International Trade Committee on July 31st, 2006

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

According to the agreement as it is currently written, the Government of Canada will get back $4 billion from the U.S. government and will give them to Canadian producers. However, if it decided that this agreement is not acceptable, it could offer loan guarantees to producers. Those guarantees would reassure bankers and possibly investors. However, investments are more based on medium- and long-term considerations than the financial security of a bank.

[Stephen Atkinson]

I think I understand now. Sorry.

I believe a lot of this depends on whether the U.S. really does want a solution. We have seen changes, and at the same time, we're told, that's it, the case is closed; if you don't sign, watch out; this is the best we can do, etc. That's basically what I've seen. When you talk about the change, like 23 months, you do ask yourself.... Yet they can't wait to get at us, which certainly for eastern Canadians could be very damaging in terms of these different duties or penalties.

The question is, do we have any room at all? If we do make these loan guarantees to the industry, will we be able to go back and do something better? I don't know the answer to that. Clearly it's something that I think is worthwhile.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Atkinson.

Monsieur Crête, your time is up.

Now to the Conservative Party, Ms. Guergis.

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

Thanks very much, Mr. Chair.

I'll start with Mr. Atkinson. I may be splitting my time, depending on whether my colleagues have a question.

Some of the comments you made in the recent weeks indicate that you weren't aware that Canada actually did force the United States to concede on a number of points.

I just want to take you through a few of those points, the first one of course being the termination clause. Your termination period is the standard for international agreements and it was implicit in the April 27 framework. I'm happy to actually list off a number of them. I have a list of 17 agreements where there are six-month termination clauses, and it doesn't mean those deals were only for six months. So the termination clause that we were successful in having secured at 23 months is far better than what we had before.

I think a one-year moratorium on trade action is substantial as well. Again, this is something the United States did not want and we were able to convince them to go forward with it.

The other concession is the anti-circumvention clause. The U.S. did not want this, but Canada persisted. Because of the anti-circumvention clause, the provincial sovereignty over forestry practices is protected. This includes B.C.'s market pricing system.

Another concession the U.S. made is the dispute settlement mechanism. They did not want this in the agreement, but we insisted. Disputes will be addressed using commercial trade law and not American trial law, as we have in the past. I think that what is just as important here is that they are enforceable and effective remedies and that if Canada wins a dispute it can reduce the border measures accordingly.

If you want to comment on those, please feel free to do so.

I see that you don't address any of these concessions in what I have read in your report, nor do you actually tell us what you think the alternative to this deal would be. I'd really like you to tell us what you think the alternative is if this deal does not go forward. Tell me your opinion, and be very detailed if you can.

I'll leave it at that.

[Stephen Atkinson]

Thanks.

My apologies, to begin with, if I have misrepresented you--meaning the Conservative Party, of course.

In terms of looking at the agreement, as I say, the big thing is, can we do something about our costs? We are looking at a lot of bankruptcies. Sadly, or maybe positively--it depends how you look at it--I do see the Canadian dollar going up, that it is a proxy for oil prices. China and India are not going to slow down in their consumption. So I do look at the industry getting weaker.

So where I write about the agreement, basically pointing out how much money we're going to lose and looking at it from that perspective, of course a lot of it relates to currency as well. Overall, clearly those are positives that I missed, but at the same time, I am looking at it in the way that, under the agreement, especially if we don't have a quota, if the B.C. interior runs flat out, is it going to knock out the pulp mills in northern Ontario? Sure it will. So I am looking at it more from that perspective.

Can we do a better deal? I don't know, but the big thing is policy exits. How do we get out? And at the same time, can the provinces put in a market-based system?

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

Would anyone else care to comment?

[Simon Potter]

I'd like to make a comment on the termination clause. I think we have three aspects here that really make this a separate case from these other agreements that you're mentioning. I think it's only fair to say that in those other ones, those deals weren't bought with my billion dollars. That's a big difference here.

The second difference is that those other agreements you mentioned weren't done in settlement of an extremely litigious dispute, a very long-standing, hugely litigious dispute in which one party appears to have been willing to do almost anything in that litigation.

Thirdly, those other agreements don't have the situation we have here, where we've lived through five years during which the American government seems to want to do just whatever the coalition asks.

So I really don't think in those three circumstances it is enough of a reassurance to the Canadian industry, faced with a termination clause of 23 months when they were told they were going to get seven years, to just say, well, that's normal. In those three very specific circumstances I gave, it's very reasonable that we should ask at least for the assurance that the power of termination in article XX will only ever be used as a last resort and only if consultations show that the agreement cannot be made to work properly.

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

May I suggest to you that this is and has already been talked about and agreed and discussed?

[Simon Potter]

Talked about--that's fine. I'd like to see a letter, and so would members of the industry.

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

Consider that just to be the whole basis of the agreement, in my opinion, here looking at it.

[Simon Potter]

With great respect, that may be so, but presidents who have to make decisions with large numbers of employees at stake, great investments at stake, would like to know more than that that seems to be behind the agreement anyway. They would like to have some clear assurance of what I've just said.

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

And what do you think is the alternative, then, without a deal?

