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

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, members may recall the case of Spiro Agnew who when charged with tax evasion basically pleaded what was called nolo contendere. It was basically not to plead guilty or innocent, but rather to say “the legal fees are going to kill me on this, so I might as well just plead nolo contendere and at least I can get away without having to pay enormous legal fees”.

It seems that this is the same kind of bullying that the government has laid on the lumber industry by telling it that if it does not take this now that it is on its own. I think this is the crux of the issue in this regard.

I wonder if the member can give some indication to the members and to Canadians about the financial dimensions here and about what is really being lost, not only in terms of the duties improperly collected, but also the interest for all these years.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Clearly, Mr. Speaker, this is not a commercially viable deal. This is an absolutely ridiculous deal that the companies have rejected consistently throughout the summer, until the government started bullying them individually and saying there would be no alternative to this Conservative sellout. There would be no alternative, no loan guarantees and no support in any way.

In his testimony, Russ Cameron from the Independent Lumber Remanufacturers Association indicated in regard to the complexity and the lack of commercial viability of the deal:

Well, there are eight possible tax rates, depending upon the random length index and whether you're above or below the 110. Oh, and the quota can be applied regionally, so that the quota applies to the entire region. You add up all the shipments, and once that region exceeds the shipments, then the border closes and you can't put your product in, no matter how much you are willing to pay.

The cost of this sellout goes beyond all Canadian industries. It goes beyond the four years of litigation victories that this government is ready to throw away, rip up with a stroke of a pen. It goes beyond all of those aspects. It goes beyond the billion dollars. It goes beyond the precedent that is set for any other industrial sector.

It goes to the very heart of commercial viability of softwood communities and softwood companies, softwood companies that are now in a situation where they are dealing with punitive taxes. They are dealing with multiple administrative charges that are forced upon them by the government, consistent bullying, and the fact that there are multiple tax rates that are all set retroactively. When they sell their product, they do not know whether they are going to be able to make a profit or not and they do not know whether they are going to keep their doors open or not.

Testimony clearly indicated that we could be looking at, in certain parts of the country, up to 20% of the mills closing as a result of this badly botched negotiation and this badly flawed sellout. So, the member is very correct to raise this question. We pay and we pay, and we do not get a heck of a lot back.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Mr. Speaker, part of what that member just said is true; that is, if we do not sign this agreement we will pay and pay because of the uncertainty that will remain in the softwood lumber industry.

That member is living in a dream world if he believes that by not signing this the Americans are just going to roll over and play dead. We are going to see more challenges and more litigation, the likes of which that member cannot imagine, or rather will not admit. We are going to see tens, maybe hundreds, of millions of dollars more in litigation, accompanied by uncertainty in the industry, which is going to scare off investors. It is going to scare off expansions to the mills. It is going to cause foreseeable job losses and foreseeable mill closures.

For some reason, that is what the NDP members want for the forest workers and their families of this country. They want the uncertainty to continue. They want the litigation to continue. They want the hundreds of millions of dollars in legal fees to continue. They want the investors to go running until this industry becomes stable. They want the bankers to be scared off by the uncertainty and start calling in loans on the small mom and pop operations, through to the medium and even the large-sized mills.

I just cannot imagine how they can face the workers in the forest industry who they claim support their position and tell them about the possible, probable, and most certain job losses that are going to occur if we do not sign this deal.

I live in the largest softwood lumber producing riding in all of Canada. I do not live in downturn Burnaby or New Westminster. I live where the lumber pioneers of this country have carved out an industry, right from small scragg mills to the super mills that are in the riding of Cariboo—Prince George.

We produce more softwood lumber in that one riding than that member could imagine. I can tell the member that the mills, the workers, the investors, the families, and the kids of this buoyant forest industry, not just in my riding but across British Columbia and all across Canada, supported by the provinces, the industry and the workers, they all support this because they know, contrary to the misrepresentations of that member there to the folks in the industry, this deal is good for the industry, it is good for Canada, and it is good for the province.

If that member there and his party want to do something right by the forest industry's workers and their families, they would quit trying to snow them with those misrepresentations about this thing and get behind it, support it, and let us get some certainty and let us get on to a buoyant and bountiful future in the softwood industry in this country.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, how would the member know? He was chided in the Prince George Citizen because he had not even read the agreement. That is unbelievable. He was chided in the Prince George Citizen because NDP forestry critic Bob Simpson and I had actually read the agreement and he had not. That member has not been standing up for his constituents. He is absolutely right when he says he is part of softwood country, but he is absolutely wrong when he says he has been doing due diligence. He has failed the people of Prince George. He has failed the people of the north.

