Good afternoon. Thank you for the invitation.
Like most of the other witnesses who will testify on the subject of softwood lumber and the proposed deal with the United States before this committee, this subject and this deal is my job.
The Free Trade Lumber Council, which I represent, was created by Canadian industry in late 1998, two years before the expiration of the Softwood Lumber Agreement of 1996, for the purpose of obtaining free trade in lumber sooner or later. With the deal that Canada plans to enter into, at least as we now know it, it will mean much later and perhaps never.
The deal, as we have seen it so far, guarantees that for the next seven to nine years there will not be free trade in lumber, and the restriction on Canadian access to the U.S. market--unless very complex details are worked out very carefully, deliberately, and well--will be very damaging to Canadian forest industries. In addition to being the only organization whose representatives will come before you dedicated expressly and specifically to achieving free trade sooner or later by litigation or negotiation, somehow or other we are the only organization representing interests from all affected Canada. I use the term “affected Canada”, because the Yukon, the Northwest Territories, and, most importantly, the Atlantic provinces are not affected.
The United States government has investigated in detail the forestry practices of all Canada except the Atlantic provinces over and over again. Those investigations have been tested before NAFTA panels. NAFTA panels have found over and over again that according to the prevailing law--and the Americans, as you know, keep changing the law, but we have responded to the changes--Canadian provinces do not subsidize the production or export of softwood lumber, and imports of Canadian softwood lumber into the United States neither injure nor threaten to injure any United States industry.
I thought, having the honour and privilege of being your first witness, that I might provide you with something of a balance sheet, examining the basic terms and what we know of subsequent drafts, to compare what the Americans want and what they are getting and what we want and need and what we are getting. And then I will leave it to you, because this deal will become before the House of Commons and it will be up to you to decide whether you will approve it, whether we are getting enough, and whether the deal is a fair deal.
Here's what for the last five years we've wanted and continue to want: we want a long-term durable settlement of the dispute over softwood lumber; and we want an end to legal battles and litigation, recognizing that Canadians have been sued, Canadians have been charged with unfair trade practices, and that the only reason there is litigation is because the United States industry, aided and abetted by the United States government, has brought Canadians into the legal dock, charged us with misconduct, and obliged us to defend ourselves. We would like to no longer be charged and we would like no longer to have to defend ourselves, and we would like free trade.
To achieve these goals, we have been willing to change our forestry practices, even when we did not think there was anything wrong with them. We have been willing to meet every charge with a legal answer. We have been willing to pay something, even though we honestly don't know exactly why we should. We have been willing to negotiate even if we heard no compromise of any kind from the other side.
And here is where we are. We have negotiated on and off since before this round of cases was filed by the U.S. coalition and we have never encountered any serious compromise from the U.S. side, including this time. Meanwhile, a NAFTA panel decided definitively that Canadian exports to the United States neither injure nor threaten any U.S. industry, and according to U.S. law that should have been the end of the matter, nearly two years ago.
The United States then accused an American panellist of misconduct and the whole unanimous five-member panel, with three Americans on it, of getting U.S. law wrong. A NAFTA extraordinary challenge committee, chaired by the former chief justice of the United States Court of International Trade, exonerated the American panellist in very strong terms and upheld unanimously the NAFTA panel. The U.S. answer last August was to refuse to implement the decisions.
We have now completed the briefing and hearing before a U.S. court to have those decisions implemented. We are waiting for a decision. We were in court on this matter just this past week because the judges are concerned that the April 27 agreement might mean that they should not bother to rule. They concluded that they should rule, and the decision is literally just weeks away.
Another NAFTA panel has decided definitively that Canadian softwood lumber is not subsidized. That decision should have been implemented on April 28, eliminating the countervailing duty that constitutes most of this case, including deposits of some $40 million every month still being collected at the border. But on April 27 the United States challenged that panel too, comprised of three Americans, including an American judge. The United States says that the unanimous panel got U.S. law wrong, including the American judge. We would proceed to go through that challenge, and by law it would be over on August 10 of this year, but Canada agreed with the United States to stop that proceeding so that we cannot get a final outcome from the NAFTA panel.
Two governments have agreed that we should not have the final decision, after four years of litigation proving that Canadian softwood lumber is not subsidized. Why? Why can we not have these legal outcomes? One has only to read the opening statement of the current draft of the agreement from the United States. We got that last Friday.
The second paragraph says that the agreement is “seeking to resolve disagreements with respect to shipments to the United States of Canadian softwood lumber that the United States has found to be dumped and subsidized and threatening material injury to the softwood lumber industry in the United States.” Now, Canada could hardly sign that statement if there were definitive legal decisions to the contrary. We cannot imagine how Canada could sign that statement under any circumstances. In fact, the legal process required the U.S. agencies, not just the NAFTA panels, to find the contrary. The United States International Trade Commission issued a determination that says there is no threat from Canadian imports. The United States Department of Commerce has issued a determination concluding that Canadian softwood lumber is not subsidized. But those determinations ultimately are in limbo as long as we do not have the decision of the Court of International Trade and the completion of the April 27 ECC.
Here then, we can see a basic U.S. objective of the agreement: to erase the last four years of litigation, to eliminate all Canadian legal victories and replace them with the same old legal assertions that the U.S. industry has been making for the last twenty-five years. They want to be ready for another trade war on this issue as soon as the current deal fails or expires, and they want to wipe out any advantage Canada might have gained from defending itself during the last four years.
In the opinion of the Free Trade Lumber Council, we cannot build a long-term durable peace on the foundation of a lie, in which Canada is guilty as charged even after it has proved its innocence. The basic terms with which you are familiar are not as bold as the U.S. version, but they come to the same conclusion by claiming that all the legal implications of the last four years are now suspended “without prejudice”. The Canadian victories are erased, and the U.S. view of Canada is restored as if nothing happened during the last four years.
Of course, a great deal has happened. Most importantly, Canadians have deposited into the U.S. Treasury over $5 billion in duty deposits that the law now clearly shows never should have been collected. Canadian companies have been bled dry. Many have been put on the verge of bankruptcy because of eroding credit and lack of cash.
And here's the second item on the balance sheet. The U.S. industry wants our money, and we want our money back. The deal gives us back 80¢ on the dollar, which in the net present value of money a year ago might not have been bad but is now so close to the legal result that would give us back 100¢ on the dollar we at least have to raise an eyebrow.
The U.S. coalition crippled our industry for four years, making us pay premiums to compete in the U.S. market, thereby giving themselves a huge competitive advantage. Then they wanted to keep the money, even though both the WTO and a U.S. court have said they are entitled to none of it.
Despite what the U.S. Court of International Trade said on April 7 in a case brought jointly by the Government of Canada and Canadian industry, the basic terms proposed to give the U.S. industry $500 million and have the U.S. government keep another $500 million. The lead counsel for the coalition told the three-judge panel in the Court of International Trade in New York just last week that the coalition was compromising because it was only getting $500 million when, according to the Byrd Amendment, they should be getting $5 billion. He did not mention that the legal cases before NAFTA have proved that he lost and he's entitled to nothing, and that he also lost the challenge to the Byrd Amendment--