[Simon Potter]

As I've said, I think it's a reasonable choice by a company that can weather the storm for another couple of years--

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

There are a lot of them that can't weather a storm any longer.

[Simon Potter]

I agree, and it's a reasonable choice for them not to want to, but in the absence of the assurances that I am talking about in my paper, there will not be the 95% approval that the Government of Canada has said it wants before going forward.

In order to get that approval and in order to save the agreement, which your government wants, I believe it's necessary to find some way of giving the assurances I've identified. That would allow people to say, I'd rather settle than continue to try to win in litigation.

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

And you do recognize that the binational committee and the other committees and such will be available afterwards to continue to work.

[Simon Potter]

Just as they've been available to us now, so far in the litigation, and they've worked very well. We've won near unanimous good judgments from them.

People can argue this on both sides, and I am not arguing for the one or the other. I am actually advancing proposals designed to ensure that you can get your agreement.

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

Mr. Potter, I'm going to go back to some comments you made in February 2006. To quote, you said that “any system, no matter how well thought out at the beginning, can be made to fail by a determined litigant who does not care whether his tactics imperil that system”.

We all know how determined the coalition is, and we all know that in the case of softwood, litigation has failed. The option to not having this deal is continued litigation over and over again. I think it's been proven time and again.

[Simon Potter]

I did say that, but I didn't know it was in February 2006. I thought it was a bit earlier, but never mind. Whenever I said it, I think I was right. But with respect, I did not say that the litigation had failed. I said that any system, no matter how well designed, could be made to fail by a determined litigant. The system has indeed failed in softwood lumber. The litigation is starting to succeed; it has not failed.

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

Regarding the dispute mechanism in the agreement, do you acknowledge that as being a positive step?

[Simon Potter]

I'm proud of myself enough to say that I could have made it better, but yes, I have always said there ought to be a dispute resolution mechanism in the settlement. There is one there; I'm very glad. In some ways, it looks unwieldy to me, but I'm very glad it's there and I'm sure it will prove useful.

But we have dispute settlement, have used it, and have many victories in the current dispute. We're heading in the right direction. Some people could say, let's stick with that, rather than pay a billion dollars for 23 months. I'm hoping they don't. I'm hoping we can find a way to get them to agree not to say that.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Guergis.

Mr. Julian, you have seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair.

And thanks to each of you for coming forward today to give your comments on this important issue.

All day, we've been hearing from many industry and provincial representatives. With one exception, everybody has either been opposed or raised serious concerns about this proposed deal.

I'd like to pose specific questions for each of you.

First, Mr. Duncanson, you raised the issue of the deal being final. You said you hoped it wasn't true that there needed to be changes to make the deal more commercially viable. I'd like you to specify what makes this proposed deal not commercially viable right now. It could be the running rules, the complexity of quota and export tax, or the huge volume of paperwork. I'd like to ask you that.

Then, Mr. Atkinson, you raised a number of issues. The lack of policy exits, I believe, was what you were referring to when you talked about waiting 18 months, and you also talked about the incentive to sell raw logs, which is a huge issue in British Columbia. The softwood communities are justifiably concerned about seeing logs leave their communities and go elsewhere, which means jobs literally going down south. So perhaps you could expand on those two points.

You also made two specific references that Canfor will shut down lumber mills and that mills in northern Ontario won't be around. I'm wondering what your sense is on the number of mills that will be shut down as a result of this botched deal if it is implemented as is, and how many jobs will potentially be lost?

Finally, Mr. Potter, you raised the issue of Lumber V, which I think everyone agrees we're going to be into at some point. The question is whether or not we give away half a billion dollars to the American industry to fight Lumber V, and whether we give away four years of litigation that we've continuously won?

I agree with you that we're now at the point where litigation is becoming successful, because we're at the point where we have the two last hurdles to get over. So do you have concerns about fighting a Lumber V, having given away the benefits of the litigation--which according to Mr. Grenier cost over $100 million, so essentially we're starting from scratch—and having given half a billion dollars to the American industry as well?

Those are my questions to start. Thank you.

[John Duncanson]

If I can remember your question to the point on the commercial viability, we've heard that term mentioned several times here from Mr. Potter as well as from a number of the industry reps in the associations. I'm in agreement with him.

I think, for example, that on article XX, the termination article, I did learn something today. I had not realized--and not being privy to the behind-the-scenes negotiations that all of you have and the members of the associations have--that had been requested by B.C. But I do feel that the 23 months is not commercially viable as far as having the companies sign on is concerned. I think it's fairly evident that they want either a letter or just an acknowledgement that we tried to get a little bit longer. I think the standstill definitely helps going forward.

The biggest commercial viability of the deal as it is right now is the return of the $4 billion. Maybe you didn't get my gist when I was saying that probably the one biggest problem we've had in the past five years in previous softwood lumber cases has really been the damage it's done to the capital investment in the Canadian sawmill industry. It really has been very much interfered with. I personally, as I said, think that to the extent a deal can change that situation I support it. Four billion dollars is a lot of money. With the current anti-dumping and countervailing duty, and with the prospects of a softwood five around the corner, the investment in this industry will dry up to virtually nothing.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'll stop you there. Thank you. I have to divide the time with Mr. Atkinson and Mr. Potter.