International Trade Committee on June 19th, 2006

[The Chair, Conservative, Leon Benoit]

Thank you.

Finally, we have Mr. Ritchie.

[Gordon Ritchie]

Thank you, Mr. Chairman.

Elliot is a great fan of litigation. Indeed, I've observed that most of the lawyers on this file are, as are their children, and their children's children.

[Some hon. members]

Oh, oh!

[Gordon Ritchie]

I have to admit almost personal culpability. When I not only drafted the extraordinary challenge procedure but convinced a reluctant Prime Minister that it was necessary to avoid frivolous constitutional challenges, I never expected, even in my worst nightmares, that the Americans would, first of all, use it every time as a routine appeal in the hope that eventually they'd win a lottery by having two crazy American judges in the process; nor, since that hasn't happened yet, that when they lost those cases, they would then refuse to abide by them, despite the fact that under U.S. law those are final and binding decisions.

Yet I would remind you that when you are putting it against Elliot's conjuring about this wonderful, glowing future--winning the next ECC--that we have already won the extraordinary challenge. We won it last year on the injury case, and that's the end of it. Legally, we won.

Eventually, we had to go before the United States Court of International Trade to try to get them to force the administration to obey their own laws. I guarantee that if, as I hope, a decision were to have gone in our favour, it would have been appealed and appealed. Further, if we were to have won all those appeals, and if the Americans finally decided they would actually obey their own highest court, then the following day the U.S. coalition would introduce another lumber case, this time with renewed determination and very possibly with further congressional action to make their own law even less favourable.

So consider the source on that sort of an observation.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Now we go to the second round and to the official opposition. It is Mr. Temelkovski, for five minutes, please.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Thank you very much, Mr. Chair.

I'd like to ask Mr. Rutenberg a question. We're negotiating with the Americans. All the appeals have been successful for Canadians and unsuccessful for Americans, yet at the end there's no agreement, or there's an agreement that is substandard or one-sided. Do you think that the American negotiators in the future will use this as a precedent for other agreements or for dealing with issues other than softwood lumber?

[Barry Rutenberg]

I'm afraid that it could be true.

We had people comment today that softwood lumber has been treated a little differently. Indeed, the cement agreement with Mexico that concluded a month or two beforehand did have exit ramps and a conclusion at the end of three years.

I think that within the lumber framework, which I certainly believe is a major trade disagreement between the U.S. and Canada, this would have a precedent. I don't know that I could say it would apply to milk or other things. I don't know enough to answer that question.

I think this could come back to haunt you. “Haunt” is the word I was thinking of, and I haven't come up with a better word. I think it would stay there, and it would be a ghost to you.

If you give it up now, having gone as far as you have, you'd get to start over. A lot of tuition has been paid and a lot of legal fees have been paid. I'm not trying to send every attorney's grandchild to college tuition free. If I were sitting on your side, I wouldn't want to start over.

As a consumer, let me make a point. You talked about $5 billion. From the American consumer's viewpoint, for that $5 billion or more since May 2002, you have to count the fact that we've also paid on all the domestic U.S.-produced ones. It's at least $15 billion. The guys who do southern yellow pine have done it, and so have the cabinet people and the garage door people.

My personal estimate, and not the association's estimate, is that we're looking at $25 billion to $30 billion. It's spread over to the consumer since May 2002. It's huge money. I think part of my dream is that someday some of it may actually go back to the American consumer, but that's not where we are in court.

If you asked me about where you are, if I were you, I wouldn't want to lose the momentum that I have. You'd have to start over. In people's minds, the people in the Commerce Department and USTR, you're going to reinforce their position. I think that would be terribly unfortunate. If I was sitting on your side, I would consider it to be ill-advised, but it's obviously your decision.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Mr. Ritchie, maybe you can comment on the same thing.

Most of you have also said that we had to hold our noses when signing this. Whether you agree or disagree with the agreement, we've got to take the medication and move on. How much medication do we have to take? If it was $1.1 billion or a $1.2 billion difference, would we have not signed it?

