International Trade Committee on July 31st, 2006

[The Chair, Conservative, Leon Benoit]

Good afternoon, once again. We're ready to start meeting number 19 of the international trade committee of the House of Commons.

We have with us the next group of witnesses.

Mr. Temelkovski has asked to have a vote on an earlier motion that I acknowledged. I assured him we would do everything we could to have Ambassador Wilson appear and he would do everything he could to appear, even at the August 21 meeting, if possible. Mr. Temelkovski has asked for a quick vote on that motion. We didn't deal with it earlier, so could we just do that before I introduce the witnesses? Then we'll get right to this final group of witnesses.

This is on the motion that we have the Canadian ambassador to the United States, Michael Wilson, appear before the committee.

Yes, Ms. Guergis.

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

Thanks very much.

I'm not opposed to that in any way. My understanding is that Ambassador Wilson has actually already agreed that he would love to come to the committee and that we have had some conversations. It wasn't submitted in a list to us when we asked to put lists forward of who we wanted. That's simply all you really have to do. I don't think a motion is required for it. It's just simply asking, and then you shall receive.

The difference with the McKenna motion was that he was asked, and he declined. That's why I thought it would be appropriate that we had a motion there, but with respect to Ambassador Wilson, we simply have to ask and we will receive. I don't know if a motion is really necessary for that, as this is the first time at committee we've asked him to come.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Guergis, for that clarification.

Monsieur Crête is next.

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

Maybe the simpler solution would be to vote on the motion and to resolve the issue.

As far as we are concerned, we are in favour of this motion.

[The Chair, Conservative, Leon Benoit]

Let's have a quick vote on this. Nobody has any objection.

(Motion agreed to [See Minutes of Proceedings])

[The Chair, Conservative, Leon Benoit]

Now we will go to meeting number 19 again, on the softwood lumber agreement signed July 1 between the Government of Canada and the Government of the United States.

From the Free Trade Lumber Council we have Carl Grenier, executive vice-president and chief executive officer, and Bill Reedy, manager of Gorman Brothers. From the Ontario Forest Industries Association we have Jamie Lim, president and director general. And from the Alberta Softwood Lumber Trade Council we have Trevor Wakelin.

Mr. Murray Summers isn't here today, so, Mr. Wakelin, you can carry the ball for the Alberta Softwood Lumber Trade Council.

We'll go in the order that you are listed. We'll start with Carl Grenier from the Free Trade Lumber Council.

[Carl Grenier, Executive Vice-President and Chief Executive Officer, Free Trade Lumber Council]

Thank you very much, Mr. Chairman.

There is just a small detail. Mr. Reedy here, of Gorman Brothers, is with the Free Trade Lumber Council, but he's on his own here, speaking for Gorman Brothers.

[The Chair, Conservative, Leon Benoit]

Oh, I see. It's listed a little differently on the notice here.

[Carl Grenier]

That's what I was explaining. It was explained to me by Monsieur Dupuis.

[The Chair, Conservative, Leon Benoit]

Thank you for the clarification.

[Carl Grenier]

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.

[The Chair, Conservative, Leon Benoit]

Pardon me, Mr. Grenier. We had agreed to six or seven minutes of presentation. Are you near the end?

[Carl Grenier]

I have two more paragraphs, then I'm done.

[The Chair, Conservative, Leon Benoit]

Go ahead. I'm sorry for interrupting.

[Carl Grenier]

The commercial protections that private parties thought they had received are not there at all. If that view should prevail, it's the end of NAFTA.

NAFTA has been Canada's insulation against absorption by the United States. It places us, at least in one forum, on equal footing, commanding respect. This government aggressively is giving it away. What will it get us? Will we get a break on the use of passports at the border? Will it get us a better seat at the table when the United States decides whether it will shoot down missiles headed for Toronto instead of missiles headed for Chicago? Will the United States withdraw from Iraq because of our criticism?

The forest industries are being sacrificed on the altar of foreign policy, with no apparent benefit for Canada. The bravado with which the Canadian industry is being told to take this deal or leave it, and Parliament is being told to endorse it or be blamed for early elections, confirms that the deal is political, not commercial, and that the government's agenda is not focused on the softwood lumber industry at all. We only wish that, in negotiating an agreement that we all had hoped would help our industry, the government had stood up for Canada in facing the Americans instead of standing down to the Americans, with us on the altar.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Grenier.

