International Trade Committee on Aug. 21st, 2006

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Thank you, Mr. Chairman.

My first question is addressed to Mr. Parent. We all agree that the industry and workers are currently facing a crisis. However, let's come back to the agreement itself and what it means for the industry. I presume you were present during Mr. Johnson's testimony.

According to him, this agreement will provide a framework for the industry, bringing security and specific gains for both Quebec and Canada. He was very clear in that regard. The two fundamental points are that this agreement will ensure the survival of the industry and the firms that operate within it. Furthermore, the mechanism whereby the federal government will subrogate in the rights of the industry means that some money will be returned by Christmas time or perhaps even by Halloween, which would solve a lot of problems and allow businesses to reinvest, as has been requested.

I would like to hear your comments on this. I'm talking about the agreement. I respectfully believe that it will solve a lot of the problems workers are currently facing.

My second question is for Mr. Rivard. I paid careful attention to both your testimony and your brief. You mentioned the fact that the crisis the industry is currently experiencing is related not only to countervailing duties, but to the rise in the Canadian dollar as well. We all agree that this is a problem. However, don't you think that settling the dispute and the fact that there will no longer be countervailing duties levied would counteract some of the negative effects the industry is feeling because of the higher Canadian dollar?

Also, you raised a great many points where you say that this or that is necessary. Those points are all well taken, but an out-of-court settlement is never perfect for either of the parties, because the basic principle involved is that each must make concessions.

As Mr. Johnson stated a little earlier, we could lose our legal cases at any time on a purely procedural matter, rather than on the substance of the case. If one of our arguments didn't fly and the whole thing collapsed, what would your perspective on it be? Do you not think we would end up in a bottomless pit, if that were to happen?

[Sylvain Parent]

I will try to address all of your questions.

To begin with, I'd like to comment on the assertion that the softwood lumber agreement defines a framework for the industry. At first glance, one could say that it establishes a framework of sorts. However, we have strong reservations because in the past, particularly with the quota system, the situation has always ended up being called into question, something which had a direct impact on operations on the ground. As I said earlier, the industry in Quebec and elsewhere is experiencing an unprecedented crisis. It is a combination of several factors: the softwood lumber dispute is a factor, energy is a factor, fibre supply is a factor, and the cost of fibre is another. The softwood lumber dispute is part of a whole. All these factors taken together make for a completely catastrophic recipe as far as employment is concerned. Will this allow our industry to make gains? I doubt it. Everyone has concerns.

We have many opportunities to exchange views with Quebec industrialists. Do they really have any choice when it comes to supporting this agreement? The signals we've been getting from them have more to do with the economic and industrial context, which is particularly fragile. We often hear it said that this is the worst possible settlement, but we are forced to accept it. That is probably the case at this time. The industry has a structural problem, and that has far-reaching consequences. Indeed, Mr. Wilson said this morning that the most important reason for ratifying this agreement is that it will protect 300,000 jobs. But there's still a lot of work to be done in order to protect those 300,000 jobs and reassure Quebec workers as a whole.

Last month, 14 sawmills whose workers are part of our organization stopped operating temporarily, but for an undetermined period. Job losses are continuing. As I noted earlier, we are talking about 7,700 direct and indirect jobs that have been lost in Quebec, and we expect to lose as many again. That is why, when people try to convince me that this agreement will provide guarantees and consolidate the industry's position, I can't help but have my doubts.

We are asking that as long as we have not come out of this crisis, the federal government establish mechanisms to support the people of Quebec and help them cope with the difficult situation we are currently facing.

[Normand Rivard]

As I mentioned in my presentation, the higher Canadian dollar is one of the most significant problems facing the industry. But let's just consider that higher dollar and compare it to the tariffs we've been paying. If this agreement is implemented, tariffs will increase because of the higher dollar and because the market is weakening, as every economist has pointed out. There is no doubt that is what is affecting us the most.

