal is of short duration. Within two years, the deal can be abrogated by the U.S. producers and by the U.S. government. They can say that they do not like it and that it is not working very well. In the meantime Canadian producers will have backed away from their lawsuits. How do we get that back? We cannot restart those lawsuits. It works very well for the U.S. producers and the U.S. government.

Another point is that the export tax increases as lumber prices decline. Does that really work to the best interests of Canadian producers? I do not think so. It might work for the best interests of the U.S. producers, but the prices have tanked already, from about $450 U.S. per thousand board feet to around $270 U.S. per thousand board feet today and the export taxes are going up. We have the compounded problem of low lumber prices and increased export taxes. Is this in the best interests of Canadian producers? I hardly see that. When lumber prices are low that is when Canadian producers need all the help they can get.

The member for Skeena—Bulkley Valley alluded to another reason why this is a bad deal and that is the anti-circumvention article. In a nutshell, this clause robs Canadians, within their federal government and their provinces, of sovereignty when it comes to forest policy. The U.S. is basically saying that if Canada does not do things the way it does things, then clearly Canada is subsidizing. I know for a fact that the auctioning of timber in the United States is not exactly a perfect market. Companies have bid on federal forestry timber and have been let off the hook later when pricing did not quite work to their advantage.

I have worked in the forest products industry. If a forest company wants to set up a lumber mill, an OSB bill, an MDF mill, or a pulp mill in Tennessee or Mississippi, the American government will put all sorts of incentives into its hands, whether they be sales tax abatements, property tax abatements, subsidized cogeneration energy, tax holidays of various descriptions, a whole range of things. Under our process, we cannot look at U.S. subsidies. We can only respond to the process in place, and that is fair enough because we agreed to that. However, the Americans should at least respect the process that is in place.

Is it too much to concede or believe that Canada might have a comparative advantage in softwood lumber? Our U.S. friends and neighbours to the south cannot seem to get a grip on this. I am prepared to say to the United States that perhaps it has a comparative advantage in IT or in other industries. However, Canada has a comparative advantage in softwood lumber.

A study done a few years ago showed that, in terms of total factor productivity, Canada's forest industry was 40% more productive than the U.S. forest industry. The problem the United States has is with the little sawmill in Portland or in Montana. What does it do with the workers if they are getting over blown by a very competitive industry in Canada. That is a U.S. problem and it has to deal with that.

There are other examples such as in Pittsburgh, Pennsylvania, which was a big commodity steel player. Steel companies could not compete with commodity steel because of the Asian producers. They became niche players and higher value-added players. Then Pittsburgh became a huge IT economy.

This is not our problem and it should not be laid at our feet. There are sawmills in the United States which cannot compete with our highly efficient mills. I have been to many mills in Canada and many mills in the United States. We should pride ourselves on the fact that we have some of the best sawmills in the world. The United States is now telling us that we are going to pay for this because of the softwood lumber deal.

We should never have cut a deal. This is a bad deal, and we should reject it on behalf of all Canadians.

[Helena Guergis, Conservative, Parliamentary Secretary to the Minister of International Trade]

Mr. Speaker, the hon. member and his party, the Liberal Party, have to admit, and I have said this many times before, that they were content with 100% of nothing for the softwood lumber industry.

For 13 years they did nothing. They had calls for loan guarantees. They did not bother with them. In fact, just before the last election, they were prepared to sign a deal that was nowhere near as good as what the Prime Minister and our Minister of International Trade has achieved for Canada. We know this because our Minister of International Trade used to be theirs and now he is on this side. He had the leadership of this Prime Minister to go forward and accomplish this deal. Therefore, I give my appreciation to the Minister of International Trade.

This member has talked about litigation as though he thinks that if we win this one last court case that all of a sudden the Americans are just going to want to have a great working relationship with us, that we are going to get all of our money back and all will be solved.

I think the member is dreaming in Technicolor. This has been going on for 24 years. In fact, the last litigation has been going on for five years alone. The U.S. lumber coalition has told us that if we do not have this deal there is going to be continued litigation.

I do not know why the hon. member fails to listen to this and understand it because that is a fact. He talked about the Americans having deep pockets. He is darn right, they do, and they will continue to file lawsuits.

The member talked about this agreement suggesting that under the agreement that perhaps industry will be paying more in an export tax. That is not true. Nothing could be further from the truth. In fact, there is an administrative review that is scheduled for this fall, so that without this deal what producers are paying in duties will go up to almost 15%. With this deal, it will not go past the 15%. They will have some stability. They will know what is coming as the year goes on.

If we do not have this deal, the hon. member needs to also recognize that with continued litigation, that there would be of course new duties and they could be as high as 20%. If the hon. member could please explain to us why, first of all, his party did absolutely nothing for the past 13 years and why he is choosing to ignore 90% of the industry in Canada that is supporting this agreement? Why is he choosing to ignore that our three major softwood lumber producing provinces are supporting this agreement?

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Speaker, the member for Simcoe—Grey is right about one thing. We did not capitulate during the 13 years. We tried to take the process through to completion.

I find it interesting that she talks about the administrative review. This is where the Prime Minister went down to Washington or Cancun and at that point in time President Bush had the opportunity to waive the administrative review; in other words to use his special powers to overturn the appeal request. So he was down there, they were all buddy buddies, “Steve” and George Bush. What did the government get? It gets this contrived agreement which sells out the industry and sells out Canada's sovereignty and foreign policy. What does the government get? It gets assurances about military cooperation and so on. President Bush looked pretty good.

The problem is that this government said it would not support the industry. The reality is that if we leave $1 billion on the table, and contrary to the challenge of the Byrd amendment which says we cannot take that money and send it back to the U.S. producers, and again the U.S. has totally ignored that, that money goes back to the U.S. producers. Yet, the Canadian producers are sitting there trying to fight the softwood lumber deal. The Canadian government said I think they were bluffing because they could not have actually lived through that because the industry would have had to have support from the government to fight the softwood lumber deal. Therefore, this was a contrived deal and the industry was coerced into agreeing to it.

I have just a final point. I know it is hard to imagine that we could outlast the U.S. on this, but the reality is that some of the big producers like Georgia-Pacific and International Paper were actually bailing out of this coalition in the United States. They were the people with the big bank roll. They were financing the coalition to challenge this agreement.

If the government had stuck to its guns the way it had said it was going to do when it was in opposition and said $5.3 billion, no money to the U.S., then we may have found that the U.S. coalition might have started to tire of this.

I know it is hard to conceive that we would tire them out, but they are just as tired of this as we are and we are winning in every single way. I think the government should have done its intelligence and its strategic thinking a little better and I think there was an option there to say that we were going to outlast them. I think the deal is a bad one and should be rejected by the government.

[The Acting Speaker, Royal Galipeau]

It is my duty, pursuant to Standing Order 38, to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon. member for Don Valley West, the Environment; the hon. member for Skeena—Bulkley Valley, the Environment.

Resuming debate. The hon. member for Algoma—Manitoulin—Kapuskasing.