I would say this is a negotiator's nightmare or a skill set that one would have to come up with. Where is the breaking point? Where does this direction come from? Does it come from Ottawa? Are the stakeholders around the table outside government directing the negotiators? If it's going to be half a billion dollars, maybe we'll give it to them. But where do we stop? Is there a slide rule here?

It must get awfully hot, as it does in this room, at those negotiations.

[The Chair, Conservative, Leon Benoit]

Mr. Ritchie.

[Gordon Ritchie]

It does indeed get fairly warm, and as you will appreciate, I'm not one of the colder ones at the table. Sometimes I get pretty upset about this.

First, on the question you put to Mr. Rutenberg, I agree with everything he says. As I was joking on the way in, I thought his estimates of the adverse impact on the American consumer are, if anything, too low. Looking at it top down instead of building it bottom up, it has to be at least a $15 billion U.S. hit for the American consumer, $10 billion of which has already been pocketed by the U.S. industry through higher prices, and then they hope to get another chunk of the deposits in cash to add to it. I'm heartened to hear him say he thinks it's actually higher, that it could be $25 billion.

I think that's lousy U.S. public policy, and if I were testifying before a congressional committee—which I won't be, but if I were—I would say to them they were headed down a very wrong track. But that's where Mr. Rutenberg should be instead of here--and he's done it, and his team has done it, and they're not calling the shots. When I sat down at that negotiating table last year or in earlier years, I couldn't feel the home builders' presence there. I could certainly feel the coalition's presence there.

On the precedent issue, I would just reiterate what I said before: that horse has left the barn. We won all the cases back in 1996 and we had to settle because the Americans refused to return the money. Despite the fact that a strong legal case could be made that they were under the legal obligation to return the money, they claimed they couldn't without an agreement that was acceptable to them—an agreement that was to the serious disadvantage of the U.S. consumer, but that for the Canadian producer was in fact a pretty attractive deal.

When you talk about the size of the ransom, again it's sort of Santa Anna; you have to remember the history here. I obviously am not prepared to discuss what went on while I was at the negotiating table last year, but I can tell you it's a matter of public record. But in 2003, many governments ago, very serious consideration was given to an agreement in principle that was going to split the deposits not 80-20, but 52-48. It was a smaller volume of deposits, but that was looking at basically splitting the kitty in half. This agreement—as I say, I have to hold my nose to support it—is a bit easier to support at 80% than at 50%, and with the U.S. industry not getting 48%, but instead getting half of the remaining billion dollars.

This is not theology; this is not Utopia; this is a very difficult trade situation in which you're dealing with an extremely powerful U.S. political lobby. As Mr. Rutenberg will attest, he has more members, but I suspect this industry is putting more money into presidential campaigns, and I know they can get more signatures on a senatorial letter to the President on 24 hours' notice than anybody else I've ever seen. So it's a very powerful industry, and it is dictating the U.S. position on this.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Ritchie.

Mr. André, you have five minutes.

[Guy André, Bloc, Berthier—Maskinongé, QC]

I would first like to thank you for your presence here and for agreeing to answer our questions about softwood lumber.

Mr. Monahan, my first question relates to export charges. Option B is a little complex. Quebec tends to lean in that direction, but the ceiling is very strict. Option B sets a quota, which could be harmful to certain companies wishing to bid on certain contracts. This option could impact quite negatively on some of them. If this option remains strict and allows no leeway for other avenues, what consequences might this have for Quebec's lumber industry?

Mr. Ritchie, you say that we are ready to sign this agreement, but that it has some deficiencies. We did however win our cases with regard to softwood lumber before the NAFTA panel. This new agreement continues to say that according to certain allegations made by the Americans, Canadian industry benefits from subsidies. Should they not simply be excluded?

I have a question for all of the witnesses. According to certain rumours, the reimbursement of the four billion dollars that lumber companies have paid out in countervailing duties over the years would only begin starting next April. All kinds of delays and procedures are being invoked to justify this delay, which could harm the industry yet again.

