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

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Speaker, I will be sharing my time with the very distinguished member for Edmonton—Leduc who will be speaking to the softwood lumber debate on behalf of his constituents.

I first want to thank the Minister of International Trade who has worked so closely with Atlantic Canadian industries and who has worked with us to try to resolve issues as they pop up all the way through this debate.

The softwood lumber agreement is critical to our area in Atlantic Canada. I was first elected in 1988 and the first thing on my table was the softwood lumber issue. It has been on our table ever since and with this agreement perhaps it will get off our table for a little while.

The Maritime Lumber Bureau represents the mills in Atlantic Canada and it has been totally focused on this for at least two decades. It has been very successful in negotiating exemptions from any countervailing or anti-dumping duties. It has negotiated with the United States governments and Canadian governments repeatedly and has been successful each time. It means that Atlantic Canada is not involved with this. We are totally exempt from the accusations of subsidies or interference with the marketplace.

The exemption was earned by Atlantic Canada. The Atlantic Canadian industry worked hard to get it and it earned it. It earned it by maintaining forestry practices that are exactly the same as they are in the U.S. It does not allow the United States to give complaint to our practices. Most of our woodlots in Atlantic Canada are privately owned, as they are in the U.S. Our lumber is sold at market value, as it is in the U.S. It removes the opportunity for anyone to accuse Atlantic Canada of having any subsidies or grants.

The industry in Atlantic Canada has consistently refused funding from a variety of programs offered by our federal and provincial governments because it does not want to be in a position where anybody can point a finger and say that Atlantic Canada received a subsidy, grant or benefit, a position that would allow the United States authorities to point a finger and accuse us of subsidies.

The last thing industry did to earn this exemption was quite amazing. After the industry earned the exemption, suggestions were made that some lumber was coming in from other provinces and funnelling through Atlantic Canada in order to get the exemption. The Maritime Lumber Bureau established its own tracking and certification system and now if a 2x4 pops up in Texas it can be traced back to an Atlantic mill and right back to the private woodlot from whence it came. There now can be no question that all softwood lumber from Atlantic Canada is coming from private woodlots.

There is no basis for any accusations of subsidies in Atlantic Canada, not now and not ever has there been a basis for an accusation of a subsidy, which has allowed the Maritime Lumber Bureau to negotiate these exemptions time after time, both with the American government and often with the Canadian government to convince it. Sometimes the Canadian government has seemed a little more difficult in the past than the American government but, in any case, the bureau has been successful in negotiating these exemptions.

The Maritime Lumber Bureau represents mills in the four provinces of Atlantic Canada. Its CEO and president is Diana Blenkhorn. I have to compliment her for her negotiating skills and her ability to understand the market, the challenges and the situation. She has negotiated with the Americans, with Canadians and with other provinces and she has been able to maintain, on behalf of the Maritime Lumber Bureau, this exemption. I believe she is the most knowledgeable person in Canada, probably anywhere, on this subject.

The softwood lumber agreement provides Atlantic Canadian mills stability. Atlantic Canadian mills do not want to spend their time in court. They do not want to spend their time with lawyers. They do not want to spend their time in tribunals. They want to spend their time making their mills the best and most efficient mills they can be and producing the best possible product they can produce.

From the beginning, when the softwood lumber agreement terms were finally ironed out, which took quite a while, the Maritime Lumber Bureau has supported the agreement wholeheartedly on behalf of all the mills in Atlantic Canada because again the agreement confirms the continuation of the exemption that has been so hard-fought and so justly earned in Atlantic Canada.

However, the bill actually does not provide the specific term exemption for Atlantic Canada. It does provide for zero rating, and some people may consider that the same thing, but for those of us in Atlantic Canada a zero rating is not the same thing.

At the end of this agreement, five, seven or 10 years down the road, we may be at this debate again. The Atlantic industry wants to maintain the exemption exactly the way it has been. We want the same words in the agreement that have always been there before, that is, that Atlantic Canada is exempt. It is essential that the bill we are dealing with now reflects the agreement and specifies that Atlantic Canada is exempt.

After discussions with the minister today, we have agreed that we are going to work together to come up with an amendment to clarify this issue and make sure the wording of the bill is the same as the wording in the agreement. Again, I thank the minister for his open-mindedness on this issue and his ability to react quickly and move forward. That is why we have the agreement we have today. It is because the minister has done that. He has worked with the industry from coast to coast. He has worked with governments in Canada and the United States. When there is an issue he deals with it, and we find a way to resolve it and we move on.

