International Trade Committee on Oct. 3rd, 2006

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

My understanding is the latter, but I'd certainly appreciate your checking up on that.

Thirdly, on the dispute settlement mechanism, we had a binding dispute settlement mechanism under NAFTA that was never used under the previous and current governments. Essentially we are giving that up through this agreement. The dispute settlement mechanism that's outlined in the deal refers to the fact that there is no enforcement of awards other than in accordance with the agreement, that the tribunal may not award costs.

The question comes to ultimately what is the recourse under the dispute settlement as described in the agreement itself. Looking through this, going to paragraph 32, if the United States does not uphold their part of the bargain, which they clearly haven't under NAFTA and under the softwood dispute anyhow, it looks to me like the endgame is that either party may terminate the agreement. Essentially the dispute settlement, the only binding mechanism, is that in the end after all the process—which is very convoluted, and there are many pages of the agreement itself—ultimately it just means the end of the agreement if one party or the other does not uphold its end of the bargain.

Are there other components that I am missing in this?

[Paul Robertson]

Perhaps we can start with the reason for the creation of the dispute settlement mechanism as identified under the SLA, the softwood lumber agreement.

There were two principal reasons, one of which was to provide expeditious resolution of issues as they arise in order to minimize disruption within the commercial trade in the softwood lumber sector. The other was to provide sufficient scope to deal with all the issues that have been identified--or all the obligations and rights that have been identified--under the softwood lumber agreement. You will find that with respect to the dispute settlement mechanism, there is a much shorter time period in which disputes will be resolved, either through mediation or arbitration. Those are set out quite clearly in the SLA in terms of so many days here and so many days there; everybody understands the timeframes involved in a dispute settlement mechanism.

With respect to arbitration, it is final and binding; both sides have an obligation under the treaty to respect the arbitration findings reached through this expedited process. Therefore, it would be fair to say that if a country has an obligation under the agreement--which it does in this case, since they've acknowledged that arbitration will be final and binding--they will implement the decisions of the arbitrator in this case. I don't think it's as open-ended as I understood your comments to be just before my answer.

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

I will come back to this on the next round of questions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Julian.

We'll go now to the second round. It is a five-minute round. We will start with Mr. Maloney.

[John Maloney, Liberal, Welland, ON]

Mr. Robertson, one of the objectives of the binational industry council is to strengthen the North American lumber industry by increasing the market for its products. Other initiatives would include expanding the market for wood products in non-residential construction, developing new methods and markets for the use of wood in raised wood floor systems, defending the use of wood in existing residential markets, promoting the use of wood in green building standards, building the sustainability of wood products or demonstrating their desirability as an environmentally preferable building and finishing material.

All that suggests to me that we're going to be increasing and expanding our export and production of wood products. Would you agree with that objective, or with that comment?

[Paul Robertson]

Insofar as the actions and work done by the industry council promote the use of wood, I would have thought the increased use of wood would have a positive impact on both U.S. and Canadian production figures to meet that new demand.

[John Maloney, Liberal, Welland, ON]

Correct me if I'm wrong. You also indicated that various regions have to choose between an option A and option B. Option B would put a quota or a cap on exports, and option A would be an export tax if the price fell below a certain amount.

If you have an influx of wood into a market, most likely the price will drop, so I'm having difficulty reconciling the objective of increasing the sale of wood products into the United States with the option A and option B. It seems to be counterproductive. If we increase our markets into the U.S., we're going to trigger either option A or option B, which would be to the detriment of our industry, would it not?

[Paul Robertson]

Option A and option B are triggered by the price level for wood, so that if there is greater demand for wood, one would expect the price to increase, consequently lifting the price. At the same time it would decrease the use of the border measure on the export, because as the price rose, there would be less imposition of option A or option B.

I would just like to clarify with respect to your consideration of option A and option B. I'm sure you understand it, but I wasn't sure by your comment.

Option B reduces the export charge that a producer would pay within a certain price zone, but in exchange there's a reduction of the volume of export. That's option B. I'm sure you understand it, but with your shorthand, I just wanted to clarify.

Second, with respect to your earlier point, if the binational industry council expands the use of wood through these initiatives--if the entire market grows--so too does the Canadian quota related to that U.S. market, so there is a reflection of that dynamic within the mechanism established for the imposition of the export charge.