The Bloc Québécois has proposed loan guarantees as temporary assistance for the industry. If this situation were to last a few months longer, how would the industry be able to go on? Certain companies might go bankrupt within a year if they do not get this reimbursement.

[Pierre Monahan]

I would like to state at the outset that our company is in favour of Option A, given the specific position of one of our mills in Ontario. We have done calculations and drawn up market hypotheses based upon the predicted sale prices that have been published. Indeed, Option A would cost more in terms of taxes, and its impact is more negative.

That being said, there is consensus in Quebec with regard to Option B. The caution with regard to this option relates to the flexibility of its administration.

Let us take the case of Home Depot. A customer tells me that he would like to get delivery right away of what I was supposed to send him next month. I will not be able to make the delivery because I have already reached the set quota. They even went so far as to suggest that we be levied a penalty, that we be granted a given period of time to make the necessary adjustments and that the calculations be adjusted later. If I make the necessary adjustments within a 12 month period and if I respect my quota, there should be no penalty. If I go over my quota, I will have to pay a penalty. Let us be given the necessary flexibility to be able to satisfy our customers' needs, because, otherwise, we will lose contracts. Option B must provide for this flexibility that would allow us to accommodate our customers.

[Gordon Ritchie]

With regard to the matter of precedents, which also covers the domestic issue, frankly, softwood lumber has always been a little bit apart from the rest, just like milk is here in Canada. I therefore am hoping that this will not affect the other relationships there are between our two countries. There are however no guarantees in this regard. To date, no other industry in the United States had the will nor the political weight to convince the American government to completely set aside its legal commitments. But there are no guarantees.

Secondly, you and I both read the agreement in principle and nowhere do we see a concession on the part of Canada with regard to subsidies purportedly granted to our softwood lumber industry. I can tell you that when I was at the negotiation table, the premise was to reject outright any allusion to subsidies to our softwood lumber industry. We have seen that every time this matter has been put before an independent arbitrator, we have won.

That being said, this in no way prevented the coalition from repeating over and over that Canadian softwood is subsidized and, big surprise, its allies in Washington believe this to be true. Nothing in the agreement will change that.

I would have liked us to be able to include in the agreement that everyone accepts the fact that the softwood lumber industry is not subsidized, but we have not said that that was the case.

Finally, with regard to the reimbursement issue, I have no good news for you in this regard. It is crystal clear that the Americans will drag out this process, just like they did the last time, when we had to wait more than eight months for payment of a much smaller amount. This time, we will have to wait quite a while.

It is not for me to give you an answer to your question with regard to guarantees for the affected industries. Personally, I believe that we could mount quite a solid case in that area.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Ritchie.

Merci, monsieur André.

Now we'll go to the government side. Mr. Lemieux, you have five minutes.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you very much, Mr. Chair.

I'd like to put this brief question to you, Mr. Falconer.

If I heard correctly, yours is the largest union representing forestry workers. When you were giving your presentation, you were quite categorical in your view on this agreement. We've heard from many witnesses over these past few weeks and, much as there is today, there has been a variance of opinion on the softwood lumber deal.

Under the trade action, I think there certainly is consensus that the lumber industry has suffered. It's suffered terribly from many perspectives, certainly from the cost of litigation and from the cost of paying duties. The outcome has been that some companies have had to close their doors. There has been a loss of work under the current situation.

My concern is that you were very categorical in condemning this agreement, and yet I think there are positive aspects to it. For example, there's stability for the market and stability for business in particular. On the business side, you know that if you're trying to slay too many dragons at the same time you have to decide where to focus your efforts and how to balance one against the other. I see that this deal offers stability to businesses and, in doing so, offers stability to the workers. When you have a company that's stabilizing, or when you have an industry that's stabilizing, I think people have confidence now in their company and they have confidence in the longevity of their term of work. As well, this $4 billion in duties coming back to the lumber industry, as we heard today, will help pay the debt that has to be paid and will also have a stabilizing effect on companies.