The Maritime Lumber Bureau has worked closely with the Department of International Trade throughout this negotiation. It has supported the agreement, but again, the bureau is very anxious to see the exemption clearly stated in the bill. I agree with the bureau. I think we can find a way to resolve this very quickly with the cooperation of the minister, who has agreed to take the steps to clarify it.

At the end of the day, this agreement will allow Atlantic Canadian mill owners and forestry workers to focus on what they do best, that is, working in the industry to try to improve the quality of their product and the efficiency of their businesses. This agreement will allow them to reinvest and to compete worldwide in the softwood lumber industry. That is all they want to do. With this agreement, they will be allowed to do that in Atlantic Canada.

Again I will say that we have had nothing but cooperation from the minister on this right from the get-go, right from the beginning. There were a lot of different things that had to be hammered out, ironed out and resolved, but they have been, so much so that not only has the Atlantic Canadian industry been quietly supportive, but it has been actively supportive of the softwood lumber agreement. It will have the same endorsement and same support for the bill if we can just get the specific wording changed so that it reflects the softwood agreement that was originally signed between the United States and Canada.

I again want to thank the minister and the department. This has been an issue for me for almost 20 years. It looks like there is light at the end of the tunnel. We might have a resolution to this. Although this agreement does have an end to it, perhaps if it works and everyone is happy it can be extended indefinitely and our industries can all go back to work and do what they do the best.

[Dennis Bevington, NDP, Western Arctic, NT]

Mr. Speaker, the first words that I heard were that they are very happy to get this off the table for Atlantic Canada. Coming from the north and looking at the provisions whereby the north is not given any particular tariff on any of our exports of lumber from places such as Nunavut, I would say that probably I should go along with this agreement as well, but in reality we live in Canada. The whole country's lumber industry is at stake with the bill. The fact that one region is better suited under the bill than the other does not take away from the fact that we live in a larger country than the particular region the hon. member is talking about.

Coming from the north and being satisfied with an agreement that exempts northern producers from a tariff, that means nothing to the rest of the country. I think the hon. member should recognize that as well. Perhaps he would like to comment on how he is supporting the lumber industry across Canada as a whole. Perhaps he would put his comments in that perspective.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Speaker, I agree with the member in that I think he should go along with the agreement, but he asked me to justify or explain why Atlantic Canada has this exemption. Again, Atlantic Canada earned this exemption. Those provinces worked hard at it. They have spent millions of dollars to get the exemption and to keep it. They have spent millions of dollars in legal fees. They have refused subsidies when other provinces have accepted them. They have established their own certification program, which cost millions of dollars to invent. They have their own private woodlots.

Many provinces have woodlots owned mostly by governments, but in Atlantic Canada we are different. We must have different terms for each province because each province has different forestry practices. We cannot say that everyone is the same. That is what we have been fighting for over the years: that Atlantic Canada has earned the exemption, is entitled to it and has had it all along. There has never been an accusation about a subsidy and there never will be as long as the Maritime Lumber Bureau is active.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Speaker, I would like to ask the hon. member for Cumberland—Colchester—Musquodoboit Valley how, partisan rhetoric aside, he can possibly think the negotiators had excellent skills? It is pretty clear that the outcome of the negotiations was not very good. His own minister pushed the negotiators into a situation that, at the time, could only end in reductions, given that he had already said he would accept less.

Second, I would like to ask the member how he can talk about stability? Just because something has been signed for nine years does not mean there is stability. He even said it could go on beyond that time. I feel it is presumptuous to think so. We all know that in this kind of agreement, anything indefinite cannot last. Companies were wondering whether they should sign, and now they are already wondering when it will be challenged. How can anyone talk about stability?

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Mr. Speaker, the hon. member probably does not understand that I was a car dealer for 20 years and I know a good deal when I see one. This is a good deal. I am amazed at how the government has negotiated this deal. There was no splitting the difference on this. On almost every single issue we had our way, not 100%, but awful close to it, so much so that the hon. Minister of International Trade would have a great future in the car business.

This deal will provide stability. It will allow our mill owners to stop worrying about tribunals. It will allow the Maritime Lumber Bureau to stop spending all its money and time on legal hassles and flying to Washington or Ottawa to negotiate with bureaucrats and politicians.

