Thank you very much, Mr. Chairman.
I would like to thank the committee for the opportunity to address you this afternoon.
As Assistant Deputy Minister for Trade Policy and Negotiations at Foreign Affairs and International Trade Canada, I engage on issues related to the forest sector through the implementation of the Canada-U.S. Softwood Lumber Agreement, and through my responsibilities for the management of the North American Free Trade Agreement. With me today is an expert on the softwood Lumber Agreement, Mr. Colin Bird. He is the director responsible for managing the Agreement.
The Canada-U.S. Softwood Lumber Agreement has provided stability to Canadian softwood lumber exporters at a time when the entire forest sector is facing unprecedented economic challenges and structural adjustments. It returned approximately $5 billion to Canadian forest firms, and brought an end to the fourth round of trade litigation in this long-standing dispute. Canada worked closely with provinces and interested stakeholders throughout the dispute to achieve a lasting resolution. This close collaboration continues in the context of implementing the agreement.
Canada agreed to put in place export charges and, for some provinces, quotas for softwood lumber exports. More specifically, provinces subject to the Softwood Lumber Agreement export measures can choose between two alternative regimes. Option “A” consists of an export charge that ranges from 0% to 15%, depending on the price of softwood lumber. Option “B” includes both an export charge of between 0% and 5% as well as a quota, both of which vary depending on the price of softwood lumber. Funds collected through these export charges remain in Canada and are returned to the provinces.
Our entire industry and our government would prefer free trade in lumber. But these export measures provide a far better trade environment than the alternative of continued, and unpredictable, U.S. trade actions—by this I mean countervailing and anti-dumping investigation. Under the Softwood Lumber Agreement, the United States is prohibited from taking such trade actions.
Having agreed to export measures, Canada pledged not to provide grants or other benefits that would undermine or offset those export measures. Certain exceptions to this obligation are provided by the Agreement, for example for pre-existing measures and measures related to forest management or environmental protection. How to interpret this obligation under the Softwood Lumber Agreement remains an area where we have differences with the United States.
There is currently an arbitration under way in which the United States has challenged certain programs of Ontario and Quebec, including loan and loan guarantee programs, as circumventions of our export measures. Canada has worked closely with Quebec and Ontario to defend these programs. Among the issues before the tribunal is whether to consider benefits provided to pulp and paper operations that are associated with softwood lumber producers as potentially offsetting the export measures. Canada has argued forcefully that they do not and that they have no impact on exports of softwood lumber products to the United States.
We fully expect the tribunal to agree with us. We anticipate the tribunal's final ruling will clarify this matter, at least with respect to the types of programs at issue in this case. The tribunal's ruling is expected late this year.
The softwood lumber agreement has provided stable and predictable access to the U.S. market for Canadian softwood lumber producers. This has been especially important in the recent economic climate. The agreement has enjoyed the support of Canadian industry and provincial governments. Canada works diligently to ensure its terms are respected.
Foreign Affairs and International Trade Canada works closely with other federal departments and agencies as well as with provincial governments to ensure that initiatives in the forest sector respect Canada's obligations under the SLA. We have worked with Natural Resources Canada on significant initiatives, including the $1-billion pulp and paper green transformation program, the $100-million investments in forest industry transformation program that was launched just last month, and the $170-million program of other initiatives in support of market diversification and innovation initiatives for the forest sector, about half of which will be invested in Quebec.
Together with the ongoing engagement of EDC, which my colleague has outlined for you, these initiatives seek to facilitate the development of a sustainable and competitive forest sector in a manner that respects Canada's obligations under the softwood lumber agreement and other trade agreements.
I trust that this information is useful to the committee, and I look forward to answering your questions.