International Trade Committee on Oct. 3rd, 2006

[The Chair, Conservative, Leon Benoit]

Thank you.

Do any Liberals have more questions?

Go ahead, Mr. Temelkovski.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Thank you very much, Mr. Chair, and thank you to the witnesses.

I have a number of questions. I will start with the larger questions.

The Americans collected $5 billion from Canada, and with this agreement they are looking at returning $4 billion, therefore keeping $1 billion. Are those figures correct?

[Paul Robertson]

The figures aren't accurate in terms of.... We now stand in the neighbourhood of $5.5 billion in overall deposits, and it's quite right that of that amount $1 billion will be transferred to various U.S. accounts as I identified earlier today. We're now working with an overall figure in terms of the deposits being collected, and duties are still being collected on the products and interest has to be put to those duties of $5.5 billion.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Okay, that's fine. That's close enough. And those are American dollars?

[Paul Robertson]

Yes.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

Out of the $1 billion that the U.S. is keeping, or out of the $4-something billion coming back to Canada, is Canada keeping any amount of that? Is government?

[Paul Robertson]

There are two mechanisms for the return of the refunds of that amount you identified once you subtract the $1 billion from the equation, as you have. One process is the Export Development Corporation process--

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

I'm not interested in the process. I'm interested in whether Canada is keeping any of the money after it comes here, that $4 billion to $4.5 billion, whatever the amount is. Is that divvied up again and going to companies or individuals?

[Paul Robertson]

I was trying to allude to two processes.

One is an expedited refund process through the Export Development Corporation. The second is the more normal Customs refund process. But the way the EDC process has been designed--and as you know there's a special charge imposed--the money that's being taken by the EDC process, or by that special charge for those who are not participating in the EDC process, is meant to pay for the $1 billion.

No Canadian government cut is envisioned in those processes other than that some money may be accrued between the time when EDC pays the money and the interest on that money, which can go up to two years before it's refunded. That money is intended to pay for the administrative costs of the program. The programs are designed not to produce a net benefit to the government in those two processes.

I hope I've answered your question.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

That clears it up for me.

In terms of the members and the panels, the six plus six, and six plus six, and so on, are they and their staff going to be on the Canadian payroll or are they going to be on the payroll of this international or binational industry council?

[Paul Robertson]

The industry-to-industry council is self-funded. How that money is used by the industry council--as you've mentioned, the six from the U.S. side and the six from the Canadian side--is a decision to be made by the council when it sits for the first time and works out its modus operandi and how it wants to proceed. There is no element within the softwood lumber agreement saying they will be paid x or per diems or that sort of thing. I think the industry council must determine the extent to which there is any sort of funding for the members who sit, or per diems to cover the cost of travel, or things of that nature. I don't think there's anything within the annex forming that to suggest that we have anticipated any salaries or things of that nature for the participants.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

I heard earlier that the members of the panel will be announced within the next few days. Will they be accepting something not knowing how they will be compensated?

[Paul Robertson]

I think I said it would be in the coming days, which might be a few more than several. I'm not sure when the announcement will be made. I think the candidates are accepting the responsibilities of this council in order to further develop wood use rather than to gain monetary rewards for their services, because these are senior lumber executives in Canada. It would be better to ask those nominees that question when they're named. I don't have the sense that they're looking for that type of monetary reward. They're participating, I think, on the basis of service to Canada and to the sector.

[Lui Temelkovski, Liberal, Oak Ridges—Markham, ON]

I have one more question. Usually when appointments to any committee, department, or council are made, the nominees come before the House of Commons committee. Will these appointees be coming in front of us so we can ask them questions, or will they not?

[Paul Robertson]

At this point all I can do is take note of the interest of the committee to speak to these members once they're named. I can't say whether or not what you want to see happen will happen. All I can do at this point is take note of the desire of the committee to speak to these individuals, and I will take it back.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Temelkovski.

Could we have a member of the Bloc? Monsieur Cardin, go ahead.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

We could have covered the issue of the Binational Industry Council fairly quickly. Fortunately, we have questions that can round out the issue.

I have been wondering: without an agreement, there will be no binational industry council, is that not so? Last week, we were informed that the start of the agreement was pushed back from October 1 to November 1. We were told that this was due to consultations with the industry. Furthermore, it seems that the United States and Canada have to await the decision by the US International Trade Tribunal before the agreement can be implemented.

Given the situation, we have to ask ourselves questions. In fact, we are told that the delay would be attributable rather to the sizable number of softwood exporters who decided last week not to drop their lawsuits against the United States following the imposition of punitive duties.

I am wondering whether or not we are currently caught in a quandary. The Americans told us that if the lawsuits were not dropped, there would be no agreement. However, we are now told that a significant number of people will not drop their lawsuits.

Is this not the real reason for the extension?

[Paul Robertson]

There are a number of elements to your question. First, I would just flag that the extension is no later than November 1; it's not that November 1 is the new implementation date. I'd like to make that clear at the outset.

Second, due to complexities on both sides of the border--and as you mention, particularly relating to termination of litigation--the two governments decided to make this extension. From the Canadian side, it's also in reaction to stakeholders' requests for an extension because of the complexities of filling in the legal documentation. However, I should say at the outset that the legal documentation being requested of the Canadian side is progressing well; that progress continues.

