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

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Chevrette.

I would ask members to focus on the discussion here. There is a little bit of chatter going on, which is a little bit distracting. These gentlemen have come and they have devoted their time, and it is important to listen to what they say.

Next is Mr. Warkentin.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you very much, each one of you, for coming this morning. We appreciate your testimony.

I come from a riding that has a significant forestry industry--or had a significant forestry industry. Unfortunately, over the last number of months, we've seen a number of mills mothballed, with the hope of someday re-opening. We are all looking for that light at the end of the tunnel. We hope the Americans start building. We hope Canadians continue to build, and in some cases start building again as well, so that our industry will start up again.

Obviously, we have the things that make for a long-term, profitable, solid business. We have access to trees. We have access to all the things that make us leaders in this industry. We also have mills that are high-tech and certainly ready to go. We'll give any mill in the rest of the world a run for its money when it comes to efficiency. We have mills that have pretty much taken advantage of every opportunity in terms of utilizing every bit of waste. They are super-efficient. Some of our surviving mills have been credited as being the most efficient in our country and are actually the most efficient in the world. That is the only reason for their survival.

The question that keeps being brought up, even in my community, where we have such a dependency on the forestry sector, is this. Sure, the government can come in, even if it were just able to hand money out, but what is the purpose, at this point, of creating wood that drives down the cost of the product? Certainly we could open the mills that have closed down if we threw a bunch of money at them. But what's going to happen, at least in my community, is that the mills that are surviving are going to be shut down. How do we differentiate?

Mr. Lazar, you know the industry across the country. In terms of our capacity right now, have we reached a point at which we're able to move forward with current capacity, or do we have to limit capacity additionally? I'm just talking purely from the perspective of product on the market. Are we still in a situation where we're flooding the market?

[Avrim Lazar]

If you look at prices, it's pretty clear that there's no scarcity of forest products on the market. The price of lumber now is less than the price of a log to the mill gate. Pulp and paper prices are at historic lows.

Monsieur Bouchard, I'm going to answer his question because it's partly an answer to yours. Government hasn't torpedoed the forest industry; the marketplace has. The government didn't drive lumber prices or pulp and paper prices down; the marketplace has. So our solutions have to reflect what the real problem is, which is that nobody wants to buy our stuff because the world is in recession.

You have to ask yourself, what is the constructive role that government can play? It's fairly simple.

One, help us get through this period through access to credit, EI work sharing, and help for the communities that have to suffer through it. To be fair, what the government announced in the budget has all of those things, and it's actually seeing it happen that we're now looking forward to.

Two, help us prepare to keep the jobs in Canada when markets return. That involves, of course, new products, new markets, transformation to green energy, encouraging the use of responsible wood in home renovation and government projects. All of those things are there, and we can certainly use more of them. Certainly on the tax side the last budget was weak in terms of improving the tax conditions for all of Canadian manufacturing. We'd like to see more there on the transformation to a green industry.

Let's not fool ourselves that government is the answer. Markets are the answer and they will come back with or without government. Government cannot be delinquent and say it has nothing to do with us. The things we've been asking for are absolutely necessary.

I want to just say one word on the softwood agreement, because we're dancing around it a bit. At today's prices, everything we sell, we're selling below the cost of production. That's true of us, the Russians, the Europeans, and the Americans. The price of our products is less than the cost of production. That's why we're in deep trouble. That is the legal definition of “dumping”. The Americans don't have to worry about dumping because they're not selling to us; we're selling to them. If we lost the Softwood Lumber Agreement, we would be subject to dumping charges, if they were fair, of anything from 28% to 32%. We have never experienced a fair judgment from the U.S. commerce department. It would kill us. So let's not be cute about the Softwood Lumber Agreement. We need it to survive. We don't need it as an excuse for government inaction; we don't need it as something to hide behind when people don't want to do things. We do need to be cautious and strategic in only doing things that will not allow the agreement to be thrown out.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Warkentin, you're out of time.

Very quickly, sir, because he's over his time.

[Guy Chevrette]

Briefly, I will answer that we won all the judgments on Lumber IV. We left $1 billion on the table. Remember the signing of the agreement. After winning all the judgments, we're stuck with a $68 million penalty.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Roy, I'll allow you maybe at a later time to just jump into the fray, but we have to be cognizant of the time, and we're well beyond it.

Mr. Thibeault is next.

[Glenn Thibeault, NDP, Sudbury, ON]

That's great. I'll take it. I'll get right to questions.

