International Trade Committee on Aug. 21st, 2006

[The Chair, Conservative, Leon Benoit]

Your time is up.

We'll go now to Monsieur Paquette from the Bloc.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

Thank you for your testimony. I wouldn't say it clarifies matters any, because as we move through this day, the more the views presented are diametrically opposed. I think that fact alone justifies a decision by this Committee to continue its work with some additional sittings.

Mr. Chevrette, who is CEO of the Quebec Forest Industry Council, appeared earlier today. He described the agreement as imperfect, but added that the industry needs a shot in the arm. He said a considerable number of members had supported the agreement because they need liquidity. This dispute has hit them very hard. In addition to that, the Canadian dollar and energy costs are very high.

In your view, are there some parts of this agreement that need to be improved, even though it may be possible or impossible to do that in the coming weeks? Supposing the Committee recommends that Canadian and U.S. government representatives get together to make certain adjustments by means of letters of understanding; in that case, are there specific issues that you would like to see addressed? Or do you believe that the text of this agreement is perfect the way it is and requires no further change?

From what I've understood, two firms support the agreement. I would like to know whether they believe the agreement has been improved. If the third witness would like to add something, I would be happy to hear his comments as well.

[William Van Bergeyk]

With respect to Mr. Chevrette's comments that the industry as a whole—us, all of us—needs oxygen, we certainly don't need the government to apply the mask without turning the oxygen on. We don't want it snuffed, and what is happening is that we're being snuffed.

[Jim Shepherd]

Mr. Chair, I'd like to respond in light of the fact that this negotiation has taken years to arrive at. There's an emotional toll on this country that most who are even outside the industry feel attached to softwood lumber, and every time an industry grouping or a section of the forest industry comes back and says we need one more thing, the negotiation will never end.

This is not a perfect deal. It cannot satisfy the interests of everyone, but to leave the emotional aspect of this deal out there continually is not going to be helpful in getting this thing solved. I believe the negotiators have brought the best deal that they can achieve for this country and for our industry. I believe that the statement “the negotiation is over” is the practical and the right statement to make, so industry can make up its mind and move on.

[Paul Perkins]

I would just add to that by saying that in my presentation, I referred to—and Bill Van Bergeyk has also talked about it—the fact that some of these working committees have not had their principles laid out. This is not the final answer. There is work to be done, and I think this committee should work with the government to in fact press for principles that will reinforce the desire to get to a functional North American market. Some of these issues can perhaps be improved on going forward. If we do get the majority and we can go forward, then they should be empowered to work in that regard.

[Pierre Paquette, Bloc, Joliette, QC]

Negotiations do, obviously, have to come to an end at some point. That's what we're being told. The industry had very little time to consider the ins and outs of this agreement. We have always encouraged the government to take whatever time it needed to ensure that all stakeholders knew exactly what they were getting into. Yet it would seem that there are still a great many unresolved issues.

I have a copy of the letter Mr. Emerson sent to industries in Quebec. It talks about refunding some of the countervailing duties they paid through Export Development Canada over the next four to six weeks. Yet Mr. Wilson talked about four weeks this morning.

Has anyone explained to you how this is going to work? The first step is to obtain the list of exporters who paid duties and determine approximately what amount is involved in each case. I imagine you are aware of that. If the list is provided by U.S. authorities, that may take a very long time. What specific information have you been given in that regard? For many people, the big advantage of this agreement is that in the short term, they will be given some breathing room. What kind of guarantee were you given that you will actually receive some money within the next month or a month and a half?

[Jim Shepherd]

Mr. Chair, the answer to the question is yes, I expect money. What I have been led to believe is that once the negotiated settlement is in fact enforced and put into place, with the timeframe of six to eight weeks through the Export Development Bank, those exporters of record would receive their funds through a process that means we would see that money by that timeframe. So that is my understanding at this point.

[William Van Bergeyk]

Annex 2A refers to Canada seeking to ensure that payments would be made within six weeks. Today we heard that it's somewhere between four and eight weeks, and in the annex it simply says “will seek to ensure”. It doesn't guarantee, so that the protracted payments are going to be likely, and liquidation only begins 10 days after the effective date of the agreement, but liquidation can take up to six months. So those payments that government is promising the industry are only going to be made to those members who actually sign a purchase and sale agreement.

