Thank you, Mr. Chair.
Good morning to you and your fellow committee members, and thank you for the opportunity to speak with you and present the concerns of Canada's manufacturers of wood products.
The Canadian Wood Council is a national association representing Canadian manufacturers of wood products used in construction. Through our 11 member associations, we represent thousands of companies of all sizes and from all provinces.
Our members want to be on record that this is an extremely difficult time to succeed in manufacturing in the current climate. Forecasted profits, where they exist, are in steady decline, reducing return on investment rates to the 3% to 5% range, which is far too low for an industry as capital-intensive as ours. Costs are escalating due to factors beyond our control; jobs are being lost, and thousands more are in jeopardy.
I will pass on discussing the impact of the Canada-U.S. softwood lumber dispute on Canada's wood manufacturing sector as it seems to be outside the scope of this committee. Suffice it to say that resolution of this dispute, whether through negotiation or litigation, is not going to make the wood products sector suddenly healthy again. It will simply reduce cost uncertainties, i.e. lawyers and tariffs, as we get closer to the managed trade environment that existed in the past.
It must be said here that our industry has shouldered an inordinate share of the burden in defending the principles of free trade on behalf of all Canadian industries and the Government of Canada.
With respect to the four issues this committee is concerning itself with, namely, the high value of the Canadian dollar, high energy costs, globalization, and the availability of skilled labour, the impact of the Canadian dollar's rise cannot be overstated. Recent analysis by the Conference Board of Canada shows that our industry loses $2.3 billion for each 10% rise in the Canadian dollar. Given that the dollar has appreciated by almost 50% in the last five years, we're talking about annual lost revenues of over $11 billion.
I must point out, Mr. Chairman, that these figures already take into account the potential savings realized by buying productivity-improving equipment from the United States. I've heard the argument several times that the dollar's rise is not that big a deal because manufacturers can purchase equipment more cheaply from the United States. This is a tenuous argument in the best of situations, but it comes close to fallacy for our members, as a large percentage of our members' equipment is sourced in Europe, which has seen its currency rise in a fashion similar to ours, thus negating any buy-cheap advantage for equipment, while sales remain largely denominated in American currency.
Moving on to the high cost of energy, our members have done a tremendous job in squeezing efficiencies out of their operations, far outpacing the improvements across the broader manufacturing sector.
Industry Canada has reported that the productivity gains of the wood industry exceed those of most other Canadian industries. Wood producers have improved their energy efficiency by 17% since the year 2000, compared with a mere 3% for the entire manufacturing sector. Yet the profits do not follow. Clearly, this is not sustainable, and if required input costs continue to rise, as they have in the recent past, hundreds, even thousands, of firms and the communities they support will have to face some gut-wrenching decisions.
To make matters worse, by the middle of the next decade, there may be almost no forests left in British Columbia due to the pine beetle infestation. This infestation could spread to Alberta, and possibly the rest of Canada, if left unchecked.
Globalization, however you choose to define it, represents a vast array of opportunities and challenges. We can talk about the potentially vast opportunity presented by new markets in China, and it certainly may be tempting for governments to seek the next big market as a solution to our current problems, but the fact is there is much to be done to change the building construction culture in new markets, to accept wood where it has not historically been, while here at home a vast untapped market awaits, the non-residential market that Marta referred to earlier.
Public buildings and low-rise commercial projects in North America could consume $12 billion worth of wood annually without any changes whatsoever to existing building codes, yet there still exist procurement policies that actually favour imported steel--a product that injects tonnes of CO2 into the atmosphere--over home-grown Canadian wood that reduces atmospheric CO2 and reduces heating and cooling costs for the lifetime of a building.
The availability, or lack thereof, of skilled labour is an issue of growing concern for our members, as it is for employers across the country. In some of our plants, there will be a 50% to 60% turnover in the next five to seven years due to retirements, and in many areas, the replacements for those workers, Canada's youth, are dropping out of high school in near-record numbers.
There is a serious disconnect here that needs to be addressed. It must be said, however, that the government's plan to improve and hasten the acceptance of foreign credentials is a step in the right direction, and we understand that there are issues to be worked out as immigration is a federal concern, while the licensing of doctors and engineers, for example, is largely under provincial jurisdiction.
Having spent 10 years working as an engineer before joining the Canadian Wood Council, I've seen first-hand how frustrating it can be for all involved--employers, workers, and families--when new Canadians cannot practise the craft for which they were trained, mainly due to unnecessary regulation or overregulation in areas such as this.
What can the Canadian government do to help this industry, which accounts for 3% of Canada's GDP--10% in British Columbia--and employs over 300,000 Canadians? There are several things.
One, understand that ours is an industry fighting for its life, with challenges coming from all sides, and commit to helping a cornerstone of Canadian culture and the Canadian economy by following through on the previous government's pledge of support and also by working with industry to promote the use of Canadian wood in construction.
Two, understand that wood is the only building product that removes carbon from the atmosphere, and that concrete, steel, and plastic have all been proven to have much worse life-cycle impacts on our environment in energy consumption, and commit to supporting wood construction through programs such as DFAIT's program for export market development investment and NRCan's Canada wood export program.
Three, understand that ours is an industry that carries an excessive regulatory burden at all levels of government and commit to reducing these unnecessary and unhealthy barriers to success. In the United States, for example, the wood industry can write and implement a new wood construction standard at a minimal cost in a matter of days, whereas in Canada, the process consumes substantial amounts of both money and time, often achieving exactly the same result. We know that the government's smart regulations initiative is a step in the right direction, and we look forward to seeing it succeed. But more work is needed, especially where federal, provincial, and municipal regulations collide.
And four, understand that quite literally, tens of billions of dollars and hundreds of thousands of jobs are at risk. It is true that Canada is a nation of exporters, but it is equally true that we export more than oil.
In closing, let me say this. It is a testament to the men and women of our industry that they have been able to survive current market conditions and still outpace most other industries in terms of productivity gains. Wood construction can and should play a greater role in tackling the issue of climate change. Remember that every cubic metre of wood that replaces concrete in construction removes one tonne of carbon from the atmosphere.
CWC would welcome an opportunity to explain further how government procurement policies could be improved to favour the best environmental building product there is: Canadian wood.
Finally, we have not even covered how critically important residential construction, the backbone of the North American economy, is to our industry. With housing starts beginning a downward trend, it is fair to say that the pressures on our industry will only worsen.
Mr. Chairman, thank you for the opportunity to speak with you today. I would like to offer my assistance anywhere I can as we work together to tackle these tremendous challenges. Thank you.