Subcommittee on Canadian Industrial Sectors Committee on March 12th, 2009

[Guy Chevrette]

Mr. Vincent can supplement my answer.

I would say that the federal government is currently giving QWEB an enormous amount of help in opening other markets. We are currently operating in China and trying to add a wooden storey to their small concrete houses that would capture humidity and could play a promising role in promoting health.

In Europe, we've made a few breakthroughs, but it's not easy because Europe is self-sufficient, or virtually self-sufficient. It's the Russian market that should be monitored to see what is going on. We know that there was a channel through Finland for distributing products around the globe, and perhaps we should talk to environmental groups. Instead of fighting here where forests are growing, like in Canada, North America and Europe, these groups should mainly attack areas that are becoming deforested, where they're going to be looking for an enormous amount of wood. There are countries that are in a state of deforestation, and nothing is being done. It would be useful if we could ask environmentalists to get involved in the short term.

[Michel Vincent, Director, Economics Markets and International Trade Branch, Quebec Forest Industry Council]

When the issue of competitiveness arises, we very soon start talking about competitive advantage. One of our competitive advantages over our international competitors is that we are located near the largest softwood lumber market in the world.

As the members from British Columbia said, at some point, we have to stop putting all our eggs in one basket and look elsewhere. There have indeed been a lot of one-time projects, it must be admitted. However, markets develop that way in the Middle East, England and Europe. Obviously, if we look at the Asian market from Quebec, there's a whole country that has to be crossed. When wood leaves Quebec, it's already more expensive than wood from British Columbia; so when you send it across the country it becomes even more expensive. So it's not easy, in financial terms, to send it to Asia.

Our main advantage is clearly our proximity to the U.S. market, and that advantage is weakened by trade restrictions. That's why people are increasingly starting to turn to international markets, but in a very small proportion to the total volume of wood we export.

[Avrim Lazar]

This is not an either/or thing. I mean the American market is wonderful. It will become wonderful again: their population is growing; they're going to need houses. We've been monitoring the purchases of tents in the U.S., and they don't seem to be moving into tents! They're going to build houses again soon.

So the American market is going to be good for us, and to think that's our only market would be foolish. Of course, we have to go into Asia. To be fair, Canada's forest industry is among the top Canadian exporters into India, Korea, China. For all our major markets, we're already in there. And we can do more, and government can really help us in these markets, because they're used to private-public partnership coming to market there. That's how business is done in many of these markets. So, yes, there is a big role to play.

Global demand for forest products is expected to increase by about 2% a year. That's huge. Demand for newsprint in North America is going to go down. Demand for paper in North America will probably go down, but we'll be able to sell wood. Our pulp will be internationally competitive. It can't be replicated, and it has great qualities. It's very hard for countries without much forestry to produce it. So we're going to be selling pulp globally, and we'll be selling newsprint. India's market for newsprint is going way up, because they love their newspapers there.

So there are markets, and government can help.

[The Chair, Conservative, Dave Van Kesteren]

Monsieur Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

No, that's fine. I'll give my time to somebody else.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

Thank you to the guests for coming. It's interesting hearing different views. One of the things we're going to be doing is studying a broad range of industries as we go through this study. I think one of the things that we have in common—although we may have different views on how to solve the problems—is that we want to help Canadians help their families, to make sure people are able to put food on their tables and afford their mortgages and everything else.

I want to come to the global context a little bit, if I could. There was a little bit of talk about it. I think sometimes we forget a bit of the global context. There have been several, or an increasing number of, third-party or external commentators who have been noting the strength of Canada relative to the rest of the world. We have the Daily Telegraph in London saying:

If the rest of the world had comported itself with similar modesty and prudence, we might not be in this mess.

We have The Economist saying:

...in a sinking world, Canada is something of a cork. It's well regulated banks are solid.... The big worry is the fear that an American recession will drag Canada down with it.

I think we're seeing the effects of that.

And The Economist continued:

Mr. Harper says, rightly enough, that his government has taken prudent measures to help Canada weather a storm it cannot duck.

Even President Obama has said:

And, you know, one of the things that I think has been striking about Canada is that in the midst of this enormous economic crisis, I think Canada has shown itself to be a pretty good manager of the financial system and the economy in ways that we haven't always been here in the United States.

Very recently, The Wall Street Journal, in talking specifically about housing, has said:

Canada is connected at the hip to the world's largest market, and collateral damage coming from the housing and financial meltdown in the U.S. can't be ducked. Tax cuts in 2007 softened the blow and kept Canada out of recession.

So there's lots of commentary. In fact, we had the IMF talking the other day about the relative strength of Canada. We've had both the IMF and the OECD talking about how Canada will come out sooner and stronger than almost any other country, because of the steps we've taken.

Obviously, we're specifically focused on the forestry sector today, but I think it's important for us to keep our eye on the big picture, because the measure of the real success of all the industries we're going to study is going to be if we can broadly get demand back up. If we can get demand back up in the U.S., if the Americans can do it through their $1.75 trillion deficit, and if we can do it through our much more modest stimulus package here, I think that's the long-term key to success in all of the industries that we're going to be discussing.

I won't really ask for a response on that. I think I see some nods at the table. I want to get to some specific questions, if I could.

First off, I just have a quick question for Mr. Lazar about the regional breakdown of the sector. Can you maybe give us a little bit of a picture of what percentage of the industry is in what parts of the country?