[Paul Perkins]

I think it's been said that, yes, we do expect money. At the Toronto meeting, trade minister Emerson did indicate that it would be somewhere in the six- to eight-week range, and we have heard that the financing process is through EDC. So I think it is there.

To the earlier part of the question, Mr. Chair, about how we were given limited time to analyze this, I would counter that we've had four years to analyze what we could live with. Many of us were at the actual negotiations in Washington for four or five weeks at a time two years ago. This is not a new subject. This is a subject that has been with us for some time. So we have all had opportunity to consider what in fact we could live with going forward.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Perkins.

Monsieur Paquette, your time is up. We'll go now to the government side, to Ms. Guergis.

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

Thank you very much, and thank you to the witnesses for being here today.

First, Mr. Perkins, I want to build upon something you have said. You made a recommendation to the committee that once the agreement comes into effect, we should perhaps be working with this joint committee. I'd like you to expand on that a little bit for me, if you can.

Also, perhaps you could just tell us here at committee how you see Canada and the American industry working together in a harmonious way to build a stronger North American market--if you wouldn't mind commenting on that.

As well, at a previous meeting we had a vice-president from your company here, and she made a couple of very good points. I'll be like my colleague Mr. Julian and give her a little round of applause. The first point was that there's no better alternative to this agreement. She also said there was a high degree of political will necessary to reach this agreement and that it should not be wasted. She stated that the opportunity this deal presents should not be taken for granted; it may not appear again.

Of course we know the previous Liberal government was not able to negotiate a deal. I might add that I found it very interesting today to see that they were supporting loan guarantees when they would not support those when they were in government.

I'll move on.

Could you outline why you feel this opportunity needs to be taken advantage of, and what are the factors that increase the harm to industry should this dispute drag on any longer?

Also, perhaps Mr. Shepherd could comment for me. Are the Americans looking elsewhere? Are there third countries, other countries, that are starting to come in and take some of the market because of this dispute? Are the Americans looking elsewhere? Could you elaborate on that for us, please?

[The Chair, Conservative, Leon Benoit]

Mr. Perkins, you look ready and willing to go there.

[Paul Perkins]

I'm not sure. I hope I didn't contradict my colleague in any way. She made good points, so I'm not sure what that made mine.

However, on the situation of the committees, the agreement does specify a number of structures, some of which are government only, some of which are industry to industry. I won't pretend to understand how those are expected to function at this point, but what I would be asking the government to do is to both spend time working with the U.S. government in preparation for setting up the structure and principles in a way that they believe will strengthen this agreement and in fact give it the chance to run to its full term. I think it's very important that these committees be given all the opportunity they can have.

That said, I'm not exactly sure how you do that. I think the risks are self-evident. I think the risk, if we do not approve this agreement, is that the political climate in the U.S. changes very dramatically. In fact we did get the President involved, and the senior administrators, for once, in solving this 20-plus-year deal. I don't think an opportunity will present itself again, and I think the chances of going to Lumber V very quickly are real. In fact, they could ask for special presidential orders to impose tariffs on Canada going forward. So I think the risks are very real if we reject this.

[The Chair, Conservative, Leon Benoit]

Mr. Shepherd.

[Jim Shepherd]

Perhaps I could address the honourable member's question first on third country imports into North America, and then comment briefly on what I see going forward in terms of preventing Lumber V.

As we speak, the North American lumber market is probably one of the best lumber markets in the world, save Japan, today. There's no shortage of fibre around the world. Today we are witnessing lumber coming in from European sourcing, panels coming in from South American sourcing, and remanufactured products coming in from Asian sourcing. More and more, the global trading of fibre is becoming part of our competition. No longer can Canadian and American manufacturers depend on just a local market for their individual needs. Other countries are starting to see the opportunities and are putting the infrastructure in place and the economics that make sound sense for them, and more fibre will come into our backyard as we go forward into the future.

This leads me to the big concern, how two industries--U.S. and Canadian--have fought continually for a market share that, at the end of the day, may be eroded by third country imports. I think it's absolutely critical for this industry not only to sign this negotiated settlement, but to move forward in a relationship that builds a North American model around our own homegrown industry as opposed to fighting each other. I think that's absolutely critical. When you look at the various lumber cases that we have so valiantly fought, it has typically been through the voices of lawyers, legal counsel, and the courts, which nobody can understand, and nobody can read what the value of these decisions is. We will not solve this through that process.