Now, Mr. Reedy, we will correct the notice so you will come under Gorman Brothers and not under the Free Trade Lumber Council. Go ahead with your presentation, please.

[Bill Reedy, Manager, Gorman Brothers Lumber Ltd.]

Thank you very much.

My name is Bill Reedy, as you heard. I am an owner and the president of Gorman Bros. Lumber Ltd. I'd like to thank you for the opportunity to speak to this committee.

Gorman Bros. is a family-owned business located in Westbank, British Columbia. We've been in business for 55 years. We employ 350 people and contract another 125 to work in the forests. We've spent the last 10 years developing an extremely high-end product and carving out a niche market for it.

To be blunt, we feel like Alice in Wonderland: all logic and reason appears to have been abandoned. This agreement is an abomination. Collectively, we have spent four years and more than $200 million to prove, once and for all, that the forest companies of Canada are not subsidized. All decisions by U.S.-dominated trade panels have unanimously stated that there is no basis or justification for the current duties on softwood lumber. It is incomprehensible why anyone would refuse to allow the final legal ruling to be made in our favour; give away $1 billion of our money, which was taken illegally; and then turn around and put an export tax on our products, effectively acknowledging that we are subsidized.

For the Prime Minister, Mr. Emerson, and this government to participate in this total capitulation to use pressure illegally is an unforgivable abdication of the trust and responsibility assumed by those taking these elected offices.

We are a specialty mill that produces only one-inch boards and the products made from them. We do not produce any dimensional lumber used in constructing wood-frame homes. Our products are used for decorative finishing, furniture, and mouldings. No mill in the United States is capable of producing spruce or lodgepole pine boards equal to our product. The demand for our boards is so strong that we have not been able to take on a new customer for more than five years, even though we have increased production every year.

Most importantly, our boards have no impact on the sales of U.S. board producers, as we sell to customers who do not want their lower-quality products. If you review Random Lengths, an independent survey of the average selling prices for boards, you'll see that our product is priced between $50 and $130 U.S. per thousand board feet, which is higher than any other product on the market. On top of this, our customers must pay significantly higher freight costs to get our boards.

This absolute fact, which can be substantiated by anyone who wishes to do so, is clear proof that neither are our boards the cause of lower lumber prices, nor are they sold at less than market value because they are allegedly subsidized. There is no reason for any of our products to be included in this dispute.

We've managed to survive because 10% of our production was excluded by law from the duty. These products were known as end-matched boards. As a last-minute strong-arm tactic, the coalition recently had the U.S. Department of Commerce drag this product from its original category into the scope of the current duty. This has been devastating for our company.

We sold about $100 million Canadian last year. In our industry, it is reasonable and necessary to make at least a 10% margin on sales. The $10 million would provide $4 million in taxes to the government and would give us $6 million to reinvest in modernizing our business. As a result of the stronger Canadian dollar and the illegal duty, we generated only $290,000 after-tax dollars last year.

If the end-matched products had not been illegally drawn under the scope of the duty, we could have earned another $1.5 million, with the after-tax portion available for reinvestment. The end-matched exclusion represented the 1.5% margin left in our business.

By agreeing to impose an export tax based on the price of a commodity such as dimensional lumber, this agreement prevents even a specialized mill like ours, with expensive high-end products, from being successful. This effectively reduces the industry's earning ability to almost zero, eliminates the capital improvements needed to remain competitive, lowers employment, and reduces the taxable wealth in this country.

While the U.S. government has stood solidly behind this industry, even in the face of the repeated defeats of the NAFTA and WTO panels, our government has not only abandoned our industry, but it has also handed the U.S. coalition everything it wanted.

I respectively request that this government set aside this destructive agreement and continue with litigation, which will invariably confirm that our industry is not subsidized and which will return all the money that was illegally collected to its rightful owners. This money will be taxed by and for the Canadian government, with the remainder going back into the economy. It is criminal to give the coalition our money to pay for their unfounded allegations and legal fees.