He has not read the agreement. He has not even read the badly botched bill that punishes companies twice with the double export tax, with the AD and the CVD. In addition, the bill imposes an EDC because the government botched the special charge. So here we have a badly botched bill, and instead of standing up for his constituents, instead of standing up for Prince George, that member abdicates his responsibility. It is appalling.

Let me read just one of the reactions from analysts who actually understand the industry, who actually have read the bill, and who actually have read the agreement. Stephen Atkinson said:

When you look at a situation like a Canfor that is going to run its lowest-cost wood, then clearly you're going to shut down those lumber mills in the southeast quadrant [of British Columbia]. What happens then is that it'll put some of the pulp mills in danger, whether it be the Kamloops mill, whether it be the Celgar mill, and then that supply comes into question.

Very quickly, on raw logs, what really happens is this. Let us say we are paying a duty. Let us pick a number again. Let us say it is 15% or whatever. If we can bring in the logs without any duty to the United States, then of course it makes sense to put the lumber mill there and create jobs south of the border. There has been no Conservative from Kamloops, no Conservative from southeast British Columbia and no Conservative from northern British Columbia who has been standing up for an agreement that everyone knows is going to sell out those areas and that everyone knows is going to lead to lost jobs. Yet not a single Conservative MP from British Columbia has stood up against this and said, “This is bad for B.C., so we are not going to permit this”.

There is only going to be one answer from British Columbians and that is that in the next election there will not be a Conservative left west of the Rockies. That is because they have failed British Columbians.

[The Acting Speaker, Royal Galipeau]

The hon. member for Cape Breton--Canso will be mindful of the fact that there is less than a minute left for both the question and the answer.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Mr. Speaker, it would have been good to keep the member going. I share his concerns. I did not catch the first part of my colleague's intervention, but I share his concerns about the loss of article 19, the dispute resolution mechanism that I think was held in high esteem by all free trading nations. It was seen as a premier mechanism.

Let us bring this down to the grassroots. In the value added sector in the riding of the member for Burnaby—New Westminster, how does this equate to jobs lost, to jobs missed in that sector?

[The Acting Speaker, Royal Galipeau]

The hon. member will be mindful of the fact that he has less than 30 seconds for his answer.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I could easily talk for 30 minutes, because this is a horrible sellout that is bad for Canada. I mentioned Stephen Atkinson's comments. What this does is essentially fuel American jobs through American mills by raw Canadian logs. That is the horrible aspect of---

[The Acting Speaker, Royal Galipeau]

Resuming debate. The hon. Minister of Industry.

[Maxime Bernier, Conservative, Minister of Industry]

Mr. Speaker, I would like to inform you that I am going to share my time with the hon. member for Simcoe—Grey.

It is my pleasure to rise today in the House on Bill C-24. I want to ask all the hon. members in the House to join me in supporting this bill. Why? As most of my colleagues have pointed out here in the House today, the softwood lumber agreement benefits the industry, consumers and Canada as a whole. It is a practical, flexible agreement that puts an end to the trade disputes that have been going on for years and provides the softwood lumber industry with access to the U.S. market on very favourable terms.

The agreement eliminates the punitive American duties, puts an end to costly legal proceedings, and gets our softwood lumber producers out of the courts. Since 2002, this dispute has cost more than $35 million in fees that the Government of Canada has paid to help the softwood lumber industry fight this battle.

Now we have an agreement that will bring stability and recover more than $5 billion in duties that have been levied. I am proud to be part of a government that has found a solution that will give Canada and the United States a future opportunity to make North America more competitive in this sector.

I would like to explain briefly today how the concerns that the industry expressed during our consultations in the summer have been met in the agreement. We had the good fortune of being able to build on a strong Canadian position developed with the cooperation and contributions of the provinces and the industry. Ultimately, an agreement was reached of which all Canadians can be proud.

How were the concerns of the industry and the provinces taken into account? From the outset, they wanted the government to negotiate an agreement that would ensure repayment of the duties that had been collected. The industry asked the government and me personally, from the moment the new government came to power, to negotiate a real agreement with the Americans.

