Industry Committee on Oct. 31st, 2006

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

The agreement with the Americans provides for two possible options: option A and option B. As I understand it, option A is to impose a 15% tax. That is what British Columbia would prefer. Option B, Quebec's choice, is a 5% tax and quotas.

If we have quotas, that means there will be a distribution based on the historical value of export rights to the United States. However, some producers who have not necessarily exported over the past few years would still like to have a share of the market because they have a product to sell.

What do you suggest we do to ensure that these people get a reasonable share?

[Russ Cameron]

Yes, the quota is certainly a problem. The United States has just been on one of the longest big consumption things that we've ever seen. The consumption has been a record for the last four or five years. Canada has been supplying about 35% of that market. Under this agreement the option B thing for quota allows Canada 34% of that instead of 35% if the price is over $355 U.S. on this composite and then it scales down from there. Right now we're way in the basement. The lowest price that has any benefit at all is $315, and we're below $300. In the share that is allocated to Canada the price we're at right now is 30%. Therefore one-seventh of the available shipments to Quebec and any other region is gone. Quota by definition implies that you're not supposed to have enough.

In 1996, when we had the last quota system, as I was saying earlier, you were able to ship more. You could pay $50 and ship some more, you could pay $100 and ship some more, plus the amount of quota you had for which there was no fee at all. Under this one here you would expect that Quebec companies and any region that elects option B is going to be allocated a share based upon their shipments in the last year or two, and that will be their history. That by definition is going to be lower than what they have been shipping by say 30 over 35 type of thing. There is no provision whatsoever for them to ship a single board foot more than the quota they've got unless they go out and purchase quota from somebody else. They can't pay more money or whatever.

It seems to me, and I'm not from Quebec or anything, that the only hope Quebec has is that I hear that you are reducing your overall annual allowable cut by 20% or something like that. I can only assume this is why Quebec would have selected the quota system, that they're thinking, yes, we're not going to be putting as much wood out but it's okay because we're not going to have as much wood. I guess that's the logic behind it.

The other thing is that you're still going to have to pay a 5% tax, whereas under the old quota regime that we had you paid no tax.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

My question was specifically about people who do not have that history. What do you think should be done?

Should the Government of Quebec or the federal government reserve a share for them? They want to sell and they are in a position to participate in the market.

[Russ Cameron]

The provincial governments and the federal government have an option to withhold some quota. In 1996 the federal government withheld I believe 600 million feet of the 14.7 billion that was allocated to the country, and they asked for expressions of interest from new entrants who needed quota. They received requests for 8 billion feet, which they were unable to fill with the 600 million. I would suggest, of course, that if there is anything held back by the federal-provincial governments it just means that other people are going to get less. Will they be able to withhold enough to allow for any new entrants? I don't know; I guess that remains to be seen. That has not been decided, as far as I know.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

Thank you very much for appearing at committee.

In my notes in front of me I have a statement that Canada's furniture industry had experienced tremendous growth from 1993 to 2002 as a result of rapidly growing exports to the United States. Do you know how much that growth was?

[Russ Cameron]

I'm sorry, I know nothing about the furniture industry. I think that was perhaps another witness who was going to appear here.

[Colin Carrie, Conservative, Oshawa, ON]

All right.

[Russ Cameron]

The only thing I know about it is that the U.S. furniture manufacturers seem to be having quite a time with Chinese imports and they've piled a bunch of duties on them as well. How the Canadian guys are faring in Canada against the Chinese competition or in the United States I really don't know.

[Colin Carrie, Conservative, Oshawa, ON]

Okay.

You discussed the agreement. I'm curious to know, do you see this agreement as bringing you stability and access to the U.S. market?

[Russ Cameron]

No.

[Colin Carrie, Conservative, Oshawa, ON]

So you don't see any...?

[Russ Cameron]

It's not going to bring stability, no. I read to you the opinion of the Canadian Lumber Trade Alliance--that's all the big guys, the B.C. Lumber Trade Council and the whole bunch of them--when they did their submission to the U.S. Court of Appeals. They see that, yes, we're going to be back into this again. I don't know why this is sought to bring stability. As I said, it simply institutionalizes an uncompetitive position for Canadian industry.

I really don't know very many people, big or small, who were in favour of this deal. Some guys went along with it because they were going broke and they had to have the money. Some were intimidated, frankly, by all the phone calls they got from the Canadian government. Some of them got up to six individual phone calls urging them to sign on to this deal.

[Colin Carrie, Conservative, Oshawa, ON]

My understanding is that the majority of the companies did support it. Why would they support it if it's such a bad deal?

[Russ Cameron]

I don't know that they did support it. My understanding is that the companies turned it down initially, on April 25. They didn't want to do this deal, at least in B.C. They were subsequently...talked to, maybe?

I wasn't there, I don't know. But we were certainly talked to, I know that. We just said, no, this doesn't work for us.

[Colin Carrie, Conservative, Oshawa, ON]

In terms of your industry, I think over the last 10 or 15 years the Canadian dollar has been at 65% to 75%. How much did you rely on that low Canadian dollar for your productivity?

[Russ Cameron]

With regard to currency fluctuations, when we have a low Canadian dollar it's great for export. In the mid-eighties we had a slide down as far as 64%, I think. We're back up again. Or was it 20 years ago our dollar was higher...?

It moves around. You just adapt, eh.

Do we like a Canadian dollar that's low? I think anybody who exports does.

[Colin Carrie, Conservative, Oshawa, ON]

Has your industry made significant investment in new equipment in the last ten years? Ultimately, of course, the dollar goes up and down. Do you have any numbers on any investment your industry has made over the last ten years?

[Russ Cameron]

I think you could say that the large companies in B.C. have made a fair bit of investment, and they continue to do so. There was quite a round of investment to try to get around the anti-dumping duty. I think the companies in the interior of British Columbia found that the more they produced, the less the component of their fixed cost was, which helped them in the dumping calculation as far as the zeroing goes.

On the B.C. coast there's been almost no investment. It has been more regional in British Columbia.

[Colin Carrie, Conservative, Oshawa, ON]

With regard to stimulating more investment or purchasing newer equipment, do you have any suggestions for the government to follow?

[Russ Cameron]

Yes, I do.

I suggest that we finish this softwood lumber case, get all our money back, and have free trade. We take the legal precedents we have, we take the fact that the coalition is really getting beaten up--once again they lose and get no return on investment--and we take the fact that the United States has lost their ability to use zeroing in calculating their anti-dumping. All you do is change that on a spreadsheet and there is no dumping.

We should also take the fact that the British Columbia government has made a bunch of forest policy changes. Even prior to their making the changes, the U.S. Department of Commerce had to admit that B.C.'s subsidy was negative $430 million.

So just finish the case. We've already got it won. At some point you have to say “Look, you're going to lose every time, so give up.”

As I said in here, I think the U.S. administration is losing their appetite for it, and I don't think the coalition has the membership to do it again--unless we provide it and the funding.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Mr. Martin.

[Tony Martin, NDP, Sault Ste. Marie, ON]

I represent a constituency in northern Ontario. We recently spoke with some of the leadership in northwestern Ontario. They are being decimated and blame some of it on the agreement. They often refer to it as the perfect storm—high energy prices, duties, and the dollar. In my own community, just this week a paper company went into bankruptcy protection. Some of that, a good percentage, is the high cost of energy and the dollar.

Have you done any analysis on the dollar? Do you have any thoughts on what we as a government could do to make the situation better?