While I make no claims of political expertise, I am competent enough as a negotiator to know that with this complete legal victory, we'll be in a much better position to work toward a long-term, fair solution to this problem with the U.S.

I'm sure everyone is aware that when Canada won the last labour dispute, and the U.S. was ordered to return our money with interest, they simply refused to do so until we signed a quota agreement. Given the U.S. government's policy of bullying, we'll probably not see our money until a solution is found. But we will have the findings of the law on our side, we will have honoured our commitments to NAFTA, we will have complied with international treaties, and we will not have to bribe the coalition with our money. This makes considerably more sense than giving up all our legal victories and facing the same unfounded protectionist claims three years from now.

It is not the stronger Canadian dollar, but rather the imposition of duties or export taxes that makes it impossible to compete. Gorman Bros. has proven that in the absence of protectionist measures, we can successfully compete with anyone anywhere in the world.

I urge this committee, and all the political parties it represents, to do what is necessary to stop this agreement from taking effect and replace it with a sound solution, based on the principles of the NAFTA agreement, which both governments signed, and on the decisions given by both the NAFTA and WTO panels.

Gorman Bros. Lumber, and many other Canadian lumber manufacturers like it, can only succeed if our government will fulfill its obligation under these international treaties and insist that other signing countries do the same.

Once again, thank you for the opportunity to express our concern. We request your immediate assistance.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Reedy.

We go now to the Ontario Forest Industries Association and Jamie Lim. May we have your presentation, please?

[Jamie Lim, President and Director General, Ontario Forest Industries Association]

Thank you very much, Mr. Chair.

Ladies and gentlemen, it is an absolute pleasure to be back here again in front of the committee to address the future of my home town, my community, of Timmins, Ontario; the future of the province of Ontario; and indeed, the future of Canada. That may sound grand, but I will show in a moment that is the way Prime Minister Stephen Harper used to think of the softwood lumber dispute. I'm leaving it to other CEOs like Mr. Reedy and to other association directors to address the running rules and the woeful lack of commercial sense in this agreement. I want to focus on the situation in which our industries have been placed, the promises that have been made, and our sector's most urgent needs.

I think I can summarize the United States' strategy in six steps: file petitions demanding outrageously high duties, and the Department of Commerce will deliver them; make it exceedingly onerous and expensive to fight the duties, with endless questionnaires and intrusive and costly verifications; stall, dragging out the process, while Canadians are paying outrageously high duties, making the legal process expensive, not because we're getting fleeced by the lawyers but because the U.S. will use every procedural device to run the costs on us; exploit every possible legal ruse so that the cases cannot reach conclusion, and Canadians cannot enjoy the fruits of their legal victories; claim that it is the Canadians who are being litigious and that the U.S. wants to be accommodating, although they refuse to yield even to their own laws, and then declare that the best solution is peace through a deal; finally, with Canadian industry exhausted and many companies near bankruptcy, find a Canadian government willing to make a deal at whatever cost so that the whole thing just goes away. Some companies will take the deal because they do not believe that they can fight the U.S. and their Canadian governments at the same time.

Here's what the Prime Minister told Parliament last October 25 when he did not have all the legal victories that we have today:

Most recently, the NAFTA extraordinary challenges panel ruled that there was no basis for these duties, but the United States has so far refused to accept the outcome and has asked Canada to negotiate a further settlement. Let me repeat what I have said before, and let me be as clear as I can. This is not a time for negotiation. It is a time for compliance.

We are still without compliance, but Prime Minister Harper gave us negotiation.

Mr. Harper also said last year:

If the U.S. industry is able to pressure the government not to return duties when it has lost its last NAFTA appeal, it will not matter if most other trade is dispute free. If the rules are simply ignored, then the very basis of a rules-based system is threatened and the future of all Canada-U.S. trading relations could be profoundly affected.

As we all know, in the deal negotiated, the rules are indeed ignored. We do not get back all of our money, and timely payments will come as advances from the Canadian taxpayer, not--as according to the rules--from the United States. Not a single company, not one forestry interest in Canada, shares this government's enthusiasm for the deal or believes that it is good, if not perfect--not one. Minister Emerson and the Prime Minister have talked about perfect, but simply even good--not one company sincerely believes that this deal is good.

