International Trade Committee on Aug. 21st, 2006

[John Brodrick]

To address your concern about High Prairie, at this moment the pine beetle has been found within 100 kilometres of our town. So you can see our concern.

One of the responses I heard at an earlier meeting today was that the anti-circumvention clause would look after that, that it would allow us to address the pine beetle. Yes, in the forest management regulations themselves it likely would, but it doesn't give us any more wood to ship across the border or any more right to ship any more wood across the border. What do we do with it? That's the problem. Alberta is going to be in the same position as B.C. is in right now.

Actually, I did attend a pine beetle summit in Calgary that was put on by the provincial government. They flew us out to B.C., and I met with some local mayors out there. With the devastation, they're standing around scratching their heads; they don't know what to do.

It's not only the lumber part of it either. It's siltation, dead forest, forest fires, floods, the whole shooting match. If you don't have ground cover....

In a couple of the towns, they had a wilderness tourism industry that they were really working on. I'm sure I don't know anybody in this room who'd want to camp in a dead forest; I sure as hell don't. That's one of the things.

How would it affect our town? We're a very small town of 3,000 people, though we do service approximately 17,000 in the surrounding area. But if you get rid of 600 jobs, I don't know what we'd do. I really don't.

[David Milton]

Let me talk about running rules for a minute. There's the vision of what they should be, if you had to have them what they would be, and what you think you have.

It was the expectation in Ontario for the longest time that if you were going to cut a deal, if you were going to get a deal, it would not be very much dissimilar to some of the previous deals where there has been allocation of a border measure as a quota.

You're a company. You're assigned a quota on the basis of something--export experience, percentage of volume, production--and that's your quota. You may be constrained that within every 90 days you have to ship a certain volume and you can't go more or less than 5%, you can't accumulate, and you can't roll over. My colleague Monsieur Chevrette talks about the same things and the discipline that companies have had. Even small and medium-sized companies can deal with that.

The running rules as we know them now are adjustments monthly, surge mechanisms, certain percentages you can carry forward. Some you can carry backwards, but you can't add them up, and these can't be subtracted. What happens during the end of a period of time? I'm being ludicrous and hilarious to the point that they are so difficult to understand because they're not written down anywhere. Running rules are invisible. They're not well known. Everything you think as you answer the question speculates something else. You say,“Well, what if...?”

My suggestion is that if you have to leave 10% or 15% of your ability to ship on the table in any month, in any quarter, in any period of time, that's far more than the margin your firm makes. So the running rules themselves will finish you, let alone every other thing. But complying with just the running rules alone can finish you.

But $450 million to the White House is an allegation that has been suggested. I'm happy to be party to it, because being able to speculate that it might be true may raise the attention of people to say, where is this $450 million designed to go? What are meritorious initiatives? Let's have a little look at this. What's the list of the merit?

The vision of the industry at the one time when we were talking about a deal was to improve the market for forest products within North America. We were prepared to put money into that initiative, and we in fact--the Canadians--were prepared to take the lion's share, the first largest percentage of it. All we needed was the concurrence of the United States and a mechanism.

Thank you for your time.

[Guy Chevrette]

If loan guarantees were to become available within four days and loans were guaranteed at 80 per cent, I would call another vote.

[The Chair, Conservative, Leon Benoit]

We'll go now to round two.

Mr. Boshcoff, you have five minutes.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Merci.

Mr. Milton, first of all, thank you for answering that first question: what should the deal have looked like, and what should we have got?

I will ask three questions, one of each of you.

The Ontario government acquiesced on Friday, and based on the statement that there were improvements to the deal since—and this is how I calculate—we went up from 84 months to 23 months and then we rocketed to the top of 18 months. Wait, that's not an improvement. So I'll let you try to answer: what improvements?