[John Maloney, Liberal, Welland, ON]

Thanks for clarifying that.

The $50 million that's set aside for the binational committee—$40 million for their operations and $10 million for arbitration costs—what happens when that is utilized? Is there a mechanism to replenish the operating costs?

[Paul Robertson]

There is no mechanism now for replenishment. We're speculating a bit about how quickly this money will be used. But I suppose if that money is used and there is a case to be made for further funds, this would have to be considered by both governments with respect to the initiative. I think the $40 million U.S. that is targeted for the council's activities is thought sufficient for its work over the longer term.

[John Maloney, Liberal, Welland, ON]

The agreement also provides that the objectives of the binational industry council could be strengthened to strengthen the North American lumber industry. What other objectives would you envisage by the terminology “could be”?

[Paul Robertson]

Frankly those are the ones that were envisaged, which we've identified. But we certainly don't want to restrict the business leaders, when they get together to consult and talk about this initiative, from any other initiatives, from implementing that type of work and the overall objective of increasing wood use in North America. The ones that I think were thought by both sides in the negotiations were identified in those objectives as more indicative objectives, but would be the bulk of the work.

[John Maloney, Liberal, Welland, ON]

You said that possibly the meritorious initiatives would be social housing. Is that correct? Is that social housing in the United States?

[Paul Robertson]

Yes, it is.

[John Maloney, Liberal, Welland, ON]

Are all the meritorious initiatives in the United States?

[Paul Robertson]

That's right.

[John Maloney, Liberal, Welland, ON]

We have no control over that at all. Do we know what sectors of the United States this might be going to, or is it countrywide?

[Paul Robertson]

That's a function of the decisions made by the independent endowment foundation. I don't think there is any specificity with respect to those overall objectives that were set out in the agreement for the work of the endowment.

[John Maloney, Liberal, Welland, ON]

Could you elaborate on what the overall objectives are?

[Paul Robertson]

Yes. They're set out in the agreement as well. They're basically what has been identified by this foundation.

As I mentioned in my opening, they are, one, educational and charitable causes in timber-reliant communities; two, low-income housing and disaster relief; and three, promotion of sustainable forest management practices, as set out in the agreement. Those are the three overall guiding principles by which the timber endowment or the meritorious initiative endowment will be directing their work.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Maloney.

Now to the Bloc, to Monsieur André, for five minutes please.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Thank you for being here with us today and clarifying these issues, which are of great interest to Quebec.

As you know, the softwood lumber agreement has become tremendously important. We have had quite an economic disaster in the past few years.

My understanding is that the Binational Council and the other committees, whether it would be the Softwood Lumber Committee, The Technical Working Groups or the Working Group Dealing with Regional Exemptions from Export Measures, are each made up of 12 people. Therefore, in principle, there will be six people on either side. Moreover, a government committee made up of U.S. and Canadian elected officials will oversee all the committees. Is that so?

[Paul Robertson]

Yes, for a number of these working groups that haven't been established yet, the numbers and composition have not been agreed to. We know, for example, that the business council that we've spoken about will have six and six. I might have left you with the impression that the softwood lumber committee has a set number of representatives, but what I was speaking about there was primarily the industry committee.

The softwood lumber committee, as I noted earlier, will be composed of representatives from both national governments and will have the lead responsibility. How other committees are formed and the representation on those committees is yet to be determined, which is why I was saying earlier about consultations that will be taking place with the provinces concerning emphasis within groups, who is needed at the table for those groups, consultations pre-meeting and post meeting of those groups in order to ensure that we have a full picture and we're carrying forward the Canadian interest in each of the meetings.

That type of structure of organizing ourselves has yet to be determined, but that will be determined after consultation with the provinces in terms of their views respecting that mechanism.

[Guy André, Bloc, Berthier—Maskinongé, QC]

Will one of the four committees deal with the renewal of the softwood lumber agreement? When the current agreement ends, there will surely be a second, then a third, a fourth, etc.

[Paul Robertson]

I should say right now that type of work is not set out anywhere in the agreement. Focus can be put on any issue that both parties think is important to do, but as it stands now, the softwood lumber agreement does not envisage work of the type you've described in terms of any future agreement relating to the softwood lumber industry.