Deal or no deal, our forest industries are facing an immediate and dire need, as are hundreds of thousands of people who depend on the sector for their livelihoods. Companies are in a fiscal liquidity crisis. We've been robbed for almost five years. Two years ago, all opposition parties, including the party of the government today, agreed that the forest industries of Canada deserved help through loan guarantees--not loans, just guarantees--so the companies could borrow from banks and restore some liquidity as their profits were being illegally drained into the U.S. treasury.

Here is what Mr. Harper said, again on October 25:

We have asked the federal government to assist companies...with loan guarantees.... ... these initiatives are long overdue and the time for action is now. We need to move quickly and decisively to help our softwood industry.

Such sentiments were restated prominently in the party's campaign platform, “Stand up for Canada”, echoing another October 25 statement: “Now is the time to be clear and to stand up firmly for this country”. The new government did not deliver loan guarantees. Instead, it celebrates doing exactly what in opposition it said should not be done.

After the April 27 announcement, there were representations that we would start seeing the return of our illegally collected cash deposits in June; loan guarantees would not be necessary. Then came predictions about payments in July, then September, now October, maybe November. More likely there will be no money for more than a year after Mr. Harper said “Now is the time”.

Meanwhile, mills have been closing and they continue to close. People are being put out of work. The stability and predictability promised through this deal is the predictability of shuttered mills and unemployment. Even if the deal were as great as Minister Emerson says, our industries remain financially hamstrung, and loan guarantees remain an immediate need.

But it would appear the government wants to force us to take a bad deal by starving the industry into submission. There are to be no alternatives. Of course there were and there are alternatives, but not unless this government stands up for Canada.

On April 28, the final decision of a NAFTA panel was to have taken effect, ending the countervailing duty deposits. The industry should have been or would have been paying the United States $40 million per month less, but the Government of Canada joined with the United States to prevent that decision from taking effect. We, the Ontario industry, went to court in the United States to get the decision finalized. Now, instead of promised loan guarantees, the Government of Canada is using our tax dollars to hire two of the priciest American law firms to fight us, to defend the idea in U.S. courts that it does not have to obey the NAFTA rules and that it has a right when it forces Canadians to keep paying illegal duties to the United States.

The government should lift the suspension on the NAFTA proceedings and provide the loan guarantees that will save the Canadian industry and Canadian jobs immediately. Even if it were with the greatest goodwill and intention, the government has for nearly a year put off the financial help Mr. Harper said last October the industry must have. The once certain and predictable outcome of this deal is that by the time any small measure of good can come from the negotiations that replaced the promise of help months ago, the forest sector will be smaller, more mills will be closed and more people—more Canadians—will be unemployed.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Lim.

And now from the Alberta Softwood Lumber Trade Council we have Trevor Wakelin, chair. Go ahead with your presentation, please.

[Trevor Wakelin, Chair, Alberta Softwood Lumber Trade Council]

Thank you, Chair.

Good afternoon. Thank you for inviting me to appear before you today.

I provided a presentation to this committee on May 29 outlining the Alberta industry's concerns regarding the framework agreement that was announced on April 27. Today I will outline the Alberta industry's position with respect to the final agreement announced on July 1.

First, though, I wish to correct the record with respect to remarks made by a member of the standing committee at the standing committee meeting of July 13. At that time, a member stated that the Alberta natural resources minister had said that the Alberta industry was supportive of this agreement. In fact, on July 4, the Alberta Softwood Lumber Trade Council issued a press release stating that a significant majority of the Alberta industry opposed the agreement, finding it unacceptable in its current form. Letters to ministers of both the Government of Canada and the Government of Alberta were issued by our council, concurrent with the news release, requesting further changes to the agreement. I have been assured that the Government of Alberta, and specifically the Minister of Sustainable Resource Development, continues to support the Alberta industry in this position.