Time and again, the courts have condemned the Americans for their illegal actions. On about four or five separate occasions, courts have ruled that collecting these tariffs was illegal. We have even seen courts issue an order for the funds to be returned to Canada. In my opinion, it's only a matter of time. Certainly, if the federal government had wanted to get involved and help the industry, it could have done so. It's only a matter of time and, in my opinion, it won't take that long. Eventually, they will have no choice but to return the money, and the battle will be won. In my opinion, though, the battle has already been won.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I respect your opinion, Mr. Rivard, but it is a question that is worth asking. We heard from Mr. Johnson, who is, after all, an expert on international law. He is a negotiator and has handled litigation. He was absolutely unequivocal on that point. With all due respect, I would point out that he didn't say it was a matter of time; he said that the situation was fraught with uncertainty and that the whole thing could collapse from one day to the next, if only on a procedural point.

Did that testimony change your perspective?

[Normand Rivard]

No, not at all. As far as that goes, the federal government should be helping the industry. In my opinion, no one would have opposed it; in fact, there would have been a lot of support. I believe the federal government has a responsibility to support the people of Canada, the forest industry, and every other industry.

The illegality of the actions taken by the Americans has already been demonstrated. I often have discussions with industry representatives at the national level, in Ontario or in British Colombia. And a point on which there is consensus within the industry is the need for the federal government to support and defend Canada's forest industry. It should be providing that support, but it has not.

[The Chair, Conservative, Leon Benoit]

Thank you all.

Now we go to Mr. Julian, from the New Democratic Party.

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

Thank you very much, Mr. Chair.

And thanks to all three of you for your presentations. They are by far the best presentations we've heard so far today.

I have lots of questions. What I'll do is start off with Mr. Feldman and then go back to Mr. Parent and Mr. Rivard afterwards.

We've clarified the legal cases, Mr. Feldman. Both Mr. Johnson and Mr. Wilson admitted there are no further appeals. We're looking at two last hurdles for final victory. And I think we've clarified the termination clause. We've gone from seven years firm to 23 months firm to 18 months firm.

I'm interested in how you perceive clause 34 being used, potentially, which gives the right to the United States to terminate the agreement without further recourse to any other criteria.

I'd also like you to respond briefly to Mr. Johnson's comments. He said something about its being two or three years before we would get any repayment if we actually do the right thing, which is to get over those last two hurdles and win those victories. I'd like to hear your feedback on whether you believe that is in any way real or whether it is exaggerated, as the litigation situation was.

May I have just brief replies, please, because I'd like to come back to you.

[Dr. Elliot Feldman]

On your second question, the agreement sets out now the terms of U.S. law. It says that once there's a notice for the liquidation of the entries, within six months Customs needs to repay the money. That liquidation notice is to follow within 10 days of a final court decision saying that the entries are indeed to be liquidated.

Now, it could take a period of time to return all of the money, as there are many entries. But the first money, the money that's due from May 2002 until whenever this agreement come into effect—all of that money—is due immediately, because under the U.S. statute, Title 19, chapter 4, subsection 1504(b) of subtitle III's part III, that money has already matured for four years, and post that, all that money has to be returned within six months. That's the statute, so the notion that no money would be returned for two or three years would simply be illegal.

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

What you're saying is, if we win those final victories, or even with the decision potentially next month, we could be seeing funds as early as spring through litigation, and then continually after that.

[Dr. Elliot Feldman]

If there's no agreement, I think you'll have to complete the period of appeal under the Court of Appeal, so I think you're 12 months away—

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

Okay.

[Dr. Elliot Feldman]

—but at 12 months away you'll get two years' of the money and all of the interest immediately, and then you'll see the rest of it come in, and it'll be 100%, accumulating interest until the date it's returned.

Under the terms of the agreement, interest stops on the effective date. Some of that money is going to be withheld for up to as much as four years and will earn no interest at all. Under the terms of the U.S. law, interest is earned until the date the money is returned.

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

So with this agreement we lose a lot more than $1 billion.

[Dr. Elliot Feldman]

You lose a lot more than $1 billion.

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

Thank you for that.

On the termination clause 34...?

[Dr. Elliot Feldman]

My sense, as I tried to indicate earlier, is that we've created an incentive package for the coalition to file another petition. The terms of the agreement are a straitjacket for Canadian industry. If it works as the coalition would like it to work, there's no reason to bring another case, but if it doesn't work for whatever reason, the benefits of filing a petition are manifest and would have effect 24 months from the effective date.

