Mr. Van Bergeyk.
Evidence of meeting #25 for International Trade in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
Evidence of meeting #25 for International Trade in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
4:10 p.m.
Senior Vice-President, Forest Products, Federated Co-operatives Limited
To your question, Mr. Vincent, there is no question that a strong Canadian dollar, or what we'll say is maybe a weak U.S. dollar, interest rates, market conditions, market share—whatever you call it—are going to be very significant factors that we all face. I'd just as soon face those independent of any other market interference. Give us those things to contend with by themselves and we'll do quite well, thank you.
4:10 p.m.
Chair, President and Chief Executive Officer, Canfor, Forest Products Association of Canada
Mr. Chair, we are not dealing with the Canadian lumber industry, we're dealing with 400 individual lumber companies, all with different economics, in 10 different provinces, with different wood baskets and different costs of doing business. The tragedy in this file is that everybody has a different need, and there is nothing worse than a strong Canadian dollar, low housing starts in the United States, high costs of transportation. All these elements build to a very difficult market condition. With over 400 different views of what's needed for them, I don't see any other way of getting around to some consistency here.
4:15 p.m.
Bloc
Robert Vincent Bloc Shefford, QC
Just to conclude, it seems to me that even without the 5, 10 or 15 per cent, given the high Canadian dollar and the cost of oil, our industry will be at a disadvantage as far as exports are concerned. Furthermore, adding 5, 10 or 15 per cent is tantamount to handing the forest industry a death sentence. If nobody does anything and $500 million is being allocated here and there, I believe there is a real danger that it will find itself in the same situation as the textile industry.
I'd be interested in hearing your views.
4:15 p.m.
Chair, President and Chief Executive Officer, Canfor, Forest Products Association of Canada
We currently operate several facilities in the United States, and these facilities are struggling the same as Canadian companies and Canadian mills in Canada are. The gist of this deal is to build some sense of the bottom of the market and those terms around lumber pricing that apply the tax. My sense is that the industry on a North American basis will not sustain these lumber prices that will equate to these high tax levels. Nobody can survive, not even U.S. competitors.
So at the end of the day, something will change. And my prediction is that the high levels of tax rates that are being talked about today will not be sustainable.
4:15 p.m.
Senior Vice-President, Forest Products, Federated Co-operatives Limited
Mr. Shepherd said he saw no resolution; I see a resolution through a third party. Because the resolution hasn't been reached between two parties, it needs a third party to resolve it. There is no question that in the interim the industry is going to be drastically affected by market pricing, markets that are perhaps weakening, interest rates that are rising. I'd just as soon face those independent of market interference and get this resolved through a third party.
4:15 p.m.
Vice-President, Policy and Planning, Weyerhaeuser Company
Our position would be very close to that of Canfor's. Some of the elements described, such as the high Canadian dollar, have pushed up the Canadian cost floors to the point where the bottom of the market, as described in this agreement at $355.... We should remember that at $355 random-length composite, we do in fact have free trade. Although we're there today, we don't believe the ability to sustain prices well below that is sustainable on either side of the border. So we are believers that the government has done a good job of establishing what can be a reasonable bottom-loaded target for this industry.
As I said earlier, the advantage of the bottom-loaded target is that it will not penalize our U.S. customers when markets are good, but we should not forget that we are into a very difficult market right now.
4:15 p.m.
Senior Vice-President, Forest Products, Federated Co-operatives Limited
Mr. Chair, just as a point of correction, at $355 we are not at free trade; there is still a market cap of 34%. We should never forget that. In either option, option A or option B, there is a market cap.
4:15 p.m.
Conservative
The Chair Conservative Leon Benoit
I see Mr. Perkins shaking his head. If you would, please respond to that, Mr. Perkins.
4:15 p.m.
Vice-President, Policy and Planning, Weyerhaeuser Company
We don't want to start to argue here at the table with our own compatriots.
My belief is that the market cap also goes away at over $355, and you are in fact in free trade under either option A or option B. But I am not the expert on that element of it. Someone would need to research it.
4:15 p.m.
Conservative
4:15 p.m.
Conservative
Pierre Lemieux Conservative Glengarry—Prescott—Russell, ON
Thank you, Mr. Chair.
Gentlemen, thank you for being here today.
I'd just like to pick up on a comment made by Mr. Perkins. It's important because he's the one who mentioned that this agreement is actually for seven to nine years. That hasn't changed. Yes, there's a termination clause, which would be at 24 months possibly--18 months plus the six months that we had spoken about before--but for those of you who are participating in this committee and those of you who have been watching the proceedings, if you've been listening to the opposition, they're trying to play two cards at the same time. The one card is that this is an absolutely fantastic deal for the U.S., and the second one is that they're going to terminate it, this great deal, after 24 months.
You just cannot have it both ways. So I want to underline the fact that your argument disconnects. I also want to underline the fact that the deal is for seven to nine years, as you gentlemen well know.
The second thing is that we have to inject some reality here. The first part of reality is that the lumber industry will get over $4 billion back. That's what they're lacking right now. What we heard from Mr. Paquette earlier today was that there's a lumber operation closing down in his riding. We heard from an earlier witness that there are companies closing down and there are workers being laid off. That's today; that's with no lumber agreement. So if that situation continues, we're going to see more of that, and that's what we're hearing from industry. This softwood lumber agreement will take back over $4 billion and inject it into our Canadian lumber industry.
Lastly, to pick up on a point that I think Mr. Shepherd might have made about continued litigation, if we have no softwood lumber agreement, the U.S. Coalition for Fair Lumber Imports has been very direct, very upfront and straightforward that they will renew litigation. They will do it. They are on record for having said so. So going back to the silver bullet, the fact that if we don't have a softwood lumber agreement everything is going to just disappear, all the problems will go away, I think that is untrue and very unrealistic.