Mr. Chevrette, the anti-circumvention clause is of particular concern to northwestern Ontario. Regional energy and regional pricing is the same across the province in Ontario. Northwestern Ontario produces energy cheaper than the rest of the province. There's been a movement for industry, and particularly the forest industry, to get some help that way, and I'm wondering how the clause will affect it. Also, in the same way with respect to plant modernization and worker support, could we deal with anti-circumvention for those categories?

Your Worship, when we talk about refunds and errors in calculations with no appeal mechanism, how would your association still be able to support such a deal, knowing that if it made a $1 million, $2 million, or $3 million error for Alberta, you have no recourse to collect that or to settle that dispute?

Thank you.

[David Milton]

I would have preferred, Mr. Boshcoff, if Ontario had remained silent about the position of the Government of Ontario apropos the deal. I read the words, as we all did, and I can speculate only.

I'll preface it by saying it wasn't a very strong accolade. It was almost a case of saying we are doing this because we need to say something, but I would not say it was done in glowingly supportive terms, such as other provinces had done. I suspect that it came down to three things at the end: that there was some reiteration of the United States agreement, some side letter describing that they're actually going to go to seven or nine years or whatever it was; that there would be the commitment to facilitate the discussion to clarify the running rules--this would be very important and a strong incentive for Ontario, as everyone there is confused and concerned about that--and at the end, it may have been some carrot apropos the private lands in Ontario. There are private lands and private log issues in British Columbia principally. There are significant private lands in Ontario as well.

So those three things would be my speculations as to why the lukewarm acceptance from Ontario was provided near the end.

[Guy Chevrette]

As regards the anti-circumvention clause, I am not denying that this could be of some significance in Ontario. However, the agreement has not been signed yet. So far, we've only heard about it, and yet the press attaché of the Minister of Natural Resources and Wildlife in Quebec is already saying that because of this agreement, he won't be able to make this or that change in the forest management system. The agreement has not even been signed, and people are already using it—hence the need to clearly define and circumscribe the softwood lumber agreement, and avoid talking about the forest management system in general.

[The Chair, Conservative, Leon Benoit]

Mr. Brodrick.

[John Brodrick]

First, our association hasn't come out in favour of this agreement. I guess we're the only association that hasn't officially come out.

We held an industry-wide meeting. Everyone was asked to attend; not everyone did, of course. We had a vote, a round table, nothing official. It was 10 against and 5 for the deal. We came up with a position, that certain conditions had to be met before we'd support the deal. Those conditions haven't been met yet.

[The Chair, Conservative, Leon Benoit]

Thank you.

Your time is up, Mr. Boshcoff.

We'll now go to Mr. Vincent for between four and five minutes.

[Robert Vincent, Bloc, Shefford, QC]

I've been in attendance since this morning and have been trying to understand how the government could have made the decision to conclude this agreement with the United States. The unions have given their testimony and do not support this agreement. I heard the comments made by Mr. Brodrick, Mr. Chevrette and Mr. Milton. According to the mayor, this agreement was negotiated by the worst negotiator and poker player he's ever seen. I don't understand how the conservative government could possibly think it has secured the best agreement in the world. Since this morning, we have heard people say that this is the worst agreement they've ever seen in their life.

How can people possibly believe that this agreement suits everyone to a tee, when everyone who has come before this Committee has said exactly the opposite? How can you assert in the media that people support this agreement, when no one here has said that they do? I really don't get it. Someone is going to have to explain to me who is really going to benefit from this agreement. If it's not benefiting anyone—either the unions or the industry—just who exactly will benefit from this agreement?

[John Brodrick]

I'll address that, if you don't mind.

Before I gave this speech over to the interpreters, I omitted one paragraph. I'd like to read that in at the moment in answer to your question. It's not something I do lightly:

Before I proceed any further, I would like to clarify a couple of personal points. I think it is very important. I will be 63 this coming November. I have voted for only four federal political parties in my lifetime: the PC Party of Canada, the Reform Party, the Alliance Party, and lastly, the new Canadian Conservative Party. I realize a person's vote is a very private matter, but before continuing I think it is important to bring out the fact that I am here to address this agreement and not to bash any political party. This is a bad agreement.

