International Trade Committee on July 31st, 2006

[Diana Blenkhorn]

I'll add to Mr. Irving's comment. I touched on this, saying we weren't waiting to implement our obligations. When the agreement was signed on April 27, we knew the end of the first quarter had been March 31. We knew our obligations were going to be to collect production data quarterly. So we have the first two quarters collected now. I can tell you when facilities import logs from Quebec.

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

I have some difficulty to understand why you think that the three year cancellation clause—two years plus a one-year period—is satisfying. What cost does it represent for the industry in the Maritimes? What share of the $5 billion will me paid to you and what part will you lose?

[Jim Irving]

The total cost for the Maritimes that we've talked about is approximately $150 million, which is going to be duty paid. In that, we have currency loss. We'll be leaving behind about $33 million for Atlantic Canada that will be paid, our 20% of $150 million. On top of that, we will have our legal fees and our currency losses.

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

Canada loses $1 billion in exchange for the three-year clause but the cost is minimal for the Maritimes.

[Jim Irving]

Yes, but we are sawing the smallest amount of lumber in Canada, so it's all proportionate. And we also have--but nobody wants to recognize this fact--the higher log costs in Canada. Make no mistake, ladies and gentlemen, we have very high timber costs because of the high percentage of wood that comes from private lands. Our wood does not all come from crown land. We have market-based stumpage, which has been the basis for examination with the U.S. government for some 25 years.

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

Do you recognize that the three-year cancellation clause is much more acceptable for you than for the other provinces of Canada?

[Diana Blenkhorn]

I'll answer that. You know there is something that is going to level the playing field. You can pay it to the United States in the form of the tariff--CVD, anti-dumping--and in this case, get back 80% of it; you can pay it to Canada in an export tax, which is what the agreement is; or you can do as the Maritimes have done and pay it to your provinces or the private landowners in elevated costs that would keep you out of the case. But either way, you're paying it.

It's not a small percentage of the billion dollars to us. We just paid it to our provinces and to our private landowners, made that choice to stay out of the dispute, and it happens to support other programs, like hospital beds and education.

[The Chair, Conservative, Leon Benoit]

Thank you, Monsieur Crête. Your time is up.

We'll go now to the government side, to Mr. Casey, for seven minutes.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you very much, and thank you all for coming.

I was first elected 18 years ago. The first issue I was faced with was the softwood lumber issue, and leading the charge was a young lady by the name of Diana Blenkhorn, who's still leading the charge very successfully. I want to congratulate her on that.

I also want to congratulate Francis Schiller on behalf of the remanners. I think 10 years ago none of us knew what the word “remanners” meant, unless it was a remanufactured carburetor for a car or something. He has successfully educated us all so that now we actually have remanners acknowledged in the agreement, even if it isn't exactly everything he wants. But I think it's a tremendous accomplishment and it's a model for how things should work.

Interestingly, the very first question today was by my distinguished neighbour, the member for Beausejour. In his question he complimented Minister Emerson on how good this program was for Atlantic Canada, and then he asked, if it failed to go through the legislature, would he find a way to replace it with something else and would he start the thing all over again? That's not exactly what he said, but more or less.

So from a maritime lumber point of view, Ms. Blenkhorn, would it not be simpler to pass this agreement and get it in place rather than go back to the drawing board and start all over again?

[Diana Blenkhorn]

The answer to that is very obvious from the degree of our support. We support it, we support it completely, and we urge others and all of our elected representatives in Atlantic Canada to support it.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Thank you.

I'm confused on the period of investigation. Could you explain the period of investigation part of your presentation?

[Diana Blenkhorn]

When you have a legal determination—the wins that we're talking about—those wins are based on information that's put on the record for a specific period. As you know, we were under managed trade between Canada and the United States between 1996 and 2001. When we decided not to extend the softwood lumber agreement, the United States immediately responded by launching the petition for both countervailing duty and anti-dumping.

The period that was used for investigation for countervailing duty and anti-dumping was April 1, 2000, to March 31, 2001, which was a period under managed trade. The period the Court of International Trade, the CIT, used in determining whether there was injury or threat of injury, which is the other big win we talk about, was 1999 to 2001, again a period where the softwood lumber agreement was in full force and we were under managed trade. As I said earlier, it was also a period of a high Canadian dollar.

When you're under a trade agreement or managed trade, it shouldn't be a surprise to anyone that they couldn't determine “injury” and only “threat of injury”, because if there were injury under a managed trade agreement, it would be evidence the agreement was not working.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I'd like you to paint us a picture. What will happen if this agreement doesn't get through Parliament? What do you think the American industry will do with Lumber V?

[Diana Blenkhorn]

I don't think you need to wait for the American industry. As I said earlier, I think the United States government will take action that they have available to them through their Trade Act of, I believe, 1974. You will see a section 301 or a section 601 action, or other components thereof, and it will be punitive against Canada.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

If they do, will it take a long time?

[Diana Blenkhorn]

This is 2006. We're in the 2001 case. With the appeals coming forward, we're looking at decisions between 2007 and 2009. If you start again, we're going to be through the Olympics and looking forward to the next ones before it gets resolved.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

So we might still be at this another 18 years.

[Jim Irving]

I think the other thing is what Diana pointed out about the perfect storm. With the current situation, right today—falling housing starts in the U.S., a very high Canadian dollar, subsidies being taken by all parts of Canada except Atlantic Canada in the last 18 or 24 months—I think there are serious problems for the whole country on that one.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

Do you think the recent subsidies are in the gunsights now of the U.S.?

[Jim Irving]

I'm sure the coalition is wide awake. They're not slow. They follow everything that's going on, and I'm sure they're very knowledgeable on the subject.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

I have one question for Mr. Schiller.

We talk about a first-mill basis in the agreement—remanufactured softwood lumber—with the export charge on exports of remanufactured softwood lumber from the remanufacturer calculated on the first-mill basis. What does that mean?

[Francis Schiller]

Currently, the way the duties have been charged, it's at the entry value. If a remanufacturer produces a piece of 2x4 and it's a $15 product by the time it gets to the border, they're taxed on that full $15, whereas a first mill would be taxed at the price at which they bought the sawn lumber from the primary processor—let's say it was a $10 price—and they will not be taxed on the value added. Although it's not perfect, this is very significant, because it will help these remanufacturers begin re-exporting again. It will be a step towards a level playing field.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

That ten-dollar 2x4 is an expensive 2x4.

[Francis Schiller]

Indeed, yes.

[Bill Casey, Conservative, Cumberland—Colchester—Musquodoboit Valley, NS]

So they currently charge based on the finished product, even though the raw product may be only a couple of dollars.