To come to my question now, there's no doubt that there's probably an information network that exists amongst the lumber industry and amongst workers. I'm sure they're hearing the variation in opinion that we hear here, including that there are good things that this deal offers. There are concerns too. I'm wondering how you communicate what I see to be positives to your workers. I'm wondering if you could comment on what I've just said, which is that there are positives to this. And I'm wondering how you communicate that to the actual workers in this industry.

[Roger Falconer]

Well, actually, we communicate to members by listening to their concerns. Their concerns are about the future. You talk about stability and communicating stability. Well, we talk about that all the time. We want the communities in which our members work and live to remain active, to remain open. Most of these mill towns are single-industry towns, so they depend on the forest resources to maintain the community.

What we'd like to see are the things that have been said around this table. I like some of the things I've heard; some of the things I haven't liked. The one thing that has been communicated pretty clearly is that if we allow this deal to go ahead as it's made up right now, it won't provide us with the stability that you're talking about. It may provide us with some short-term benefits, but it's not clear what we're going to have. If we allow the Americans to dictate to us about access to their market--and I've heard different speakers talk about this--there's a disregard that American legislators have for our sovereign rights, which we've negotiated as part of a deal.

Our members have every right to expect that the moneys that were imposed illegally, and have been found in every realm so far to be imposed illegally, should be returned in total to those communities. You say, “Well, we'll just give them $1 billion”, but it seems to me that $1 billion in these communities would go a long way to providing better conditions for people who are being jeopardized by the same exports of raw logs or the duties imposed that prevent their mills from being run.

The second part of that is that we have a real concern about the $4 billion that's coming back to the industry. What we want is some kind of guarantee from those companies that the $4 billion or a portion of it will be reinvested in the Canadian forest industry. As you said, our goal is the same as yours: we want to make sure there's a survival into the future.

If you look at how the Americans ignored us, if you take that one aspect.... The Americans are ignoring our wins, whether under the NAFTA panel or at the WTO. They've ignored them and they keep ignoring them, because they're hoping they'll frustrate us by waiting us out. What we're saying is that we don't think it's worth giving up when we're so close to the end.

Now, I've heard some people say that even if we win this, the next week or the next day the American coalition may put in another brief. What we have to go forward with is that we're right. And it's for the future, because if we give up now, when we try to exercise our rights in the next NAFTA.... If the government agrees to this deal, and if, God forbid, in seven years' time the coalition puts in another challenge, or if even before then it puts in another challenge--

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

I think one of the differences is that this will return $4 billion to the industry, as opposed to the illusory idea that this could end any minute now, and we may get $5 billion or we may not get $5 billion. That's where I see some stability being offered.

Actually, I'd like to just, in the remaining moments--

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Lemieux. You're out of time, and we're out of time for the witnesses.

I'd like to thank all of you very much for your presentations today and for your answers to the questions. They were very well done and much appreciated.

I will suspend the meeting for two minutes to allow the witnesses to leave the table. Then we have a motion to deal with, and we'll deal with that.

[The Chair, Conservative, Leon Benoit]

I'd better start by reconvening the meeting here. We have a motion to deal with.

Mr. Paquette, would you go ahead and do what you'd like with the motion? Move it, if you'd like, and give us a bit of an explanation of what this is.

I do want to say that it is extremely unusual to have a committee report done in the form of a motion. In the past, any time I've been involved, there has been a report written by the researchers, based on the testimony heard. That report carries through the process, is debated at committee, and then goes on to the House.

But I understand that your motion is in order, Mr. Paquette, so go ahead, please.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

Let me first begin by saying that it is true that this is unusual, because we normally go through the researchers. But let us however say that this is not a first, since last week, the Standing Committee on Agriculture and Agri-Food passed a motion that was tabled as a report, and this same document was even adopted by the House of Commons last week. What we are attempting to do is therefore not impossible.