[Guy Chevrette]

Mr. Chairman, I'm going to try to answer that. I aim to reflect the views of the members of the council that I represent. If, for all kinds of different reasons, our members voted democratically to support this agreement, and they prefer this agreement to what we have now, in all honesty, I have to present their views. And that is what I'm trying to do.

The final press release issued by the CIFQ quotes the CEO, who says this in the final sentence:

It is now the responsibility of every exporting firm to respond individually to Minister Emerson, because it is their money that's involved [...]

The Quebec industry decided to do what I came before you to report, presenting all the nuances. I sincerely believe that the Quebec industry prefers this agreement to endless litigation. They have had it up to here. I said earlier that many are completely disgusted and fed up. And I must admit that this free trade agreement, used and abused as it has been from the very outset, is really quite pitiful. It certainly doesn't encourage people to believe in harmonious trade.

As far as we're concerned, good faith negotiations are the only way to go. If the current government moves in the direction of good faith negotiations, if it enforces the agreement properly and avoids repeated litigation, if we can put an end to this trade in legal services and sit down and talk in order to find solutions that will benefit the economies of each of the parties to this agreement, then we will be happy.

[The Chair, Conservative, Leon Benoit]

Mr. Milton, a short answer.

[David Milton]

I'd be happy to, with a short answer.

Who profits? Certainly not those Canadian industries that have invested their time and effort in addressing the allegations that were put originally. Those allegations were: you're subsidized, and you're injuring us. Those are different from a deal; the deal does not speak to those at all. The deal is a handicap against Canadian industry—I'll suggest more so than against just the forest or natural resources industries, but against every industry that might in the future rely on the tenets of NAFTA, which are pretty much purged and finished now.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Milton.

Now to the government side, and Ms. Guergis.

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

Thanks very much, Mr. Chair.

I'd like to thank the witnesses for their testimony.

I just have a couple of things that I wanted to point out here.

I'm not sure if you've had an opportunity to review any of the testimony from witnesses who have come before the committee in the past, but I think it would be a really good idea, in particular taking a look at some of the testimony from Gordon Ritchie, who of course was one of the original drafters of the Canada-U.S. Free Trade Agreement, which NAFTA was based on. Some of the comments that came from him, I think, you would find very helpful, because he goes right back to the very beginning of all of this. In some of his testimony, he commented on how the United States had, from the very beginning, never intended to ever include softwood lumber under NAFTA. In fact, there were times when a memorandum of understanding was drafted to exclude softwood lumber.

So within this agreement we have here, the deal that our Minister Emerson was able to negotiate, it has a dispute settlement mechanism in place. There are some who have said that having this dispute mechanism in place is worth signing on for alone, because there is a procedure there. I'd be happy to outline that for you at a later date, because I know our time here is limited. I'm wondering if you've had a chance to take a look at that dispute mechanism, and if you have some comments for us.

Also, I see a lot of misinformation flying around the table about the meritorious initiatives and the binational council. First, on the $500 million that will be going back to the coalition, let's remember that the coalition is made up of individual small business people, and that money will be disbursed to them. These are negotiations, and the negotiations, of course, had to end at some time. That's just the way it is. Everybody wants to think that maybe they can get one more thing, but that's not always the case. Sometimes it has to end; negotiations do have to end.

The meritorious initiatives, or the $450 million that's going into those initiatives, is something that is going to be done and determined in consultation with Canada. I think it's really safe to say, and I'll even wager a pretty lofty bet on it, that as far as any money out there between Canada and United States is concerned, we're going to be watching very closely where it goes and what decisions are made as to where it will be going.