Certainly, as one in industry, I will put every effort I can into building a relationship with our U.S. competitors so we can build around a North American competitive industry as opposed to fighting over the same pie.

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

Would it be safe to say you support the binational council outlined in the agreement?

[Jim Shepherd]

I think it's a critical piece of the puzzle here. I also think we need strong endorsement from the leadership of both governments.

We also need to not forget the lessons we have learned here. Having been through a number of these fights, we'll go away and come back, whether it's in seven years or some other timeframe, and we'll start over again. We cannot let that happen this time.

I'm very committed, and I know U.S. competitors are committed as well, to finding a solution.

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

Okay. I will point out one more thing, and if you want to comment on it, please feel free to do so.

Going back to the meritorious initiatives, it's by September 1 that the United States, in consultation with Canada, shall identify the meritorious initiatives in the United States to receive the $450 million. Some of the projects they're talking about include educational and charitable causes in timber-reliant communities, initiatives related to low-income housing and disaster relief, and of course, the educational and public interest projects addressing forest management.

Do you see an opportunity for Canadian companies to sell their lumber for these projects?

[Paul Perkins]

Certainly. Two things have happened, as we understand it, as this agreement has unfolded. It sounds as though the moneys for the meritorious initiatives will be spent over a period of time and put into a foundation, so that there will be continued activity in terms of spending that money, and that they will tend to focus on wood-using opportunities. I see no reason Canadian producers should not be able to benefit from expanded demand that could come from those projects.

[William Van Bergeyk]

We already have in place both the Canadian Wood Council and the American Wood Council, who collaborate on that issue of what Mr. Perkins refers to as growing the pie. I'm not so sure we need another extraneous organization or body to do that work; it's already in place.

[The Chair, Conservative, Leon Benoit]

Ms. Guergis.

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

I want to quickly point out that I think we'll all recall that when the tsunami hit, Canadians dug into their pockets over and above the tax dollars given by the government. It was overwhelming to see how much support they wanted to give. It is the same with any other disaster that's come along: Canadians are very giving. So I don't think you'll see any opposition from Canadians to the disaster relief these dollars will contribute to.

[The Chair, Conservative, Leon Benoit]

Ms. Guergis, your time is up, unfortunately. We'll have a second round.

We'll go to Mr. Julian to end the first round.

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

Thank you very much, Mr. Chair.

Thanks to each of you for coming forward today with excellent presentations.

I will say, Mr. Shepherd and Mr. Perkins, you put your points eloquently, but you represent a minority of the industry. Aside from the Maritime Lumber Bureau—for obvious reasons involving the maintenance of the maritime lumber exemption—we've had only three presentations from industry that have unreservedly supported the agreement. The majority of the industry is very legitimately concerned about the contents of this agreement.

Though you put your case eloquently, to say that this agreement would mean we would never endure a softwood war again I don't find very credible. In fact, given that we are going over the last two hurdles of litigation—and we know these are the last two hurdles, because they're not appealable— I think that giving $500 million to the coalition actually increases the opportunity for a war to come back at us, because the funds will be there, the oxygen will be there, ironically, for the American industry to come back and fight the Canadian industry.

More specifically, I'd like to get to some questions. Mr. Van Bergeyk had an excellent presentation. The first point I'd like to touch on is the issue of raw log exports. It's a big issue in British Columbia. We're seeing logs leaving our province and going to the United States. That's where the jobs are ending up.

You mentioned in your presentation that even though you're primary producers, you add value and manufacture custom products, and that you're concerned about the impact of this proposed agreement on that value-added manufacturing. Could you expand a bit on that and on the danger you see that this deal, as many have said, would actually encourage raw log exports--in other words, continue that reduction in jobs that has critically hit softwood communities across the country?

[William Van Bergeyk]

I think it's very clear that the U.S. is interested in our wood, but they're only interested in their doing the manufacturing. The plants below the 49th parallel are the plants that want to be working, and they would rather put us out of business.

Let's just compete fairly. Let's not have market interference. Allow us to compete competitively, truly competitively. Jim has identified that there is a market share, and we have either lost or gained it. We lost it during the softwood lumber agreement. We have only since regained it, and now they're crying about it again. I say let us just compete for market share and not have market interference.