I'll put it to you, Mr. Gagné.

In your opening speech you talked a lot about the current job losses and how that's affecting the industry. Then you talked a bit about what I call successorship, how we're not seeing any of our youth coming into this market. What can we all do--and when I say “we”, I mean the industry and government--to help save this industry and save some of these jobs?

[Renaud Gagné]

The first thing to do, in the short term, is to find the necessary financing, loan guarantees that will enable us to maintain what's in place. Obviously, in some sectors, paper, for example, depending on the markets, were not working to keep all the plants open. We're working to retain our best elements. We've cut costs as far as possible in all plants. Obviously, with the falling market, we can't ask to keep all our plants open. We'll have to examine the companies that are currently in place. In our communities and among our workers, there are bankruptcy situations, the impact on people who are retiring is great, and people will be losing their jobs. These people won't be around in future to start the secondary and tertiary processing plants back up. If there is no primary processing, we definitely won't be creating any jobs in the future.

Few people are signing up for training at Laval University or elsewhere because there's too much uncertainty about the future. I remind you that there are 9,000 retirees in Quebec, and that's just at AbitibiBowater. In Lac-Saint-Jean, according to the information we have and the number of retirees, if work had to stop tomorrow morning, at the end of March, no operations would be maintained at AbitibiBowater, unlike Smurfit-Stone, which has managed to borrow $750 million to maintain four out of five plants in operation. That would be catastrophic! We're talking about 7,600 direct jobs. We're not talking about indirect jobs, subcontractors and so on. That will be hell! There will be people in the street. It's just starting and I'm telling you that there's going to be trouble in Lac-Saint-Jean next week because people will be very unhappy about what's going on. They really want the federal government's support and assistance in the form of loan guarantees.

[Glenn Thibeault, NDP, Sudbury, ON]

I'll jump in a little bit on that. Two weeks ago I had the opportunity of meeting with northern Ontario mayors. The mayor from Thunder Bay was able to bring a scarf made out of wood products, which I thought was interesting. It was made right in northwestern Ontario. Uniquely, today I happened to bring a pen made out of wood, but it's made in China. What can we do to encourage more research and development in Canada? I'll ask you, Mr. Lazar.

[Avrim Lazar]

You're talking about all sorts of value-added innovative products, and certainly the money the government has given the research institute for transforming the industry will help with that. But Monsieur Chevrette is 100% right in saying the only way we're going to have value-added products or innovative products is to have a sound basic industry.

The forest manufacturing industry is like an ecosystem. You need the grass before you can get the impalas, before you can get the lions. You need the plankton before you get the sea horses. The only way we're going to have value-added, innovative products or differentiated products is for the basic commodity to be healthy.

Frankly, that's where our competitive advantage is. The Chinese produce wooden pens at wages that are one-tenth of ours. Wages in the forest industry are well above the average Canadian wage. The value for Canadians, the value for Canada's way of life is actually in basic extraction and first transformation, because that's where scarcity is. Labour is not scarce and engineers are not scarce, but natural resources are going to be scarce in the world, and we are going to get more economic and social value from extracting and transforming natural resources than we will by trying to compete with the Chinese on labour-intensive products.

We've got it backwards. We think it's high value going up the manufacturing chain, but it's low value. It's where people work for dirt-cheap wages. High value is closer to the natural resources.

[The Chair, Conservative, Dave Van Kesteren]

You have 15 seconds, unless you want to give Mr. Roy--

[Glenn Thibeault, NDP, Sudbury, ON]

I'll give Mr. Roy an opportunity to respond on that last point.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Thibeault.

Go ahead, Monsieur Roy.

[André Roy]

Thank you. I will speak. After all I've heard this morning, I've come to the conclusion that we have to make a gift to an industrial sector that has a real future. Everyone agrees that the forest sector, that the planet, that the world will need more and more forest products. The great paradox is that our industry currently has no present. We have to convince committee members that we have to get through a crisis and that the future looks extremely good. In 2050, there will be approximately 9.5 billion people on the planet. A number of us won't be around to count the people living here, but that's what all the forecasts indicate. Global wealth and forest product needs will increase. Forest products are environmentally friendly, incidentally. Two years ago, a lot of people doubted that. Today wood is obviously an environmentally friendly material. We'll have to provide some proof by certifying our forest practices, but we're doing that. Committee members must be convinced that there is a future for this sector. In my view, once they're convinced, they will be in a better positions to make decisions.

Thank you.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Thibault.

Mr. Gourde.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you, Mr. Chairman.

