International Trade Committee on Aug. 21st, 2006

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

My question is about loan guarantees. You have made much of the fact that the industry needs money and liquidity. The motion the Committee will be debating asks the government to immediately introduce loan guarantees that the Canadian lumber industry has been demanding for a long time. Are you not prepared to acknowledge that for years now, the industry has been asking for loan guarantees that could provide some stability?

[Pierre-Marc Johnson]

If this agreement is ratified and implemented, it won't need them.

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

That was not my question. For quite some time now, the industry has been asking for loan guarantees. We see that the Conservative Government here in Canada has tried to sidestep the issue by telling the industry it will be on life support if it doesn't sign this agreement, as bad as it may be. That's the major problem that we see. We know full well that the industry is asking for loan guarantees.

I know you have extensive legal training with respect to the dispute settlement mechanism. This agreement completely rules out the possibility of using the dispute settlement mechanism. We are giving the Americans $1 billion and telling them that even if they break the law and show no respect for the dispute settlement mechanism, they can still keep the money.

Are you not concerned about the fact that other trading sectors in Quebec could be targeted by the U.S. government in future trade wars, and that Canada and the industry could no longer rely on the dispute settlement mechanism in such cases? We had it but we didn't use it.

[Pierre-Marc Johnson]

To my knowledge, even though one might consider the Americans' actions to be almost an abuse of process, they have never sought a remedy outside the existing framework of the WTO and NAFTA. They have used every single mechanism available to the fullest—some would say, ad nauseam—and it's not over yet. It could go even further in the case of at least two actions, not to mention those under way domestically.

American society is a society that thrives on litigation. It's a society where people try to use the courts to resolve a lot of issues. In Quebec and Canada, we tend to be more consensual; we try to find accommodations. American society prefers to see the matter settled and relies on the law and the legal profession to do that. That's why there are so many lawyers there. For example, Japan has a population of 100 million but only a few hundred lawyers, whereas the United States has tens of thousands of them in every State. They are very different societies, with a different approach to problem-solving.

I tend to want to focus on empirical evidence in that regard. I look at what happened after we reached other agreements on softwood lumber with the Americans; they always abided by the terms of those agreements. The U.S. government will commit to that. It's going to do so in a letter, according to what Mr. Emerson told us last week, and it intends to implement the agreement for seven to nine years. We can therefore assume that it has no intention of terminating it. Why would it? I wondered why it was focussing so much on this. The other agreements did not include a termination clause, meaning that it could have terminated the agreement at any time with one year's notice, whereas now, it can only terminate it after 18 months. It will also have to give six months' notice. So this is a 24 month agreement, with one year of free trade, or standstill, which means three years for our companies, in actual practice. So, either the agreement is in force or there is free trade, in the worst case scenario.

And how would that worst case scenario come about? Well, in my opinion, the only thing that could prompt the Americans to terminate the agreement would be if British Columbia decides to sell its timber in such a way as to considerably disrupt the market. They would surely be of the opinion, were that to occur, that B.C. companies were in the process of taking back a huge share of the U.S. market, given that the Government of British Columbia would have to get rid of the pine beetle-infested lumber. That timber is available at very low prices, which means that companies could, theoretically, sell it at a very low price. Sometimes I tell friends in Quebec that their next cottage will be built with pine beetle wood from British Columbia, because it will be much cheaper. British Columbia wanted to defend its pricing system, but what was it offering in exchange? The Canadian government probably had to agree to allow the U.S. to terminate the agreement if it considered certain practices to constitute an abuse.

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

Mr. Johnson, the Committee would in fact like to travel to British Columbia to find out what the people of that province think of this agreement.

I want to come back to the matter of litigation, which you have already talked about. You said that the alternative would have resulted in even more litigation. In fact, two are currently under way: the case involving Tembec, which is before the United States Court of Appeals for the Federal Circuit, and one which is currently before the NAFTA Extraordinary Challenge Committee. I put this question to Mr. Emerson and Mr. Wilson this morning. They answered that there would be no appeal of the ruling handed down in these cases. In fact, they would eliminate illegal tariffs. They would force the U.S. government to pay back the full amount, rather than retaining $1 billion. If the federal government is able to provide loan guarantees, why should we go ahead with such a bad agreement when we're so close to victory?

[Pierre-Marc Johnson]

I have no doubt that a number of individuals seated directly behind me will be able to explain all of that to you this afternoon. However, I think there are one or two questions you should put to them. First of all, if you lose on appeal, what happens next? For example, we could lose in front of the U.S. Court of International Trade on the matter of that court's jurisdiction, rather than on the substance of the case. What would the consequences be if we lose?

On the other hand, even if we win, when could we expect to receive the cash deposits back? In my opinion, it would take at least two and a half to three years.

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

What are you basing yourself on to make that assertion?

[Pierre-Marc Johnson]

I'm relying on what happened with two similar cases in the early 1990s. Between the time when a ruling was handed down by the final level of appeal and the cash deposits were refunded, more than two years elapsed.

Also, it is pretty well certain that if Canadian companies and the Government of Canada win both of these cases, the coalition—an observer of which is here today—will launch new countervailing or dumping suits. They'll take a few months…

[The Chair, Conservative, Leon Benoit]

Mr. Johnson, I'm sorry to interrupt, but the time is more than up. I think the committee wanted your answer, so I allowed it to go ahead. And thank you very much, sir, for coming today. I know your time is extremely valuable, and I do appreciate so much your presentation and your answers to the committee members.

We want to get into the next committee meeting, but before we break, I do want to say that members of the opposition have asked that we deal with the motions at one o'clock, at the end of the next session, because some have to catch airplanes, so we certainly will accommodate that.

Let's start this next session right away. We'll take 30 seconds here. If the next witnesses come to the table, we'll start the next meeting in 30 seconds.

Thank you. This meeting is adjourned.