This objective has been achieved. Under the agreement, more than $5 billion Canadian will be returned to the industry by the end of this session. They asked that their deposits be returned quickly. They will be. Why? Because we developed a unique mechanism through Export Development Canada that will ensure that the money is repaid to our exporters in the weeks after the agreement comes into effect, that is to say, in the first few weeks after next October 1. This process will be much faster than the usual process, which was the American process under which people could have waited as long as two and a half years to get their money back if we had not included a quick repayment process in the agreement.

The government also managed to get an exemption from the border measures for the Atlantic provinces and the territories, as well as 32 companies including sawmills in Quebec, sawmills close to the border, that the U.S. Commerce Department did not consider subsidized. Among these sawmills are several in my own riding of Beauce.

The provinces and the industry have also called for flexibility in the regulations related to export quotas in order to respond to the needs of their American customers. As a result, our new government negotiated provisions that allow companies to carry forward up to 12% of the volume of their export quota from the previous month to the following month.

The provinces and the industry also asked for an agreement that ensures stability and predictability. I am pleased to tell you that this objective has been achieved. The agreement covers a period of seven years or up to nine years, if the parties wish to extend the agreement by an additional two years. During this time, the United States cannot intervene in the courts and it cannot apply other trade remedies. This will provide Canadian companies with a significant period of stability in which to invest in their businesses and to become more competitive. They asked for an agreement that gave the provinces the latitude necessary to manage their forest. We achieved that objective. We have negotiated anti-circumvention provisions that fully protect provincial forestry management policies, including complete exemption for the new market-based pricing plan in British Columbia.

This is an initiative that promotes management of the environment. It provides for payments to respond to the claims of First Nations and measures that are specific to the forest industry.

Following a meeting on August 9 with CEOs of the forest industry, additional clarification has been made to the agreement. Specifically, maintenance of the status quo in terms of American trade remedies for a period of 12 months at the end of the agreement. The cancellation notice period has also been adjusted to provide for a 12-month status quo period in the event that the United States requests a quick cancellation of the agreement.

We are pleased to announce that the United States has provided a parallel letter to this agreement, and these clarifications respond to the concerns of the government and the industry. This letter confirms that the Canadian industry will be well protected and that the duration of the agreement will be a minimum of seven years. All of these elements of the agreement respond directly to the concerns raised by the provinces and the industry during the negotiations.

As a consequence, I am pleased to say that the agreement enjoys broad support, both in Quebec and all across Canada. More than 90% of the industry is in favour of the agreement and, in Quebec, a major union, the FTQ, supports the agreement.

Given that level of approval, I am proud to lend my support to this agreement and to C-24, which will make the legislative amendments necessary to bring the agreement into force. I ask all honourable members to join with me in supporting this bill and to join us in our mission of making Canada a more competitive and more prosperous country.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, the Minister of Industry neglected to mention that, during the recent election campaign, the Conservative government had promised to provide loan guarantees. Instead of keeping its promises, the government forced companies to accept what everyone knows is a very bad deal. It told them that they would never have any loan guarantees, that the government would never give them anything, unless they signed this flawed agreement. As a result of this deal, Canada is losing jobs, as well as any rights it had in the dispute resolution process.

How can the minister defend his position when he is turning his back on the industry, breaking his election promises and refusing to act in the interests of communities across the country that depend on softwood lumber? Can he confirm that he threatened all these companies, telling them that they would never receive loan guarantees and that all they could do was sign this bad deal. The deal is very important to the government from a policy standpoint, even though it will devastate the industry across the country. Can he confirm that—

[The Acting Speaker, Royal Galipeau]

The hon. Minister of Industry.

[Maxime Bernier, Conservative, Beauce, QC]

Mr. Speaker, I am happy with this agreement and especially with how it was negotiated. My hon. colleague, the Minister of International Trade, negotiated this agreement very skilfully.

To answer my colleague's question, it is important to note that the softwood lumber industry did not ask us for loan guarantees, but repayment guarantees. The industry wanted its money. Today, over 90% of the industry supports this agreement. Canada is a free country, and people in the industry were free to get on board and sign this agreement. That is what people asked us to do. They were so satisfied with the agreement that we have the support of over 90% of the industry. People want their money as soon as possible. And they will have it by the end of the session.

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

Mr. Speaker, it is an honour for me to speak to Bill C-24, the softwood lumber agreement, which I respectfully ask all members of the House to join me in supporting.