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

Okay, thank you for that.

I'd like to come back to what I think is quite a staggering revelation, that the funding—the $450 million—would, as I understand it, be under the control of the White House. Congress would have no say, and Canada would have no say as to the use of that money. In a sense, in a midterm election year we'd be giving $450 million to a massive political fund.

[Dr. Elliot Feldman]

Thank you for that question, because it gives me an opportunity to conclude the remarks I didn't quite get to finish earlier.

This is in my view an historic, unprecedented, astounding intrusion into American politics. We've researched all the way back to the revolution and found nothing like it in American history.

The question I came this morning to put was, will the Parliament of Canada accept responsibility for possibly tipping the balance in American politics, in preserving the control of Congress by the President's party? This softwood lumber agreement is an historic moment in part because of that proposition, and it's up to this Parliament to decide whether it'll accept the responsibility. That responsibility cannot be shifted, and indeed that money inevitably will go to shore up the electoral aspirations of the Republican Party through the President. It's not going to be touched by Congress; it's going through an escrow fund.

These are questions that could impact American politics for a generation and impact relations between Canada and the United States for generations to come. And that is entirely in the hands of this Parliament.

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

So what you're saying is that we are not only providing money to the coalition to fight further legal battles--giving half a billion dollars to them--but we're also providing money that may go to political purposes, for the re-election of Republicans, many of whom have been most adamant against allowing free trade in lumber. It's ridiculous.

[Dr. Elliot Feldman]

The provision in article 13(A)(2) of the agreement, which lists the meritorious initiatives, contains language that could describe only a slush fund for the President.

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

Thank you very much. That is an extremely important revelation. As we've gone through these hearings, each time we have found, with witnesses, further revelations about how bad this deal is and, really, about the instability and the danger that it would create if it were actually put into effect.

I'd like to go to Monsieur Parent and Monsieur Rivard now.

You've made a very strong case for moneys to be reinvested in communities, the communities that have paid for this conflict, and you've mentioned the lack of government action, particularly the lack of support we've seen over the last few months. Do you have any sense of what would need to be reinvested in communities so that the workers who have lost jobs and lost their homes in so many cases could actually find some solace, actually find that in the end the government had stood up for them?

Of course, you've both indicated that this deal should be set aside. What is the plan A? Is it loan guarantees? Is it just finalizing those two legal hurdles? What is the best route that this Parliament and this committee should take, since the deal seems to be going down?

[Normand Rivard]

Well, as I said in my presentation, we think the $5 billion should be returned, of course. If any money is returned, we know that the federal government has participated in getting it back. Taxpayers' money has paid for that, and millions upon millions of dollars have been spent on that. We think the position of the federal government should be to tell the industry that this money must be reinvested.

In terms of reinvestment, I think we've mentioned retraining and that there is a real lack of trades out there. Money should be put in place so that older members of our workforce who are prepared to retire can do so with dignity.

In a lot of these remote communities in northern Ontario, B.C., and Quebec, when a mill shuts down, everything shuts down. The older workforce may be able to retire and stay where it is, but the younger workforce just leaves and never comes back. So money should be invested in retraining. Moneys should go to the older workforce to retire with dignity--we made that proposal. We should also make sure that the industry reinvests in the sawmill industry, the forest industry, in order to remain competitive, in order to have efficient operations, so that it can compete with the rest of the world.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We have about 13 minutes left, but members of the opposition have requested that we deal with two motions brought forth by Mr. Julian before the one o'clock break for lunch, so we will do that. I understand they have planes to catch, so we certainly will accommodate that.

I'd like to thank you all very much for coming today, gentlemen. I know your time is precious. So thank you.

We won't have a break here. We'll go directly to the motions.

Yes?

[Normand Rivard]

I have a question. Could you tell me when the MPs' vote on this deal is going to take place?

[The Chair, Conservative, Leon Benoit]

The vote? No, I can't. That'll depend on when.... There are too many things to be decided still. Of course, we'll know tonight whether industry has bought into it at an acceptable level for it to go ahead or not, and we can't go beyond that.