They can go back to what they do: producing the best quality lumber in the world. This deal will provide stability and all of this worrying will be over. I hope it is over forever, but at least it is over for a great many years.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, it is my pleasure today to rise to speak to Bill C-24, which outlines the government's resolution of the longstanding softwood lumber dispute.

It was interesting to listen to the member who spoke previously. He says it is a dispute that he has been following since he was elected in 1988. I have not been here for quite as long as the previous member or as long as the Speaker himself, but this has certainly been a dispute that has attracted the attention of Parliament and the country since I was elected in the year 2000.

It certainly affected our trade. It was the biggest trade irritant between us and our greatest trade partner south of us, the United States. It was certainly impeding what I would consider a very successful trade agreement, NAFTA. It was certainly having an impact on that.

It is perhaps helpful to remind ourselves just how successful that agreement has been in the sense that I believe softwood lumber consists of about 3% of the trade between Canada and the United States, while 95% of the trade between the two countries goes through irritant free. That shows exactly why it was so important to address the softwood lumber issue. That 3% in fact was very much affecting other trade areas.

I want to compliment the Minister of International Trade for tackling this head-on. I know he certainly did as much as he could in the former government, but certainly since this Parliament started he has been very active on this file.

I think it is important for us to remember exactly what we were facing as a government and as a country. We were facing two choices. The first choice was to continue the route of litigation, to continue to try to win disputes through NAFTA and the World Trade Organization to force the United States to recognize that we were not subsidizing our lumber industry, our forestry products industry, and to try to force the Americans to reduce the countervailing duties and repay the upwards of $5 billion they had collected to that point. That was the choice. The choice was more litigation.

Looking at that, I think we have to be honest with ourselves. The fact was that this was not a resolution. The fact was that we would be spending more in legal fees to go down that route. The fact was that we would probably be discussing some form of loan guarantee program and putting taxpayers' money at risk in order to support our industry.

The fact is that there was no real end in sight, because if we won another NAFTA dispute, another resolution, the United States could simply change its own legislation, start another series in litigation along this route and we would be no closer to a settlement than we were two, three or 20 years ago. So we had a choice. We had a choice between more litigation or this resolution.

In fact, I know that a lot of members of the House have been very critical of this agreement, but I will say quite honestly that this agreement is better than I thought we as a government could get in the first place. I thought the Americans would never sign an agreement of this type. In fact, I want to review some things that are in the agreement and some of the benefits that accrue to Canada.

The agreement eliminates the punitive U.S. duties and returns more than $4.4 billion to producers to provide stability for the industry. It spells an end to the long-running dispute. It obviously addresses the massive trade irritant between ourselves and the United States. U.S. countervailing and anti-dumping duty orders will be fully and completely revoked. The absence of U.S. trade remedy action under the agreement will offer a period of stability for the industry, which will allow Canadian companies to make the investments necessary to ensure that their competitiveness goes forward.

There is also an issue that some members are raising now in portraying what kind of export tax would have to be paid if certain provinces go over a prescribed limit. In fact, as members know, there are two choices. Option A is the export tax if our exports rise above a certain level, but there is also option B, which is the quota and a small tax. What this does is keep these moneys in Canada, in the provinces, thereby allowing the provinces to not only direct their own forestry practices but obviously address situations that may arise.

One of those situations is in my own province of Alberta. Members will know, and certainly members from British Columbia will know, of the seriousness of the pine beetle devastation in that area of the country. Two summers ago, I had the opportunity to survey from a helicopter how much had actually been affected by the pine beetle. It was incredible. One had to see it to believe it.

The concern from the Alberta industries is that the pine beetle will make its way into Alberta very shortly. It would cause some of the producers to want to harvest more quickly, as they did in British Columbia, and therefore the amount of exports would go up.

The agreement allows the Canadian government and the provincial government of Alberta to deal with that situation by having the resources come back to the province and then the province can deal with that situation. Rather than have the United States collect those duties, it allows the provinces to deal with it in a much better way. There is an option between litigating it with possibly no resolution, probably no resolution in sight. In my view, this is the best possible agreement that could have been negotiated.

As I mentioned, it makes a $4.4 billion immediate cash infusion into our communities across the country. It is one thing to talk to the industry itself, and the Minister of International Trade has identified that over 90% of the industry supports this agreement, but let us talk to the communities that are most affected.