You have noted in your intervention that there are issues, one of which relates to the United States court's requirement to lift an injunction on liquidation. That is required before the agreement can come into force, because if you liquidate without the lifting of the injunction, the United States would be in contempt of court. Of course, courts are independent of government, and the timing of their decisions is not under government control; we are, however, working with the United States to do all we can to expedite that process.

We feel that the extension timeframe we're speaking about is sufficient to resolve the issues you have identified with the U.S. court. I think that Canadian companies.... As I say, many stakeholders have requested that extension because they still have to contend with the legal documentation required. I'm not sure if it's exacerbating the problem in Canada; I think what we're seeing is time being used to bring a fuller expression of the support for the agreement, which requires the termination of litigation and liquidation. That will happen simultaneously with the coming into effect of the softwood lumber agreement. I think it's perhaps better to put it in those terms rather than as an exacerbation of the problem; I think it's taking the time needed by both government and industry to deal with the complexities of the litigation and the legal elements surrounding that.

I hope I've addressed your major points.

[Serge Cardin, Bloc, Sherbrooke, QC]

According to what you have said, the delay would also be caused by the governments, who want to implement the agreement according to the rules that they set.

From October 1 to November 1, those companies that filled out all the required paperwork to terminate litigation will continue to pay countervailing duties on their softwood lumber exports.

My understanding is that the United States will continue to collect 19% of the countervailing duties paid between October 1 and November 1. These amounts do not account for a great deal when compared with the $5.3 billion in cash deposits, but I would like to know whether these duties should apply in principle.

[Paul Robertson]

I see a number of points to respond to.

First, it's not just individual companies that are having difficulties meeting the legal obligations, the technical obligations, in termination. There are a number of associations that require time to deal with questions of bylaws and how they have to proceed with their members, before they can express the views of the association on termination. So there are companies and associations--all of this is in play, but it's moving in the right direction, and good progress is being made.

You're quite correct when you say that the companies will continue to pay duties to the United States for October. However, all of those duties will be returned to Canada because the $1 billion is a fixed amount; it's not a percentage of the deposits that have been collected over time. So there is no increased benefit to the United States in revenue generation by an extension to no later than November 1, as it relates to duty collection and to whom those duties will ultimately be refunded. As I say, that is because the $1 billion is a fixed amount.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Robertson.

Mr. Menzies.

[Ted Menzies, Conservative, Macleod, AB]

Thank you, Mr. Chair.

My apologies for not being here earlier to hear all of your presentation, Mr. Robertson.

I want to make sure you don't leave here with the impression that this committee wants to vet every appointment on these panels. Historically that hasn't been our job, and we've never decided that should be our job at this level. We certainly assume that there will be some very knowledgeable people on the panels, and I don't think it's our position at this point, unless this committee decides otherwise, to interfere at that level.

I would like to go back to a couple of misconceptions. On the dispute settlement mechanism, I understood your response to Mr. Julian's question to be quite firm that the dispute settlement mechanism in place in this agreement is binding. Could you explain that one to me again? Perhaps I didn't understand your explanation properly, but I think it's quite binding.

During all these debates in the House and committee we keep talking about how close we were--we were inches away, we were moments away from a court settlement in the U.S. in our favour. We've watched more court settlements be appealed and lost--not in our favour. Why would we assume that those that are still inches away would be any different from all the ones in the past?

[Paul Robertson]

Thank you very much, Mr. Menzies.

On your question relating to litigation, I think you alluded to the response when you talked about the potential for appeal for all this litigation. It's by no means certain when that litigation would end. I think it would be fair to say that the major lumber exporting provinces and the industry itself have taken the decision that they would prefer the certainty of the agreement to the extended process of litigation, which could carry forward into 2007 and beyond. So I think that is the answer to your first question.

I would also flag that the softwood lumber agreement stipulates that the agreement is without prejudice to the legal decisions taken so far within these processes. So all these decisions are not lost, in terms of precedent and how they do that. Nonetheless they are not final litigation decisions, and no one is claiming that they are.

On the point Michael was making about binding arbitration, both sides have committed themselves to binding and final arbitration under the SLA. There are questions relating to a reasonable period of time to bring your measures, or whatever the issue is, into conformity with the decision--consultations on what might happen if those timeframes are not met, etc.

I think you have to understand the whole process, with the emphasis squarely on the dispute settlement process from both sides, in respect to the decision of the arbitrator and the award decision of the arbitrator relating to issues brought before them. I think we would underscore that point.

Michael, is there anything else you would like to raise in that regard?

[Michael Solursh]

I think what Mr. Robertson said is correct. It is final and binding, and every international agreement is an agreement between two sovereign nations. You cannot force a country to listen if it doesn't want to. This dispute settlement is so good because it is almost like a commercial arbitration setting. An arbitrator gives an award that is final and binding, but at the end of the day, between two sovereign nations, you still need to have the opportunity to consult if there are problems with any aspect of the agreement.

[The Chair, Conservative, Leon Benoit]

The London Court of International Arbitration is handling the arbitration services. Can you explain how they fit in?