The softwood lumber agreement is good for our industry, good for the lumber communities and good for Canada. I remind all hon. members that we have two national governments that support this deal. All of our major softwood lumber producing provinces support the deal, including those of the members who introduced an amendment and subamendment today. We also have 90% of the industry supporting the agreement and the deal in the legislation. One has to ask why the hon. members are not listening to their provinces and why they are not listening to the industry.

This deal eliminates the punitive U.S. duties. It ends costly litigation, takes our lumber producers out of the courts, provides stability for industry and returns more than $5 billion Canadian. It is a practical and flexible agreement that ends the dispute on terms that are highly favourable to Canada.

Let us remember that this disagreement has been going on for 24 years, this last legal agreement five years alone.

I am proud to be part of a government that has provided a solution that will put our two nations back on track for making North America more competitive for the future. I also want to give my appreciation to our Prime Minister and to our Minister of International Trade for their exceptional work on securing this deal on behalf of our softwood lumber industry.

Today I would like to outline some of the key features of the agreement. Let us begin with the return of the duties.

Clearly, one of the agreement's most important features is the return of $5 billion Canadian. This is a significant infusion of capital for the industry and will directly benefit the workers and communities across Canada that rely on softwood lumber for their livelihood. Without question, this dispute has been extremely difficult for Canada's lumber industry. That is why it is imperative that companies receive this money as quickly as possible so that they can continue to invest in their operations and their people, and to increase their productivity and their competitiveness.

An innovative deposit refund mechanism has been developed that will ensure that Canadian companies receive their share of duty deposits within four to eight weeks after the agreement comes into force. It is designed to help Canadian companies begin reinvesting in their enterprises and bring a measure of stability to an industry that has been hit hard for over 20 years of repeated trade action.

I also want to comment that we have seen the U.S. lumber trade coalition tell us that if this deal did not proceed, if we did not have this agreement, that it can guarantee Canada that there will be continued litigation regardless of the outcome of any lawsuits.

A second key feature is the revocation of the U.S. duty orders and the end to related litigation.

Let us talk about the flexible export measures. The deal also provides a strong measure of flexibility for our provinces. For the next seven to nine years no border measures will be imposed when lumber prices are above $355 per thousand board feet. When prices drop below this threshold, the agreement allows provinces to choose the option that best suits their particular economic situation.

Option A involves an export charge that increases in steps from 5% when the price of lumber is $336 to $355 per thousand board feet to 10% when the price is $316 to $335, and then 15% as the price of lumber falls below $315 per thousand board feet. Option B combines at the same price levels lower export charges of 2.5%, 3% and 5% with quotas.

I should point out that funds collected under either option will now stay in Canada. The Government of Canada will distribute to the provinces revenues from the export charge minus the administrative and perhaps legal costs that are associated with the agreement.

This is a significant improvement over the current environment. Currently the duties imposed by the U.S. are reassessed annually. In other words, the industry never knows from one year to the next what duty rate may apply. Under this agreement the industry will know and can take full advantage of a stable predictable business environment.

The agreement also contains a provision allowing provinces to seek an exit from border measures based on a process to be developed by Canada and the U.S. in consultation with the provinces.

I urge the members who sit on the trade committee with me to work with us in committee, rather than try to hijack it this session. Let us work together toward a better future for our softwood lumber industry. Let us work on this agreement.

It provides for reduced export charges when other lumber producing countries significantly increase their exports to the U.S. at Canada's expense.

Importantly, this agreement has a dispute settlement process for issues related to the implementation of the agreement. The process will be neutral, transparent and efficient.

Often we hear opposition members talk about chapter 19. What they are neglecting or actually choosing to ignore is the testimony that we heard in committee that clearly told us that never was softwood lumber to be included in NAFTA. In fact, there was a memorandum of understanding that was pulled out of the agreement so that it would not be there. We have been trying to apply this dispute to NAFTA when no one agreed that it should be there in the beginning.

This new dispute mechanism will no longer be U.S. trial law. It will be international trade law. There are many who suggest that signing on for this new dispute mechanism is reason alone for signing on to the agreement.

The agreement of course will provide a stable business environment. But perhaps the feature of this agreement that has garnered the most attention and continues to be the subject of myth and misinformation from those who do not understand it is the termination clause. Let me be clear. This agreement will last for seven to nine years, providing a stable market environment for our softwood lumber industry. During this time, the U.S. will be prohibited from initiating further trade action.