The Government of Canada has long been on record as stating that Canada will not accept a softwood lumber deal at any cost. This agreement, however, is a deal at a very high cost indeed: $1 billion. That is $1 billion worth of our duty deposits for a short-term deal that will leave us with significant long-term pain. While some say there is benefit in paying that $1 billion in order to get the remainder of our deposits returned more quickly, that benefit must be weighed against the substantive ongoing taxes that the industry will be forced to pay during the next few years, and that's based upon market projections.

On April 27, the Prime Minister announced a framework agreement that he said would result in no taxes or quotas. However, since that announcement, the random lengths composite index price has dropped from $370 per thousand board feet to $306. As a result, today we'd be paying the maximum tax of 15% and be reduced to the minimum quotas, from 34% market share to 30% market share.

Furthermore, the current exchange rate of 89¢ compared to 63¢ at the beginning of this dispute in 2001 results in a 30% decrease in sales revenues from the same product, as well as reducing the Canadian dollar value of our deposits paid in U.S. dollars.

Given the recent decision of the Court of International Trade, a U.S. court made up of three U.S. judges, that will require the Department of Commerce to revoke the duty orders and return 100% of the illegally collected duties to Canadian producers, it is, to say the least, a bitter pill to swallow to be asked to accept this agreement.

Based upon responses from Alberta industry members to date, unless there are changes to the agreement, the majority will not assign their deposits, and the 95% threshold required for the assignment of deposits to the Government of Canada will therefore not be achieved.

During the May 29 presentation to this committee, I indicated that the Alberta industry had always supported the pursuit of a negotiated settlement--that is, a long-lasting, durable solution that would be deemed fair and equitable and commercially viable. The Alberta industry continues to stand by that position. However, the very serious concerns we expressed regarding the framework agreement have failed to be addressed in the final agreement. Worse, the final agreement now has a termination provision included that essentially eliminates the long-term stability we assume we would get from a negotiated settlement with a seven-year term.

We are of the view that if this provision is included in the agreement, it will be used. We could therefore be faced with another trade dispute, Lumber V, within three years. This is obviously unacceptable, especially as we would have to revoke our legal precedents. An overwhelming majority of Alberta producers are of the view that, at present, continued litigation would be preferable to accepting the proposed agreement.

As was also stated on May 29, the Alberta industry was deeply troubled by the possibility that we could find ourselves faced with a perpetual surge tax under option A. The basis for our concern was the likelihood of increased harvesting levels resulting from the implementation in Alberta of an emergency strategy to combat the spread of the mountain pine beetle. Quite clearly, if Alberta is unable to control the spread of the beetle, as B.C. has been unable to do before us, then the infestation is very likely to become a national problem, and the beetle will advance unchecked through the boreal forest right through to the Atlantic coast.

With the increased harvest levels in Alberta that will be necessary to avoid this scenario will come increased U.S. shipments and therefore the potential to exceed the Alberta market share. If this were to occur, the Alberta industry would be faced with a perpetual surge tax of 150%, making us unfairly disadvantaged and uncompetitive compared to the rest of the Canadian industry.

When the base period for determining market share for option A was changed in the framework agreement to accommodate B.C.'s mountain pine beetle problem and increased harvest levels, it resulted in a considerable negative impact on Alberta's market share. The resulting loss was approximately 90 million board feet for Alberta producers, making it much more difficult to manage the surge mechanism under option A. If we let this stand, the impact of this on Alberta producers will be dramatic.

The Alberta industry had considerable discussion with federal officials leading up to the finalized agreement, and we were advised that the negotiators would make every effort to ensure the provision be incorporated in the agreement, allowing for a choice between whichever was the greater of the base periods of 2001 to 2005, or 2004 to 2005. Allowing Alberta to choose the 2001 to 2005 base period would be consistent with the base period in option B, and while it would not necessarily prevent us from being hit by the surge mechanism, it would at least lessen the mechanism's impact on Alberta.

As we understand it, this provision was tabled but was rejected by the U.S. coalition. The response from our negotiators was that they had done their best and that the agreement was now a take-it-or-leave-it proposition. Unfortunately, we cannot measure success by effort but must measure it by results, and in the end, Alberta became the only province that did not have any of its specific concerns addressed.