The question I'd like to pose actually is to Mr. Perkins and to Mr. Shepherd, because you both represent companies in the lumber industry. No doubt you've heard your employees discussing softwood lumber at length. What I'd like to know is how would the softwood lumber agreement in fact help your employees, the men and women who work for you in our lumber industry?
Thank you.
4:20 p.m.
Chair, President and Chief Executive Officer, Canfor, Forest Products Association of Canada
Mr. Chair, I think I speak on behalf of all the employees in Canfor in saying that the confusion that has been generated through media reporting, the Canadian tone on the anti-American sentiment on softwood lumber, the bias that we're winning in the litigation, has all led to expectations that we're winning this thing. So there's confusion, I would say, as to what's really happening here. But at the end of the day, in the company that I represent, people want certainty. They want to know they can go to work tomorrow morning; they want to know that the company can reinvest in the facilities to be more competitive and stay in the game of producing lumber. They just want to know that their jobs are secure.
I believe that with the return of the duties, the certainty on the rules of trade and the prevention of Lumber V gives our employees the most certainty of any option that we have in front of us. Many will not be able to explain why this deal is good or bad and in many ways are more tied up in the emotion of why Canada must give in to the interests of the United States, but at the end of the day, what they want is certainty and the opportunity to go to work tomorrow morning.
4:20 p.m.
Vice-President, Policy and Planning, Weyerhaeuser Company
I think I would just support what Mr. Shepherd has said. I think our employees know the industry is going through very significant change. Competitiveness in Canada is an issue, and continuing to be competitive is an issue. This is just one element that adds to the confusion, the fact that we are said to be winning, yet we don't win, yet it never ends, the fact that they would like to be able to see an end to this part of the dispute, because frankly, it's not well understood where we are in that regard. The ability to manage to control their destiny with elements that they can work on, such as recovery, and shipments, and the fundamentals, I think, is what they want to do.
4:20 p.m.
Conservative
4:20 p.m.
Conservative
Ron Cannan Conservative Kelowna—Lake Country, BC
Thank you, Mr. Chair.
Thank you, gentlemen, for your comments.
I want to pick up on a couple of comments that Mr. Julian made. Our government is very concerned about the industry. We're not going to leave the industry once the deal is signed. We're still going to be there for you. We have a great minister and ministry staff who are working with the industry.
I believe, Mr. Shepherd, you were with Premier Campbell when he announced that the government was coming on board, and it is a concern, I know, among my colleagues on the island with regard to the review of the log exporting policy. Maybe you can explain a little bit about that. That's still running in parallel, under review with Premier Campbell and the government--Minister Coleman.
4:25 p.m.
Chair, President and Chief Executive Officer, Canfor, Forest Products Association of Canada
Mr. Chair, first of all, Canfor did exit the business of coastal logging earlier this year, so really my comments are more as a buyer of chips. What I've seen happen in British Columbia with the differences of interior and coast.... Again, to go back to the issue of who the lumber industry is, it has many different faces, many different-sized companies, many different needs. The coastal industry has its own unique set of circumstances, with log exports off private lands being a specific issue for that industry today.
I, representing Canfor, have not been averse to finding elements in this deal that help address that issue. But to hold up the whole industry across this country for specific needs in specific regions is an issue that our premier had to deal with. I think he has come up with the right compromise, supporting the deal so that we can move on, yet addressing the issue, so that he will help the industry find solutions for its needs on the coast.
4:25 p.m.
Conservative
4:25 p.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
Thank you very much, Mr. Chair.
I want to come back to testimony we had on July 31. This is in regard to Canfor from Mr. Stephen Atkinson, who, as you know, is a very respected analyst with BMO Capital Markets. This is what he said: When you look at a situation like a Canfor that is going to run its lowest-cost wood, then clearly you're going to shut down those lumber mills in the southeast quadrant. What happens then is that it'll put some of the pulp mills in danger, whether it be the Kamloops mill, whether it be the Celgar mill, and then that supply comes into question.
He goes on to talk about job losses in other parts of the country, including northern Ontario, but says at the end:Very quickly, on raw logs, really what happens there is this. Let's say you're paying a duty—pick a number again, 15% or 5% or whatever it is. If you can bring in the log without any duty to the United States, then of course it makes sense to put the lumber mill there and create jobs south of the border.
My question, obviously, on Canfor's case is whether part of your business plan is commiserative with what Mr. Atkinson has said, the closure of mills in Canada. Do you plan to expand in the United States? Similarly to Weyerhaeuser, you've scaled back your operations to a certain extent in Canada. Do you have plans to open new mills in the United States?
You've both been referring to a North American market for lumber. Of course the concern in softwood communities is that what we're going to be seeing are Canadian raw logs going to fuel American jobs. So do you have plans to expand, and are these comments by Mr. Stephen Atkinson legitimate?
4:25 p.m.
Chair, President and Chief Executive Officer, Canfor, Forest Products Association of Canada
Mr. Chair, I took that to be many questions, and I'm not sure which one you'd like me to address.
In terms of Canfor's intent to shut down mills, the answer is no. We have two facilities in the southern part of the province of B.C. They are competitive mills, and they intend to be part of the Canfor family going forward into the future.
The economics of the high Canadian dollar, low chip price, low lumber price, higher energy costs, higher transportation costs--those are the elements that come into running the business as much as anything. So it's not a softwood lumber deal based just on lumber pricing and tax. It's an added burden, I admit, but at the end of the day, mitigating this risk against much higher duties in Lumber V is the better security for our mills in the southern interior.