I should also point out that the U.S. has agreed to a 12 month standstill on trade action in the event that it may decide to terminate the agreement. This provides yet another measure of stability, one which I might add was added at the industry's request following an August 9 meeting with CEOs.

While the termination clause in this agreement is a standard feature of international trade agreements, I can tell the House that termination by either country is highly unlikely. This is a hard-won agreement and both sides have a clear interest in maintaining the rights and privileges under it.

Within Bill C-24 these features are key elements of the agreement. Bill C-24 will bring these elements into play and implement Canada's commitments under the agreement. In particular, the bill provides authority to impose an export charge in a manner consistent with the agreement. It also seeks to amend the Export and Import Permits Act to bring the export measures component of the agreement into action.

Today I ask all parliamentarians to join me in supporting this bill, putting an end to this long-standing dispute and building a brighter future for Canada's softwood lumber industry, for the workers, families and communities that rely on it.

I want to comment a little further on the proposed amendments. I find it very interesting that the member for Beauséjour tabled such an amendment, considering that the industry in his own province is unequivocally supporting this deal. The industry had written asking him to support this deal. In fact, it does not quite understand why he would not want to support the deal. I have the names of companies, such as the Maritime Lumber Bureau, J.D. Irving Limited, M.L. Wilkins & Son Ltd., Pro Lumber Incorporated, North American Forest Products Ltd., and the list goes on and on.

I am not quite sure where the member is coming from because this deal would provide market access by providing the stability and certainty that the industry has told us it clearly must have. This is exactly what the focus of the Prime Minister and the Minister of International Trade has been all along, to find a stable and predictable market for our industry.

The U.S. is not interested in escaping its obligations on this deal. It has no interest in backing out whatsoever. I remind everyone that it is only the Canadian government or the United States government that can terminate the deal.

We also know, as I alluded to earlier, that the softwood lumber industry was not included in NAFTA and that is why any attempts to try to govern it under NAFTA rules have not worked. The new dispute settlement will work. Canadian workers have always had the support of this government. It is the workers who will finally gain their job security who will benefit most from this deal. Over $5 billion will be returned to the industry ensuring that it can prosper and secure its workers jobs in the future.

In conclusion, I ask all members to can the rhetoric and to support this deal. Let us move forward for a stronger North American softwood lumber industry that will benefit all of Canada.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, the member said “can it”. Of course, the Conservatives gave away the can, as they also gave away the table and the rest of the House in this softwood sellout.

I did want to clarify something that the member said, which was completely and utterly false. It was on the issue of long term stability. Clause 34 says that the United States reserves the right to terminate the agreement without resort to dispute settlement or any other precondition for termination of this agreement. In other words, the U.S. can keep the billion dollars and run, and can terminate the agreement at any time on a simple allegation of non-compliance. There is no stability in this deal, even though we have gone from seven years to 23 months, now to 18 months, where the United States can make a formal announcement. The U.S. also has an opt-out clause at any time. All the Americans have to do is allege non-compliance. We have no recourse to dispute settlement. We have no appeal.

There is a series of questions I would love to ask the member. She made the statement that we eliminate the duties. Is she aware the duties would be higher as of October 1 under this deal than they are currently with the illegal punitive tariffs? Is she aware of that?

She mentioned the fact that the coalition would be taking on Canada if indeed this softwood sellout was not put into effect. We know darn well that the coalition is dry. It has no funds for further legal action, but this softwood sellout gives it half a billion dollars to take on our industry anytime it chooses. It alleges non-compliance and it can come right back at us, so the kick-me kids, the Conservative caucus that just could not get this right, is giving half a billion dollars away to a coalition that would not have been able to launch legal action against us otherwise.

The next question is around the export tax. The way the Conservatives botched this legal bill, the bill itself imposes the export tax on top of the current anti-dumping and countervailing duty imposition. What we have is a double tax. Is the member aware of that?

Finally, is the member aware that the United States kicked the kick-me kids, the Conservative caucus, last week and decided it is going to appeal the Byrd amendment ruling that Canada won last spring? In other words, the Americans take all of their cake away from the softwood sellout and they are coming back for other industries now, basically kicking the Conservatives for their naivety and their poor negotiations. Is the member aware of that?