Also, just to talk quickly about the binational council, you must see that there are some great benefits to having a binational council where there will be industry representatives from both countries, where they will sit and work together not only to better the agreement that's in place but also to build trust between the two countries, to build upon the agreement, to work towards what will happen after the seven years. And perhaps they'll make the decision and recommendation to make it the full nine years.

So I'm wondering if you would care to comment on any of those great items that I have outlined for you here.

[The Chair, Conservative, Leon Benoit]

Are those directed to anyone in particular, Ms. Guergis?

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

Not anyone in particular.

[The Chair, Conservative, Leon Benoit]

Okay, Mr. Milton, I saw your hand first.

[David Milton]

Perhaps I could start, please.

On Gordon Ritchie and the memorandum of understanding, this is a long file. I started doing this in 1982. Gordon Ritchie and I have been at this a long time, as have several others.

The original Canada-U.S. Free Trade Agreement specifically excluded lumber as a freely traded item. We wonder sometimes whether or not lumber has ever been freely traded, given the disputatious nature from 1789 and from Aroostook, all the way through. Dispute settlement was our hope; it was our promise; it was the thing that our colleague, Ambassador Wilson, did wring out of the United States at the eleventh hour within NAFTA, so that the dispute resolution mechanisms there, under the two various chapters, would be to the benefit of settling a dispute. It appears in the context of today that they don't work particularly well if you give up on them when you get near the end.

Will the new settlement dispute resolution mechanism work better in the context simply of softwood lumber? Pardon me, but I'm from Hearst, and you've got to prove it to me.

On the matter of meritorious initiatives in consultation with Canada, can I volunteer, please, to have my name put forward with a list of those people who will sit and have a look at what the things are? I would very much like to know what those things are before they're actually commissioned. Our fear is that while something can be cast as a meritorious initiative because you've rebuilt something in a stricken area like New Orleans, it will have gone through an awful lot of political hands to get to that point.

Thank you for the time.

[The Chair, Conservative, Leon Benoit]

We're out of time. We'll have to go to the final individual in the second round.

Mr. Julian.

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

Thank you, Mr. Chair.

Mr. Brodrick, following up on your comments around the trade associations that have come forward, Alberta certainly is not alone. There's Saskatchewan; we've had the Ontario associations, and most of B.C. Very clearly, the trade associations have stated that they have huge concerns with these badly flawed negotiations.

I wanted to pick up on a couple of points to finish off.

Mr. Milton, you mentioned the irony of this government's refusing any loan guarantees to the softwood industry, yet it's willing to have taxpayers cough up an advance--basically coughing up a second time through EDC--to provide a certain amount of money back to the companies. I would like you to comment on the proceeds of trade crime, the billion dollars that's going to the United States--Canadian money--which we all know is illegal. At every stage in the courts, it very clearly has been seen to be illegal.

By rewarding the American industry for this trade crime, basically tapping them on the head and saying, yes, here's a billion bucks for your troubles for committing that crime, do you think it increases the probability of a lumber war? Does it basically increase the war chest that this industry will have to come back at us with?

[David Milton]

Yes, in fact I do, and I'm looking forward to fighting Lumber V at some point in the future before I retire. Because we're going to get one. I can imagine that even if the term of the agreement goes nearly to its seven years, somebody will pull a trigger someday because something has changed, and we'll be back into it again.

I know that many of our colleagues in the U.S. softwood lumber coalition are astute business people. They understand the virtue of solidarity among themselves with a single focus, and they have been terrier-like for a long time on going after this file, not being diverted. I can't imagine that they will change their point of view. In fact, they will be galvanized to new heights because some of the funds that are going to be returned to them in the name of individuals who signed on will be captured and set aside for the preparation of the next time around.

I can't imagine perfection in the deal as it's structured, as complicated as it is, where something won't fall apart and trigger another round in the future. That was the thing we'd all hoped to avoid.

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

So this agreement, if the government did try to ram it through, would actually increase the probability of instability in the industry and another lumber war.