I drafted this motion because we probably will not have sufficient time, before the summer recess, to get a bone fide report from our researchers. I am told that Thursday, most probably towards the end of the day, we will be adjourning for the summer. That may not necessarily happen, but I would like to see us leave at least some trace of the fact that we heard witnesses during our first two meetings and that they did come and confirm a certain number of things.

If you will allow me, I will quickly read through this and make a few comments.

Based on the testimony heard, the Committee on International Trade recommends that the government:

1- Take the time needed to conclude a final agreement that meets the expectations of the Canadian softwood lumber industry, since it will be in effect for 7 to 9 years;

I believe that everyone would be in agreement with that.

2- Uphold Canada's legal victories before NAFTA tribunals and ensure that the agreement does not include any reference to the American allegations of presumed subsidies to the Canadian industry and harm to the American industry;

To my mind, everyone would be in agreement with that as well.

3- Ensure that the anti-circumvention clause is worded so it preserves the provinces' ability to amend and enhance their forestry policy without the risk of American reprisals;

Several witnesses brought this matter up. As a matter of fact, Mr. Ritchie mentioned this here again today. He said that this was perfectly logical and that the Americans had even tried to infer that it would be necessary to keep an eye on the provinces' forestry policies. The idea here is therefore to ensure that this clause, aimed at preventing the circumvention of the agreement, not be drafted in such a way as to in fact grant veto powers to the American authorities over our forestry management.

4- Ensure that under Option B, which stipulates export taxes and export ceilings, the ceiling is not so rigid as to prevent companies from obtaining and honouring major contracts in the United States. A flexible ceiling could be provided in various ways: carry forward of unused part of a quota to the next period; possibility of exceeding the quota by “borrowing“ from future periods;

This is exactly what the representative from Bowater explained to us a few moments ago.

5- Ensure that under Option A, the Canadian industry is not excessively penalized for sudden and temporary increases in softwood lumber exports to the United States. In this case also, the necessary flexibility could be provided in various ways;

6- Take every measure to ensure that Canadian companies receive with interest their due share of countervailing and anti-dumping duties within 90 days of the conclusion of the agreement and not of its coming into force.

You are aware that in the agreement there are countless things that are required for its coming into force and that could take up to 180 days. This would mean that 90 additional days would be added to the 180 days already provided for. We must therefore ensure that 90 days after the conclusion of the agreement, companies will have been paid their due share of countervailing duties.

Without this commitment from the American authorities, the government should present a loan guarantee program, covering all the amounts owed to the companies. The Committee reiterates that, for the purposes of a general audit, loan guarantees are not regarded as an expenditure.

7- Be extremely vigilant in obtaining an effective mechanism to resolve disputes over the interpretation of the agreement.

Everyone has requested this.

8- Ensure that if, for technical reasons (computer system not yet ready, for instance), regions that chose Option B must be subject to Option A, these regions are not required to pay the tax levels stipulated under Option A, but rather those under Option B.

This would occur in cases where technical problems would prevent the execution of Option A.

That this motion be tabled in the House as the Committee's report within the next 24 hours.

The clerk suggested that it be 48 hours. That is not a problem for me. What matters to me, is that the Committee table some initial reflections. If the agreement were not signed before our return in the fall, then we could resume this work.

There then are the issues there is consensus on and that we have heard during the course of our first hearings. I therefore move the adoption of this motion.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Paquette.

Is there debate on the motion?

I do want to point out that I, for one, have to leave right at 5:30. I have an appointment. I know there are others, as well.

Debate on the motion.

Ms. Guergis.

[Helena Guergis, Conservative, Simcoe—Grey, ON]

I have a quick question.

I'm not up on all the procedure. I have two motions here that actually deal with that report, so maybe they should be amendments to Mr. Paquette's motion.

The first one has a change in it.

[The Chair, Conservative, Leon Benoit]

Okay.

So, Ms. Guergis, which motion do you want to deal with?

[Helena Guergis, Conservative, Simcoe—Grey, ON]

Both of them.

On the first one, I'd have to make an amendment.