International Trade Committee on Aug. 21st, 2006

[Pierre Paquette, Bloc, Joliette, QC]

Thank you for your testimony, which is quite troubling. When you hear this, you clearly understand that part of the industry is supporting this agreement practically by default, because it can't see any light at the end of the tunnel. It makes you wonder just how much support there really is for this agreement.

Before continuing, I would like to put a question to Mr. Chevrette and Mr. Milton, so that the information is on the record. I want to point out once again that we checked with the Office of the Auditor General: loan guarantees do not appear in the votes. This is not an Industry Department expenditure and, consequently, there is no mention of it anywhere in the votes. That is one of the many half-truths, not to say something else, that have been bandied about regarding this issue.

Mr. Chevrette, I would like to come back to the process itself. I'd like to read the final paragraph of a letter Mr. Emerson sent to members. It's somewhat paradoxical:

The government has involved your industry and the provinces in every step of this process. I am aware that it was a long and complex one, and I want to thank you for your cooperation thus far.

According to the Minister, it seems the process was perfect. We were told over and over that the industry was consulted and involved, and that the provinces were as well. Indeed, you used a particular expression… And I basically said the same thing—using different words—to Ambassador Wilson this morning. Throughout this process, we have had the sense that it was take it or leave it. Even when we were talking about relatively minor technical amendments, it really seemed that changing the text to reflect industry concerns was something the government found extremely painful. You mentioned that the process needs to be revisited.

In your opinion, does this “do or die” approach detract from your ability to express your concerns and make changes to the agreement so that it is less imperfect?

[Guy Chevrette]

It's a question of deadlines. What happened on April 27 is a good example: we were given 48 hours to consider the proposal, and it was take it or leave it. But we operate according to certain rules. Our bylaws require a minimum of three days notice to call a special general meeting, setting aside all the rules. It really doesn't make any sense. We went along with it, we abided by the rules and were able to negotiate a few minor changes on the morning of April 27. But the day before Canada Day, once again we were told we could take it or leave it, and we had to hurry up and make up our minds. Really! We got together on July 11 and explained our reasons, but the fact is we were heavily pressured!

I agree with Mr. Wilson that it is not a good idea to drag out discussions indefinitely on a single issue. However, it is important to take the time to explain to other industry leaders what the ground rules are, particularly in light of the difficulties Quebec is currently experiencing and the current structural crisis. People want to try and figure out whether this can save their skin or not. You have to take the time to explain things. Perhaps we'd have taken the time. I will certainly be submitting written comments about the process. I don't want to conduct this post-mortem on my own. I'd like to do it with my association's international trade committee. We will be sure to let all parliamentarians know what we went through and how we think the process should work.

I said earlier that free trade had become trade in legal services. The astronomical cost of ensuring the rules are enforced, supposedly to avoid disputes, is absolutely ridiculous. We are spending a fortune in legal fees. By that, I certainly don't mean to minimize the work carried out by our legal advisors in that area, but we are talking about astronomical costs to enforce a rule that is supposed to be very simple. I get shivers up my spine when I think of the kind of technocratic rules that are going to be developed to manage the export quota rules. It's pretty obvious: it will be one form after another, and we're going to be asked to justify hiring 50 or 100 officials. Who is going to pay for all this? Well, the industry is going to have to pay, and the rest will go to the provinces. That is basically what it says in the text. Can we possibly arrange things so that the provinces have to pay more and it costs the industry less?

[Pierre Paquette, Bloc, Joliette, QC]

Well I hope you'll send us your post-mortem report, as you said. I think some thought has to be given to all of this.

Mr. Milton, you concluded by saying that you hope Parliament will give the industry a choice. I'd like you to elaborate on what you mean by that. Exactly what choice would you like Parliament to give the Canadian and Quebec lumber industries?

[David Milton]

Certainly. The choice that I'm referring to, Mr. Paquette, is the choice that we started out with, one we thought we had from the very start of this adventure, which was the return to complete and full free trade and our absolution against these allegations: you're subsidized; you threaten us with injury; you're injurious to us. The pact that we made among ourselves in Ontario--and I will suggest that we were in the forefront of galvanizing the Canadian version of the alliance to meet the allegations--was that we know we're not subsidized, we know we are not injuring the United States, so let's have our day in court, and an independent court of competent jurisdiction will uphold that we are right.