Hon. members should talk to the people in those communities, mainly in the rural regions of our country. We should ask them if they want a situation where they will be paying duties, there is no resolution, and they do not know whether they will have a job in a year or two because this situation could carry on, or do they want to have the situation resolved? Do they want to have some stability? The companies in various provinces would then know what kind of situation they are dealing with and have some cash infusion to make their company more competitive.

It is incumbent upon members who are critical of this agreement to put on the table exactly what they are criticizing, to say what specific measures they would want to see in place that the agreement does not address. They should be realistic in the sense that there are two sides to a trade dispute, two sides that have to come to the table and two sides that have to come to an agreement.

In my view, the agreement is the best possible agreement that Canada could have signed. As I mentioned before, it is a better agreement than I thought we would have been able to get. I would like to encourage all members of the House to support the agreement. The Bloc Québécois is supporting it.

I am very surprised that the Atlantic Canadian members of the Liberal Party are not supporting the agreement. It is a very good agreement for Atlantic Canada. Responding to a previous question, a very good question from the NDP to my colleague from Atlantic Canada, I would agree with him. As a westerner, as someone from Alberta, I would say Atlantic Canada, by its forestry practices, deserves this exemption. I, as a Canadian from western Canada, support that.

I want to finish up by saying that I did have the opportunity, and companies across this country have been very open to all parliamentarians, to see firsthand what the industries do and what their workers do. I have seen all aspects of the forestry industry in this country and have been amazingly impressed.

We hear the expression “hewers of wood and drawers of water”. If anyone has been to a softwood lumber facility, and they should go to the one near Prince George, they would see the computer system that measures every single log and the IT system that follows that. If they went to the mill just outside Calgary in Palliser, they would see the way that all the employees, aside from just working in the plant, are also upgrading their skills, learning how to move up the system, and taking logs that other companies may not utilize and turning them into a wood product that they can then export. It is a fantastic industry and one that all Canadians should be very proud of, but it deserves some stability. It obviously deserves our government's support.

We have signed, in my view, the best agreement possible. It is obviously supported by the large lumber producing provinces and it should be supported by all members of Parliament. I encourage all members of Parliament to take a serious look at the agreement, to support it, and to support our lumber industry across this country, but most important, to support the families in the communities who really need a resolution to this issue.

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, I have heard this speech several times today. I guess they are just passing it around.

I think a basic point is worth repeating. Many members have argued that the current industry requires some relief, that some are facing financial duress. The fact remains that the deal under Bill C-24 creates an export tax that at current price levels is actually higher than the current U.S. duties.

It also means that there is an awful lot of money that has been left on the table, over a billion dollars. Half of that is going to the U.S. softwood lumber industry. We will likely have some future difficulties with regard to other matters as they arise in this matter.

The member knows that the trade panels, NAFTA and the WTO, both concur that our industry was not subsidized. Both trade panels, NAFTA and the WTO, said that our industry was not subsidized. Now we have a problem where potentially this is an abandonment of the dispute resolution mechanism. It puts it in jeopardy for not only the softwood industry but for other industries where there are trade issues.

How does the member square taking a bad deal for a little money today at the risk of costing substantially more to not only the softwood industry but other industries down the road?

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, there are a few things I would say in reply to the member's question. The member should be completely forthright in identifying that there are in fact two options available. There is option A and option B.

Option A is in fact the export tax, when exports rise above a certain level. Option B is a self-imposed quota system plus a smaller tax.

An important difference there is that the funds stay in Canada. As I mentioned during my speech, and I did not hear any other member talk about it, so it is not a speech that has been passed around, when a situation arises in Alberta where we may have the pine beetle infestation, it in fact will allow the province of Alberta to deal with that, where there may be a surge in exports caused by increased harvesting caused by the pine beetle infestation. In fact, I think this agreement addresses that.

The member talks about a little money being returned now and having a greater cost later. I know that $4.4 billion is a fair amount of money. The fact that we have 80% of the duties returned is, quite frankly, a tremendous achievement. I would applaud the Minister of International Trade for doing that.

I would also point out to the member that the Minister of International Trade was a member of the Liberal caucus prior to the last election. He says very openly that this agreement is better than the agreement that the Liberal government was prepared to sign with the U.S. administration.