[Avrim Lazar]

It's probably somewhere in our paper, in which we did table a set of facts, which is being translated. But the industry is pretty evenly balanced between British Columbia and Quebec, where the majority is. There's a lot in the Atlantic region. Even though it's not a lot in absolute terms, it is a very large contributor to the Atlantic economy. And there's industry in Ontario and Alberta, and less in Saskatchewan.

But it's pretty well spread coast to coast. It's a large part of employment all over the country, and of course it is hugely important to rural communities. There are 300 rural communities across the country whose economic lifeblood is the forest industry.

If you count direct and indirect jobs, there are somewhere between 800,000 and 900,000 across the country. The Canadian Forest Service numbers and the Statistics Canada numbers are way off. I think with this turbulence people are having trouble catching up.

But it's not a B.C. industry or a Quebec industry; it's a Canadian industry.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I know that my colleagues here, Jacques Gourde and Daniel Petit, have significantly rearranged their schedules to make it out here today. And we have Dick Harris from B.C. and of course Chris Warkentin from northwestern Alberta.

So I think we can see what you're saying a little bit.

In terms of the rail issue, you touched on this issue as a problem, but how should the government respond? What ideas do you have for how the government should respond to that?

[The Chair, Conservative, Dave Van Kesteren]

You have 30 seconds.

[Avrim Lazar]

We actually have a workshop about this going on right now, as I speak. We floated a few ideas in the past, and the government had Bill C-8 in the past, which helped, but with the new economic conditions it's not enough.

We plan to come to the transportation committee, if they invite us, and certainly to any others. We're certainly going to be before the forest caucus and Minister Baird with some very strong suggestions.

This has become urgent. The country can no longer afford to subsidize the shareholders of CN at the expense of rural communities.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Lazar.

Monsieur Bouchard.

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

Thank you, Mr. Chairman.

My question is for Messrs. Gagné, Chevrette and Roy.

On Tuesday, my party and I introduced a motion in the House of Commons, which was supported by 152 members to 140. In that motion, we proposed to assist the forest industry by means of tax credits, loan guarantees and a policy to promote the use of wood when the government builds or renovates the buildings it owns.

I would like to hear what you have to say on that motion, briefly since you will all be speaking during the time allotted to me. Do you consider that motion realistic and does it meet the needs of the forest sector?

We'll start with Mr. Gagné.

[Renaud Gagné]

Absolutely. With very few exceptions, it's what we've been seeking for two years. In Quebec, we're working to develop a policy on the use of wood in the construction of public buildings, together with the municipalities, universities and the department of natural resources. The purpose of that policy is to ensure that, when a municipality plans to build or renovate a building, it automatically solicits bids that favour the use of wood. This involves training architects and amendments to the Building Code.

The motion is absolutely consistent with what we want.

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

Thank you.

Mr. Chevrette.

[Guy Chevrette]

Your resolution restates our demands very clearly. I spoke at length with Stockwell Day barely two weeks ago. In view of the details we've given you this morning, that vote in Parliament should be unanimous.

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

Mr. Roy.

[André Roy]

I find these measures entirely appropriate for the purpose of guaranteeing a present for an industry that has an enormous future.

First, we'll have to set the stage and promote the environmentally friendly aspect of wood. We must reassure the entire world that cutting down a tree is an act that can be good for the environment. Back home, I'm used to saying that it's not the trees we have to save, but the forests. As long as we have more forests than we did the day before, harvesting and cutting trees are not a problem.

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

Does the forest industry have a future in Quebec and Canada?

[André Roy]

Few industrial sectors can imagine as flourishing a future as the forest sector. It's curious, but I think that, 40 years from now, people will be fighting on earth over land use. We'll have to feed ourselves, and 9.5 billion human beings with more money in their pockets will eat. We'll be fighting to determine whether we should use the land for agriculture, for forests or for other purposes. The construction of highways, parking lots and mega shopping centres will no longer be fashionable. Priorities will be back in the right place. People will have to be fed and housed, and wood will be in the forefront. That's undeniable from an environmental perspective.

We have to convince the entire world. Consequently, the immediate decisions will be easy to make.

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

Mr. Chevrette, do you have anything to add or would you like to restate what you're seeking?

[Guy Chevrette]

I would like to repeat that we have to stop fearing the lumber agreement and ask ourselves if we want a forest industry. If that is the case, let's take the steps to save it. For your information, in Quebec, which is in the midst of a major crisis, there are 700 projects under review by research centres in Quebec and Canada, the CRIQ, PFInnovations, FERIC and Paprican. If we want to benefit from the research that's currently being done, we have to get through the crisis.

AbitibiBowater, Domtar and Tembec all have projects under consideration. Give them the chance to survive, because the basket of products is very promising. At the same time, that also responds somewhat to one aspect of Mr. Garneau's question.

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

Mr. Gagné, would you like to add a few words?

[Renaud Gagné]

We believe so much in the forest sector that the FTQ, through its Solidarity Fund, has just acquired land from Abitibi for $70 million. If we didn't believe in it, we wouldn't have put money into it.

[The Chair, Conservative, Dave Van Kesteren]

Merci beaucoup.

I thank you all for coming, and for your testimony. I know this was on short notice and that all of you took extraordinary measures to come here. I think as a committee we are all that much better informed about what's going on in the forestry industry. I think at this point we're at least able to construct something from this testimony.

I would like to just tell members, too, that on the Tuesday after the break we will have the Industry officials appearing, and at that point if we maybe take about half an hour to talk about which direction we want to take, would that be acceptable to all members?