Now we are on the cusp, right on the edge of the last two or three pieces that we need. Whether or not there's a deal afterwards, a conclusion, what we ask Parliament to do for us is to have the legal process fulfill itself, to make the pronouncements. That's it. If at that point the only resolution with the Americans is that we don't really care whether you are subsidized or you're injuring us--that was all a facade--and that what we really want to do is manage trade, then we'll open that discussion then. As we've always said in Ontario, we're not averse to a deal, but we are not accepting of a deal in which the allegations made against us are so trumped up that we feel we have to bail out because it's the end of the line and we've run out of money.

Peripheral to that, of course, are the loan guarantees that were requested from many quarters over many months simply to allow us to continue the legal cases to their conclusion on the understanding that the people of Canada would ideally receive 100% in return, once all was said and done. We want a guarantee so we can get our money back.

Those are the two things we've been asking Parliament for.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Milton.

Time is up, so now we'll go to the government side. There will be three members asking questions, gentlemen. They're all going to ask the questions before we go to responses, so just note the questions.

We'll start with Monsieur Paradis.

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

My question is addressed to Mr. Chevrette.

Mr. Chevrette, thank you for your testimony. There is no doubt the industry is very well served by someone like you. You describe the situation facing the Quebec industry clearly and succinctly for the benefit of people who know less about what is going on than you do. I understood you to say that you will be preparing a report. We will study it carefully. There is no doubt that there were several possible courses of action and the government had to follow one it felt it was appropriate.

I want to be sure I understand your testimony. Although you may want to comment on certain aspects of the negotiations, it is important to emphasize that some demands made by the Quebec industry were met. I'm thinking here of the termination clause and other points, such as the standstill provision.

But I just want to be sure I understand. Does the Quebec industry see this agreement as a shot in the arm? You said that there were many different reasons why people voted to accept it, and that it wasn't just a matter of money. Some demands were met.

[The Chair, Conservative, Leon Benoit]

Mr. Lemieux, go ahead, please.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Thank you.

Before I ask my question, there are two key pieces of misinformation I'd like to correct. The first has to do with termination.

This morning we heard that the agreement was in effect for 23 months, and then there was a one-month notice. Then Mr. Julian brought up that it's 18 months. What he didn't bring up is that there is then six months' notice. Industry asked for this change, and it's a good change for industry because it gives them more time to react to the situation that's unfolding.

But what's key here is that in both cases it's 24 months before the agreement is terminated. I bring it up because I think Mr. Julian needs to be more forthright on this matter. When we read 23 months, he made no mention of the one-month notice. In fact, he cut off our ambassador when he was answering that question. When the ambassador answered the question fully, Mr. Julian summarized it and said “18 months”. No, that isn't what the answer was.

So I encourage all of my colleagues when we're talking about important clauses like termination to speak in full sentences. When you say “18 months”, add the six months' notice. And while you're at it, you could also add that there's a 12-month standstill at the end of that 24-month termination part.

The second thing I'd like to clarify is a comment that was made on benchmark prices. A comment was made that at current benchmark prices, industry would be paying more in tariffs than under the current American tariffs. But there are some facts that need to be brought to light. The first is that the U.S. is going to be recalculating this tariff this year, and it's going to be raising it to 14%. Under the new agreement, Canada will collect the money, not the U.S. treasury. It's important to note that. And the tax rates will not be subject to yearly changes.

So again, when we're talking about these important clauses, we need to talk in full sentences so that people have all of the information.

My question I'd like to put to Monsieur Chevrette is this: could you highlight for the committee some of the key benefits to the lumber industry that you see this agreement offering?

Thank you.

[The Chair, Conservative, Leon Benoit]

Mr. Cannan, to end the questioning before we go to answers. You have now about three and a half minutes left.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Is that including answers?

[The Chair, Conservative, Leon Benoit]

Including answers.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I'll go right to the answers, then. Let him answer.

[The Chair, Conservative, Leon Benoit]

Okay, go ahead then, gentlemen, with the answers.

Mr. Chevrette, I believe it was directed to you initially.

[Guy Chevrette]

With respect to the points raised by Mr. Paradis, I addressed them at the outset but I will quickly review them again.

First of all, the addition of a 12-month period after seven years is a positive change, from our perspective. A term of six months, rather than one month—even though that doesn't change the 24-month timeframe—is a positive change as well, because it allows us to take action and possibly change the direction the wind is blowing in. Those six months will allow us to engage in discussions, negotiations, ad campaigns and basically do whatever we need to do by way of communication.