I think the member should be very aware of that. This agreement is better than what his own government was prepared to sign. This agreement is just for the families and workers across this country. This agreement deserves to be supported.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Mr. Speaker, the Conservative party member mentioned that this dispute has been going on for some time. All members of the House would agree with that. That is perhaps the only point on which the Conservative party and the rest of the House can agree.

The Conservative party is the only party that believes that this is a good agreement and, above all, that it will last. The hon. member mentioned that it is important for the people of Alberta because that province's forests have an infestation and they must sell off their wood. He said it is important that this agreement survive so they can get rid of their wood in the United States, no matter the price, as long as they can clear it out.

I would remind the House that the mad cow crisis also originated in Alberta. Quebec had to pay the tab. Today, the softwood lumber problem comes from the west, and Quebec is again paying for it.

Given all this effort and the $1.5 billion handed over to the Americans, would it not have been enough to pay the lawyers, in order to put an end to this endless process and, finally, reach a decision that could be enforced and facilitate negotiations with the Americans?

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, I suppose I should not be surprised, but the agreement was not signed to address the situation that may occur in Alberta. I think his comments about Alberta are obviously inappropriate, so I will not even dignify those with a response.

The fact is that we had a choice between further litigation and even if we won all of the current legal cases before the courts at present, the United States could easily alter legislation and start another round of litigation. The fact is that the only way, if we pursued that route, to recoup any of the over $5 billion would be to go through the American court system and do that. Is that what the member is suggesting?

The member is suggesting that we litigate for years and years, and go through the American court system to try to get any of the over $5 billion. That is the solution he is presenting.

It is a little surprising that the Bloc members are sort of standing up and criticizing the agreement and yet they are going to stand in the House and vote for it because their own provincial government is in favour of it. The industry in Quebec is in favour of it because it realizes what perhaps the Bloc does not, that what workers across this country need is a resolution to the dispute and not a continuation of litigation which may result in no benefits whatsoever.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Mr. Speaker, it is a privilege to stand today to address this issue.

Bill C-24 is, obviously, of immense importance to the people of British Columbia, a province that supports about half of the logging industry in the country. It is also of great importance to all of us.

We have heard variations from across the country of the impact in different regions and certainly in British Columbia itself there is a variety of impact on different aspects of the forest industry.

Value added manufacturers have a different interest than interior logging and mill operations. Coastal logging operations have a different interest than the interior ones. We have valuable coastal cedar being logged and being unfairly coupled with other types of timber being sent to the Untied States and it should have had a varied approach.

We have also heard the member for Cumberland—Colchester—Musquodoboit Valley talk about the private land logging in the Atlantic provinces which were never caught by the subsidies here.

We have companies in northern Ontario and Quebec that are hurting desperately. To answer the question of the Bloc Québécois as to why they would support it, I fear the softwood lumber companies are facing a situation where they simply cannot afford not to take back only 80% of what they have paid under illegal dumping and countervail charges and neither can their communities and the workers.

In the other cases, we have interior forest companies in British Columbia that are highly efficient, have rationalized, are some of the most efficient mills in the world and have been making profits, notwithstanding the illegal countervail and dumping penalties, and they of course cannot afford to take only 80% back.

We have a range across the country and it is incumbent upon the Government of Canada to ensure that it embraces all those interests, which, obviously, is a complicated thing to do.

Let us look at what has happened in softwood lumber over the years. The Minister of International Trade and I have seen various aspects of this over the last 20 years. We have watched the trade in softwood lumber with the United States and various disputes that have come about over it.

We hear often from the government that it has never been managed trade in softwood lumber with the United States. That was certainly true before the free trade agreement but after the free trade agreement it was supposed to be free trade, not managed trade, and yet in various iterations and agreements where governments have given in to the pressure from the American industry, we have had quotas and we have had export duties. Now we have quotas and export duties. I fail to see how that can be a victory in terms of the softwood lumber industry.

Let us say clearly and out front that this is not about subsidies for the Canadian industry. I hope we all know that. The World Trade Organization and NAFTA panels have said it over and over that it is not about subsidies to Canadian softwood. It is about protectionism in the United States. That is what it is, that is what it will always be and I think we had better call it as it is, put it right in front of us and remember that as we see what happens going forward in the future.

We have pressures from the United States that simply will not let up. My great fear is that with all the immediate, perhaps, benefits to some aspects of the industry, some communities and their workers, that this agreement might provide in the short term, this does not provide the stability that is being suggested.