I want to thank my colleague for passing his turn on to me because this sector is a fundamental concern for me.

Mr. Gagné, you talked about manpower training. Our action plan provides for manpower training for job market entrants. It's important that some come from the next generation. This also includes those who lose their jobs and older workers, those 55 years of age and older—who need more training to enable these employees, who will be on employment insurance, to acquire new skills enabling them to restart the forest industry. The market will one day pick up; it's a matter of time.

[Renaud Gagné]

The importance of training is clear. It's a troubleshooting mechanism. It isn't easy for people with 25, 28 or 30 years of service to sit down on a school bench in order to go back on the job market. People would like to take short-term training, of six to 18 weeks, for example. Beyond that, however, it's pointless. In fact, people are still waiting. In the case of plants closed temporarily or for an indeterminate period of time—not knowing whether it's for one, two or three months—people wait until the last minute before they lose their employment insurance benefits and then they go enrol.

The greatest concern is for youth. The children of these parents won't go into the pulp and paper industry, forestry or other areas. When we are ready for the recovery, we won't have any more workers. We really have to save the first stage, so that there are some people left. As Mr. Roy said—and I'm convinced of it because we've been working on this for two years—the forest industry has a long future ahead of it. We'll have to proceed differently and cultivate our forest. If we can't preserve what we have, we'll lag behind to a terrible degree, and I'm not sure we'll regain our competitiveness. Others will move ahead of us.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

We all think manpower training is important.

One of my personal friends has worked in forestry for 30 years. He's a contractor, has a skidder, cuts wood and transports it to the plant. He tells me that accelerated CCA is an advantage for him. We know that there's heavy machinery in the forest and that it's expensive.

Do you think this deduction, which is possible at the federal level, is really advantageous for the industry?

[Guy Chevrette]

Yes, and what is more, I think it will soon be in effect at the provincial level. Between you and me, in many cases, the industry guaranteed loans for our skidders. It's as clear as that.

Going back to what Renaud said, we claim that 2,000 to 3,000 young graduates won't be around for the recovery because they won't want to wait eight to 10 months to find another job and will leave the regions. You can offer any kind of course; the young people won't be there anymore. If you offered the ones who are 53, 54 or 55 the opportunity to take early retirement, they would stay in the area. However, as long as these people have three or four more years and there are no programs to enable them to get their jobs back, they won't stay in the area. They'll go to work in Montreal or other urban centres. They'll simply leave the Quebec regions. That's what's dramatic. You can have 10,000 programs, but if you don't target the right issue—which we think is to help those who are near retirement make room for the younger labour force—you won't be doing them any favours.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you for your answer.

You represent the Fédération des producteurs de bois du Québec. Are they owners?

[Daniel Roy]

Yes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

That's good.

You said you had made some 15 submissions to the federal government. Are you going see the cabinets, or members of Parliament? Who are you going to see?

[Daniel Roy]

We've had a lot of discussions and exchanges with representatives of the federal Department of Finance. We've also attended the meetings of various parliamentary committees to explain the validity of potential tax assistance measures for private forest owners.

From all of today's discussion, I understand that an industry definitely has to get through this crisis, an industry that will be in good position in future to meet the demand for forest products, which will be great.

I think that committee members must not lose sight of the fact that it will also take timber, because that's what forest products are made of and, ideally, superior quality timber to what we currently have near the plants. It's at that point that the industry will have low-cost fibre to be increasingly competitive. That way, we have the conviction... This isn't a matter of dreaming in Technicolor because promising achievements have been made in forest development in the past 30 years with government support, and measures put in place.

Woodlots currently produce four to five times more timber than the average for all forests. That's the result of workers who have made a commitment to the development of their forests using development plans, technical support and so on. But there are still a lot of opportunities for getting more owners in Canada involved in this approach.

In conclusion, we must not be afraid to intervene through the tax system to assist woodlot owners. In the United States, the U.S. federal government makes significant use of tax measures to assist woodlot owners in developing their forests. Here I have a three-page list of measures in effect in the United States; I could cite them to you.

[The Chair, Conservative, Dave Van Kesteren]

Sorry.

We now go to Mr. Garneau.

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

Thank you very much.

I would like to ask Mr. Chevrette a question, or perhaps Mr. Vincent. It concerns international markets. I'd also like to have Mr. Lazar's opinion.

For my information, have we fully exploited the other options in the international market. I assume our principal market is the United States. Are there any places where the Department of International Trade, or the government, could help open new markets?