As regards the flexibility committee, that, too, is something we see as being positive. There is no doubt in our minds that the Americans already know quite enough about flexibility. In fact, we ourselves went and explained to them how important it was where commercial transactions are concerned. We can assume that they know something about this. The Americans will certainly be discussing this with their own industry, which is already well aware of the issues.

The Americans have assured us that we will be heard as regard anti-circumvention. The goal is really to concentrate on softwood lumber, not on the forest management system. You know what that involves. A province could argue that in the agreement, it talks about “forest management systems” and that as a result, it can't make any changes. Let me give you an example. If a change were to be made with respect to pulp wood, which is worth maybe 25¢ a cubic metre, and pine beetle wood in British Columbia, they might be able to argue that our forest management system has changed. That would penalize us, even though it has nothing whatsoever to do with softwood lumber.

As for your question about the benefits of this agreement, I already answered that extensively in my reply to Mr. Lemieux.

[The Chair, Conservative, Leon Benoit]

Would either of you other gentlemen like to answer the questions that have been put so far?

[Guy Chevrette]

You're talking about pricing? You say that the provinces will get the money, but the fact remains that it's the industry that pays.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Cannan, you have time for a short question, if you'd like to ask a short question.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I just wanted to clarify the aspect, Mr. Brodrick, involving Alberta and the Alberta lumber association. You said you're speaking from a personal perspective. Did the association bring a position to the table as well?

[John Brodrick]

They were here on July 31, and I'll let that stand. No, I'm here as mayor of High Prairie.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

As far as looking at the two options we've heard is concerned, it's like Monty Hall with door number one or door number two: number one, the agreement we have, with the Alberta government, the Ontario government, the Quebec government, the Atlantic provinces, and the ambassador has indicated that industry's coming onside; versus the uncertainty of going down the path, as we've heard, of three or four years before we probably get the money back. Do you still settle with going that route rather than taking the bird in the hand?

[John Brodrick]

Exactly. If the only question were, do you want this deal, and if you don't we'll go back to Washington, carry on litigation, and try to get you a better deal, that's where we'd be today: at the second choice. But we haven't been given that choice. We've been told by the government, take it, or we're walking away and leaving you an orphan. That's the problem.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

But if you have nobody to negotiate with at the other end...? That's the option we have at the other end as well, so I think it's the best deal in the situation.

[John Brodrick]

I think we've heard three times now that “this is the final...”. Every time, they go back and get something else. I don't agree with that.

[The Chair, Conservative, Leon Benoit]

Thank you.

Now we go to Mr. Julian from the NDP for seven minutes, please.

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

Thank you, Mr. Chair.

Thank you for your presentations as well.

I certainly agree with Mr. Brodrick when he says the government keeps coming back; I wouldn't say necessarily they get something else. We started off on April 27 with a seven-year firm termination clause that's gone to 23 months on July 1. Now we're at August 21 and it's down to 18 months. Article XX, as Mr. Wilson confirmed this morning, says that after 18 months after entry into force, either party may terminate this agreement. That's not including, of course, the fact that the United States can pull it on basic allegations of non-compliance at any time.

So when the government says this is a stable agreement, I'd certainly admit it looks like a stable, and more and more it's starting to smell like a stable; I certainly wouldn't say it is a stable agreement in any way, shape, or form.

I'd like to come back to your presentations; they were excellent. I'll start with Mr. Brodrick.

You raised some really serious concerns about what the impact of this badly botched negotiation and this badly flawed deal could be in your community and your region. I'd like you, if you could, to respond with a little more detail: what you're hearing in your community, and what kinds of consequences could happen in your community and your region if we tried to ram this deal through.

Mr. Milton, you raised two very important issues. One was the issue of the running rules. I'd like you, if you could, to go into a little more detail about the various punitive measures that happen retroactively and how they could impact a business. You talked about the quotas being set on a monthly basis, but I'd like you to go into more details, because we heard this morning from Mr. Wilson that there have been no changes to running rules.

You also followed up on the revelations by Mr. Feldman that $450 million is going to the White House. You have to think there must be some reason to try to ram this through. Maybe the Conservatives want to help their Republican friends. I'd very much like to hear a little more detail there.

Just to conclude, Mr. Chevrette, I have to say I'm really sad to hear that the Quebec industry has been treated so badly by this government and is now divided. You said that loan guarantees would have changed the Quebec industry's approach to this agreement.

If, as expressed by the vote we had here barely an hour ago, loan guarantees were provided over the next few days, would that change things, in that it would be possible to provide the Quebec industry with the assistance it so badly needs?