Let us think about where we were a year ago. Yes, the former Liberal government had pursued this for over four years on a number of tracks. Litigation was certainly one of them and, my goodness, it was certainly expensive and continued to be expensive. However, going through the WTO panels and the NAFTA panels where we were in the minority against the Americans, where they had two members and we had one, we continually kept winning and we have finally came close to the end. After four to five years of expensive litigation, we have come before the U.S. court of international trade, which is an American domestic court.

The one thing the American administration, quite apart from Congress and the individual sectoral lumber industry in the U.S., has always said is that at the end of the day it will change its rules because it does not want to be subject to super national arbitrations or decision making dispute resolution systems.

We got through those and then into the U.S. courts and won at one level. Yes, that could be appealed, but it was getting so close.

Yes, it is fine to talk about and it is important to appreciate the cost of continuing litigation, but it is extremely important not to throw away all of the work that has been done by litigation with the agreement of lumber councils across the country, the softwood industry, individually and collectively, the producing provinces and the federal government. We went forward and finally got to the point where it could be won and it is being thrown away. Let us not forget what we are throwing away when we measure the value of the so-called stability of this agreement.

We fool ourselves if we think we can sit here and rely on the United States in all its complexity, whether it is the administration, the Congress or sectors of their industry, when it has shown in this case its persistence in flouting the rule of law and going forward with arguments that are not being accepted by the various courts and panels.

Will we get stability with this? We know it may go for seven years, it may go for nine years or it may go for three years. I would not put a lot of trust at this stage in the system. However much the administration may intend at this time to see it go for many years and provide stability, it is not entirely in control of this issue. I think the evidence of the past suggests exactly the opposite, that we should not count on stability into the future. The fact is there will be no stability without the rule of law, which is what we are talking about here. Can we depend on agreements, on international trade obligations, on rulings of dispute resolution panels and, eventually, which we were close to, U.S. domestic courts themselves?

Yes, litigation is expensive, but to throw it away now in the name of perhaps a false stability when we are so close to a good outcome in the American courts is a great risk.

We then look at the Byrd amendment. We keep hearing from the government, depending on how it wants to scale and emphasize the amounts, whether it is U.S. dollars or Canadians dollars, that we are giving back over $1 billion American to the United States, to be used by both the the administration and Congress for projects that may be of assistance in their re-election campaigns at various times and to help various sectors of different industries in different parts of the country. Half of that $1 billion will also go to the industry itself which has been using every opportunity to encourage its government and its Congress to flout the law and avoid its responsibilities. How can we put trust in that?

The reason only half of the money will be going to the industry is because the Byrd amendment, which would otherwise allow all of it to go to the industry, over $1 billion American, was found to be against the WTO rules. Now we find, even after this agreement was signed with Canada, the American administration is appealing that WTO ruling. How can we put trust in stability in the future and in the good faith of this agreement when no sooner have we signed it than there is an attempt to get double the amount to go to the softwood industry in the U.S. to be used against Canadian industry and Canadian interest? That is not much of a deal.

We heard the member for Edmonton—Leduc say, quite appropriately, that the softwood industry, as important as it is, and it is immensely important to the province of British Columbia, is only 3% of our trade with the United States. He asked why we would worry that we do not have perfect free trade in this area when it represents such a small percentage of our overall trade with the United States.

I will tell members why we should worry. We should worry because it is a bad precedent. Ninety-seven per cent of our trade with the U.S. could be exposed to the tactics that have proven successful through the government's agreement in the softwood lumber industry. What kind of a precedent do we want to set? What kind of a risk do we want to take with this type of agreement? I suggest it is a short-sighted agreement and it does not bring stability. There is nothing in this agreement that should convince us, from past behaviour, that this will provide stability into the future.

We are not just leaving $1.4 billion or $1.5 billion in the United States as the member for Edmonton--Leduc has mentioned, which may ultimately all go to a competing industry there. We have not talked about the other $1.4 billion that was presented by the former Liberal government a year ago to go toward a number of initiatives to assist the industry in this country, the communities, and the workers. This must be added to the other $1.4 billion. Now we are getting into really large sums.