In the final agreement announced July 1, under option A, the proposed surge tax is to be applied retrospectively instead of prospectively. As we stated on May 29, a retrospective tax makes it impossible to effectively manage shipments to meet customer needs. If indeed it is the intent to manage shipments to the proposed market share, then a prospective application of the surge tax is the only practical business solution.

As also stated on May 29, the Alberta industry strongly advocated the continuation of litigation before entry into force of the agreement. It is important to set legal precedent to prevent further trade cases against Canada; namely, Lumber V. Since we have received further important legal decisions since April 27, it is essential that the agreement now preserve these new legal precedents.

Since all of the provincial associations have rejected the agreement in its current format and all have recommended a resumption of talks so that changes to the agreement may be incorporated, a pan-Canadian position is being developed through the Canadian Lumber Trade Alliance. The intent is to provide the Government of Canada with a list of changes required to make this agreement palatable for all industry across Canada; not necessarily a great deal, you understand, but something that the industry can live with, can survive with.

The Alberta industry is fully supportive of this process and expects that the federal government will use the CLTA's list of issues to derive an agreement that can be accepted by the entire industry. If, on the other hand, the agreement is left unchanged, as has been indicated by the minister and the U.S. coalition, then we can expect that the 95% threshold for the assignment of deposits will not be achieved and that the entire withdrawal of litigation will not occur either.

As stated earlier, the Alberta industry remains hopeful that a commercially viable agreement can be achieved. We look forward to continuing to work with our federal and provincial governments to that end, so we offer the Government of Canada the following recommendations.

One, incorporate a provision in annex 7, paragraph 4, of the agreement under Canada's softwood lumber national export monitoring system for a choice between whichever is the greater of the base periods of either April 1, 2001, to December 31, 2005, or January 1, 2004, to December 31, 2005, as was tabled by the federal government during the negotiations.

Two, extend the termination provision in article XX from 23 months to 48 months and extend the written notice from one month to six months.

Three, ensure that all legal precedents from NAFTA and the United States Court of International Trade are preserved in the agreement.

And lastly, ensure that the Government of Canada incorporate the CLTA settlement issues list into the agreement.

In conclusion, I wish to state emphatically that it is unreasonable for our government to expect the Canadian industry to accept an agreement that has such potential to cause a devastating long-term impact on our businesses and negative consequences for the economy as a whole. We cannot be asked to pay too high a price for too little certainty.

Thank you. I'll be pleased to answer questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Wakelin.

We'll go now to questioning, and we'll start with the official opposition, the Liberal Party.

Mr. Maloney is first.

[John Maloney, Liberal, Welland, ON]

As you're aware, one of the contingencies for this agreement to proceed is that 32 private litigation actions would have to be withdrawn.

Ms. Lim of the Ontario Forest Industries Association, I believe, has four of these. What is your position?

[Jamie Lim]

We haven't crossed that bridge yet because we are hopeful that the Government of Canada will recognize, when you've heard so many people say this deal is not commercially viable, that it needs to be reopened, be amended, and be made a commercial agreement, not just a political agreement.

I can tell you that I have some members who are being forced to accept the deal because of their cash liquidity issues--they're being left with no choice--and I have other members who would never accept the agreement as it's written right now. So we still haven't crossed that bridge.

What I am doing on my members' behalf is advocating for a change of Government of Canada priorities. That change needs to be that we initiate a loan guarantee program ASAP, so that while we're having these discussions, we can ensure that Canadians keep their jobs, that they keep working, so that we're still going to be around by the time we do get to maybe munch on the carrot that's being dangled in front of us late in the year. Without the loan guarantee program, you're going to see more of what we've been seeing week after week across this country. It's devastating Canadian families. You just have to spend time in northern Ontario and you'll feel the devastation. That's one priority we're advocating.

As I said, the text has to be amended. We're also asking that the Canadian government stand up for the Canadian industry, just as the U.S. government stands up for its industry. Those are the things we would like to see happen right now. I wouldn't underestimate the tone that I'm hearing. On the conference calls that Mr. Wakelin referred to, I've never seen so many companies participating. There is a lot of unrest here.

[John Maloney, Liberal, Welland, ON]

Mr. Wakelin, would that sort of logic apply as well to the 95% threshold that you mentioned? Are you prepared to say no?