Go ahead with your presentation.
Thank you.
I thank the committee for having invited me once again to discuss the proposed Softwood Lumber Agreement with the United States.
I believe the final agreement impacts a great deal more than softwood lumber, or even the forest industries writ large. I believe, as does the government, that it will impact Canada-U.S. relations and Canada's place on the North American continent and in world affairs for years to come.
The government believes these impacts will be all for the good. I don't. Minister Emerson sees only good in what I consider perhaps the worst commercial deal the Government of Canada has ever signed. He thinks it improves on everything that has come before, that it is the best of all possible alternatives, but regrettably, it isn't. The government announced on April 27 that it had achieved, with the basic terms, free trade in softwood lumber. There was but one small qualifying phrase: “under current economic conditions”.
Today, just three months later, as the minister himself recognized this morning, Canadian industry operating in provinces choosing option A in the agreement would be paying 15% export tax, and option B participants would be reduced to a 30% market share cap with a 5% export tax. Both British Columbia and Alberta, under the terms of the agreement, might in surge be facing 150% penalties. This is free trade?
Jim Shepherd, Minister Emerson's successor at Canfor, has extolled the virtues of these arrangements because, he says, “at least the money would be staying in Canada”. Let's understand this reasoning.
Canadian industry today is paying in deposits about 10% to the U.S. Treasury. Had the government not interfered with NAFTA illegally and refused to appoint extraordinary challenge judges, as the law requires, that number would be dropping to about 2% about three weeks from now. The United States Court of International Trade ruled just two weeks ago that those deposits—at least all of those deposits since November 2004, with interest—belong to Canadian industry.
Industry is destined to get back all the money it is now paying, all of it, and then pay no more. Yet Mr. Shepherd and the government find some virtue in Canadian industry paying much more than they pay now, with no hope or possibility of ever getting back any of the money.
The April 27 terms called for the termination of litigation. They said nothing about preserving positions, notwithstanding the litigation of the last four years and the results. The final text does deviate dramatically from the basic terms with a colossal concession: everything we have won is to be surrendered, and we are to pay $1 billion for the privilege—actually, several privileges. We get to cap our exports, pay export taxes, have all our forestry policies scrutinized regularly and subjected to challenge on a continuing basis, before arbitrators with no particular knowledge of trade rules, or law, or forestry, or even Canada. And there is no effective way out of all this.
Policy changes in the provinces, not only for lumber but for all forest products, would be risky and could expose us to penalties at the whim of the United States. Of course, there is the most celebrated change of all, which we've discussed many times already here today, that the United States could take our money—a truly astounding sum of money—and quit after two years.
With our legal victories washed away, we would have to litigate everything all over again, so we would all be looking at four new years of litigation, where everything will have been ventured and nothing will have been gained. There is ample incentive in this scheme for the Americans to terminate, despite what Minister Emerson has asserted.
Attached to the text of my speaking notes for today are three pieces of analysis. They delve further into the infirmities, the contradictions, and commercial impracticalities of the agreement. Many of these problems perhaps could be fixed, but the Government of Canada has led the way in refusing to contemplate change, thereby steeling the resolve of the American side.
Twice in the last two weeks, the U.S. coalition has issued press releases saying it won't agree to even talk to us. Why would the Americans agree to change anything when their leading champion is the Government of Canada, promising to secure the deal that is so much in the American interest?
Industry all across affected Canada has questioned the deal and pointed out specific and essential changes needed to make this deal viable, but Prime Minister Harper and Minister Emerson refuse to change—or even to try to change—a thing. Minister Emerson has said repeatedly that this deal is the best of all possible alternatives.
Let's look at this proposition.
In the 1986 memorandum of understanding, in the midst of litigation and with no legal victories, the government negotiated an agreement that led within a year to the total exclusion of British Columbia and within three years to the near exclusion of Quebec. The agreements failed after four years, however, because managed trade never succeeds for long, and even exclusions had limitations that some could not tolerate.
The reviled softwood lumber agreement of 1996 was a quota system, with a guaranteed five-year term. We didn't pay for it. We could adjust forest policies and practices, but we could not find a way to make the quota allocations fair to everyone.
The 2006 vintage has none of the virtues of the deals in 1986 or 1996, and many more vices. Minister Emerson has not told us why it is better, and we will likely never know. The core argument in favour of the deal appears to be that it is better than the alternative, which is defined as more litigation. With unfinished text, incoherent running rules, and uncertain quota allocations, this deal is a recipe for endless litigation, and when it ends, still more litigation is guaranteed, stripped of the security of chapter 19, which the government is destroying rather than saving.
There is no peace in this agreement, except the piece of Canada that the coalition may come to own with the $500 million gift that legally it could not obtain. Indisputably, the agreement abandons NAFTA. Charter 19's North American trade experts are replaced with non-North American commercial arbitrators out of London, England. Canada and the United States claim, in their suspension of the extraordinary challenge committee, that they are sovereign over NAFTA and neither private parties nor even provincial governments have any rights. In fact, in a brief the Government of Canada filed in the Court of International Trade on July 21, Canada argues that NAFTA is not a commercial agreement at all, but rather a treaty with the United States, which it governs at its pleasure. Despite the negotiating history and the legislative history of its implementation, NAFTA is to this government nothing more than an act of state serving the interests of the federal governments, at the discretion of the federal governments.