Those adjustment projects were meant to go to a whole range of things. We have heard of loan guarantees, litigation support and coordination for further negotiation. We have heard of taking the argument directly to the American consumers, one of the parties, in addition to Canadians, who are being hurt over all these years by this illegal U.S. action against Canada. The homebuilding industry and the homebuyers with aspirations to afford a home are being hurt by this U.S. action.

Where has Canada been putting its initiatives in supporting communities, workers and the industry? I will just focus on something that has not been talked about a lot and that is some of the community economic adjustment initiatives of the former government that actually bore fruit, helped stabilize communities, helped get people back to work and helped to provide some strength and support to the individual firms that were threatened.

Let us take the British Columbia part of that softwood adjustment initiative as an example because it is the province I come from. Over the last three years in the last government, $50 million went through community economic adjustment to hard hit resource communities around British Columbia. It went to diversify the economy in those communities in a number of stabilizing, helpful and growth stimulating ways.

When we look at diversification, an industry, which is a commodity industry, or part of it is, that is boom or bust vulnerable given the fluctuations in international commodity prices, that makes us extremely vulnerable. We need to add value. We need to diversify the product by adding value to widen the profit margin so that if there is a fluctuation in commodity prices we can withstand those fluctuations within broader profit margins.

In British Columbia, 145 programs were funded by the federal government in the amount of $50 million. A further $95 million was leveraged which went into 140 communities. One of the important objectives of that was the diversification by adding value added industries and providing support for them. Otherwise, we look for diversification in resource dependent communities to diversify markets. That is where a lot of this investment went and it is where part of the $1.4 billion that had been planned by the previous government would have gone.

I know that 11 ministers in the last Liberal government visited China. Of interest to all of us when we were there was how to diversify our markets away from a dependence on the United States into that huge China market. Forest products, home building and forest product-related sales and markets were a major focus of our initiatives, and those can never be forgotten.

The third part of diversification that we have to look to as an industrial strategy to move ahead and ensure that our resource-dependent communities are not subject to boom and bust or to illegal trade action by countries such as the United States, our biggest trading partner and therefore the one that can have the greatest negative impact on us, is to diversify into other sectors of the economy.

These adjustment funds, highly leveraged through private investment, also went into tourism, into economic infrastructure of various types and into the value added part of the forest products industry. About 30% of the projects, 140 or 145 projects, that were supported went to first nations to help them in their economic adjustment and over dependence on commodity-based forest products.

This is the way we need to go forward, along with litigation and negotiation and along with considering loan guarantees or whatever might be put forward. It shows an understanding of the economy, the vulnerability in our communities and the need to take a broader approach.

I am extremely concerned that we have traded away an agreement in which there is no guarantee whatsoever that there will be stability going long into the future. If the behaviour of the past is any guide, it should suggest to us the opposite.

We have a quota. We have duties. These export duties, and let us not shy away from it, are nothing more than an additional tax, and that is a tax that is going to be on our industry. Where will that money go? We have not heard about that. We can be sure that it cannot go back into the forest products industry or we will have a cancellation of this agreement with countervail action by the United States as fast as we can blink an eye.

Canadian business is being taxed this extra amount. As we have heard a number of people say, if we think through this situation, before the ink is even dry, before the ink was even applied on the agreement, the export duty, for which our industry is vulnerable, already exceeds what the illegal countervailing and dumping duties were. This really goes beyond imagination. It may give some short term relief, and any relief is good, but this is not something that we should not count on or cheer about.

I am very curious that, with the much vaunted new relationship of the new government with the George Bush administration, all we get out of that tremendous new arrangement and relationship is a bad deal. If this is all we can extract from that new relationship, then I am not sure it is particularly helpful to Canadians, and that will be seen in the end.

There is another aspect to this that is somewhat troubling, and I think it should be, to all of us. I do not for the moment suggest that the Minister of International Trade or the government has intended this, but there is an aspect of bullying that has been going on, which sits there underneath the surface in a very troubling way. It is about taking advantage of an industry that is on its knees and the communities and workers who are dependent upon that industry.

It is an uncomfortable feeling that we have to be very cautious of as we try to craft trade and industrial policy in the country, which is so diverse. We do not want to extract, through undue or unfair pressure, from vulnerable areas of our country or aspects of our industry anything that is not in the long term best interests of the industry, its workers or the communities.

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

Mr. Speaker, the hon. member is a lawyer. He understands, or ought to understand, what is going on in softwood lumber and some of the litigation surrounding it. I think the hon. member knows that we are winning most of the cases. We expect we would continue to win most of the cases, but we have to recognize that even with another final win at the court of international trade, it is an appealable case. Right there we are pushing a settlement out another year and half. Then we would have to look at a couple of years to recover the duties. We would not see any money in the pockets of Canadian companies for somewhere between two and four years.

The hon. member also should know that in this case the litigation is not just about countervailing duties and alleged subsidies. There is also an issue of anti-dumping and going into a weak cycle in the lumber market. It is much easier to demonstrate or at least make a plausible case against dumping and we would be in a situation immediately. I can assure the member that the U.S. industry is ready as we speak to launch more cases, both anti-dumping, new injury cases and new countervailing duty cases because the very programs of assistance the hon. member refers to would certainly be countervailed and attacked. There is absolutely no doubt about that. We would not even be finished the old litigation, but would be faced with new litigation and new interim duties. Last time the interim duties started out at 27% and it took us five years to get them down to just over 10%.

The idea that there are both a tax and a quota, there is a choice. Some regions can opt for a tax no greater than 5% and apply a quota. Some regions can opt, as would happen in British Columbia, for only a tax and no quota. Therefore, there is not both the tax and a quota unless a province were to opt for that option.

The hon. member is from B.C., and Premier Campbell of the government of British Columbia is in town. Has the hon. member talked to Premier Campbell and asked him if he felt bullied into this agreement, because Premier Campbell is supporting it, as is the industry in B.C.? The reason they are supporting it is because they put in place some new policy reforms, which this agreement protects. Those policy reforms would be attacked without the agreement.

The very tax that would be place in low markets will get capitalized, as the hon. member knows, in lower stumpage payments in a competitive bidding situation. The idea that it is a new tax is really not right. It is a displacement of stumpage by an export tax.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Mr. Speaker, the hon. minister is highly expert in this area and knows the complexity, as well as anyone in our country, of the industry in British Columbia and that it is not uniform. There are companies which have very different interests from the interior to the coast. There are value added forest product companies that are not in agreement with this.

The Premier of British Columbia is coming to town and I am sure many of us will meet with him tomorrow. I will be very interested to hear from Premier Campbell on two issues.

First, we are perhaps feeling a lot of pressure on our own sovereignty, provincial sovereignty in this case, in terms of pressure from outside the country on forest practices in British Columbia. All of us have denied from the beginning that there was any subsidy. The Minister of International Trade and myself have both said in the House very loudly that this is about protectionism not about subsidies. Yet British Columbia has been forced to adapt forest products in any event, and that is troubling looking into the future in terms of our sovereignty.

Also, I am worried about, and I will be interested in how we will work together with the government of British Columbia and now Alberta, how we will deal with this surge in production because of the mountain pine beetle infestation and how that will play into this agreement. We will be scrambling for international markets other than the United States to have some place to sell this wood that will be cut at a much higher rate, but we will be unable to sell it into the United States under this agreement. That should be of real concern to us.

[David Emerson, Conservative, Vancouver Kingsway, BC]

Mr. Speaker, the hon. member raised the surge issue. Members should know that in British Columbia, under the surge provision in the agreement, there is a billion board feet of flexibility in terms of permitted surge before the surge mechanism cuts in. The surge mechanism is at 110% of the base year shipments. The surge mechanism is also not fixed in time. It moves as U.S. consumption moves over time and that will allow the surge to grow as the market grows.

[Stephen Owen, Liberal, Vancouver Quadra, BC]

Mr. Speaker, that is an interesting further clarification of it and I look forward to speaking with the minister, as well as with officials from British Columbia, as to how we will manage that effectively. There is certainly a huge challenge for the whole western area of Canada and Yukon with this infestation.

I go back to my comment. While this is an immensely important sector of Canadian industry, it does, as the member for Edmonton—Leduc has said, only represent 3% of our total trade with the United States. If we are giving in to what is really simply an industrial pressure sector in the United States on this part, what is to stop them or not encourage them from taking similar action in other sectors of the economy where they see fair competition outperforming the American economy in those other sectors?

Yes, I am a lawyer and one of the things one learns in law before anything else is the importance of precedent. By backing away from the precedence we have had in terms of the litigation we have pursued in favour of the dangerous precedent of caving in and admitting that we cannot rely on the dispute resolution mechanism of NAFTA or on the promise of free and fair trade, we end up with neither.