International Trade Committee on May 29th, 2006

[The Vice-Chair, Bloc, Pierre Paquette]

We must stop here, Mr. Wakelin. If you should have any additional information to send the committee...

[Trevor Wakelin]

Excuse me, could you please repeat your remarks?

[The Vice-Chair, Bloc, Pierre Paquette]

If you do have any additional information for the committee, you may send it to the clerk.

You have five minutes, Mr. Maloney.

[John Maloney, Liberal, Welland, ON]

Thank you.

The industry is not happy with leaving $1 billion of duty deposits on the table. In a comment that Ms. Lim made, she suggested that perhaps it might have been palatable had it been a good deal. The government is not listening to your input.

What, in your opinion, would make this a good deal? How can this be improved upon?

The question is for the whole panel. Mr. Wakelin, you can start.

[Trevor Wakelin]

Obviously, we're on record as indicating that we could leave some money on the table if it were a good deal. What I have suggested in my presentation here today is that for it to be a good deal for Alberta producers, we need something concrete written in regarding relief around the surge mechanism. If we could get that and have the market share issue dealt with, we could probably support the deal.

Those are the very important items, including the anti-surge mechanism that I referred to. Without that, we would say that the cost—the $1 billion that we're leaving in the United States—is not worth what we're going to be getting into here.

[The Vice-Chair, Bloc, Pierre Paquette]

Mr. Grenier or Ms. Lim.

[Jamie Lim]

This would be a good deal, first and foremost, if our legal victories from the last four years were preserved. The last four years have to count for something. We can't have the legal victories we've had, and we can't have spent the last four years doing what we've done to have it mean nothing.

Seven years from now--make no mistake--there'll be Lumber V. And to think that we're going to start Lumber V exactly where we started Lumber IV, after taking the threat of injury case all the way to the ECC and getting a NAFTA decision that says we're not subsidized. The ECC was suspended, but we know what the outcome would have been from that. So that's critical.

Making sure we get our money back before we start paying the new penalties from the new agreement is critical, to ensure that we don't have a period where we're being hit three times.

We need flexibility to manage our quotas from month to month, to ensure that we serve our customers. We have obligations and commitments. When you look at a hard cap under option B, we need to make sure we work out that complexity.

On provincial exits, when we started this agreement--and Mr. Grenier spoke about it in his comments--we said we would agree to a settlement that provided exits to durable, unencumbered free trade. This agreement now has reduced provincial exits to nothing more than faith and hope. In other words, good luck, have a nice time, but not likely.

What would make it a good agreement? The bottom line is, just give us the details so we know. One CEO said that the framework has the potential of being a good agreement, but we don't know yet. From what we've seen in the legal text from the U.S. side that was sent out on Friday, the language is pretty stiff. Compromise in a settlement shouldn't mean punishment and guilt. I can tell you right now that the U.S. legal text we're looking at seems a lot like punishment and guilt, and not compromise and settlement.

[The Vice-Chair, Bloc, Pierre Paquette]

There's one minute and a half left, Mr. Grenier.

[Carl Grenier]

Merci.

To make it a good deal, I would concur with what Jamie Lim has said. The legal basis for the deal could be changed. We've provided very precise language to the federal government to do that. It doesn't mean doing away with the basic terms of April 27; it means that this deal should be about avoiding Lumber V, rather than settling Lumber IV. Lumber IV was settled last year. Only the U.S. refusal to implement the final decision of NAFTA is stopping us from doing that. That's why we're in U.S. courts. Basically, that should be recognized.

There should be no punitive aspect. If we leave a billion dollars behind, that's punitive enough. But it should be clear that's what we're paying to get permanent, durable settlement of this thing, and not just another one of those trade agreements that we've had in the past.

On the policy exits, the agreement now says that in the next 18 months they will negotiate that. That's not good enough. Policy exits are important. What do the provinces have to do to get their industry out from under these restrictive measures? We need to know that now, not 18 months from now. Where will the leverage to get those policy exits be once the final deal is signed?

First and foremost, we now need a process that allows industry input into this legal drafting process. We're being kept at arm's length. We're being told that we should work through the provinces. That's not good enough. That should be improved.

[The Vice-Chair, Bloc, Pierre Paquette]

You have the floor, Mr. André.

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

Thank you, Mr. Chairman. Good afternoon everyone.

Some of us think this agreement weakens chapter 9 of NAFTA. You have made significant concessions regarding softwood lumber, even though all the legal action taken under NAFTA ruled in our favour. One billion dollars is a relatively large amount of money for an industry that was and still is experiencing difficulties.

My question is to Ms. Lim. How can we keep what we gained as a result of the legal action if we sign the agreement in its present form? Does it make any sense to sign a deal knowing that it will result in ever-increasing losses? It is anticipated that 20 per cent of your industries will be threatened despite the gains we made as a result of the legal proceedings. That is my first question.

[Jamie Lim]

Thank you.

I think we provided suggestions to the Canadian legal text that would preserve our legal victories going forward. It's very critical. That's when we talk about the complexities of writing the agreement. That's part of it--making sure that the language that's in the final legal text doesn't admit guilt. It doesn't say that this is to protect the U.S. against subsidized Canadian lumber, as the legal text is saying.

When we got the Canadian version, because we've been working.... We know this train has left the station. We want to make sure we get it off a political track and get it onto a commercial track and make it a reliable commercial agreement. So when we got the legal text from Canada over the long weekend, we put a lot of effort into analyzing it and suggesting language that would preserve our legal victories going forward and help us avoid starting at ground zero and Lumber V.

Again, as Mr. Wakelin has said, we have to make sure that the suggestions we're making, the advice we're giving, is actually being used and incorporated into that final legal text. That's going to be critical.

Perhaps Carl might want to add to this.

[The Vice-Chair, Bloc, Pierre Paquette]

Do you have something to add, Mr. Grenier?

[Carl Grenier]

Thank you.

So far, there's nothing to indicate that suggestions of this type to change the basic nature of the agreement without changing its terms, are being taken into account by the federal government.

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

I know there is a great deal of pressure within the industry to sign a deal, because everyone seems to be worn out.

Is it really necessary to sign a deal as quickly as possible? That is what the government wants to do, but from what you say, there just does not seem to have been a great deal of consultation. Mr. Wakelin told us that you had expertise in the area, but that the agreement does not seem to take this into account.

Do you think the industry can wait a few more months, so as to avoid signing a deal that could be worse than the North American Free Trade Agreement? Of course, the loan guarantees could be helpful in this regard. Do you think that the government could be in less of a rush to sign an agreement that could be harmful to us for the years ahead?

[Carl Grenier]

The timing of this is a little strange; we were no longer at the beginning of this dispute, but rather close to the end.

Even if we had gone to the U.S. courts, we thought that by the end of next year the matter would be settled. When there is a judgment from a U.S. court, the government has no choice but to enforce it. It is not at all like the NAFTA judgments, for example, which the government can choose to implement or not. Contempt of court exists in the United States just as it does in Canada.

Some very important decisions are about to be handed down, and this explains in part why the Americans were so eager to settle this matter. There is also a political will in Canada to get this matter settled quickly so as to improve our relations with the United States.

This is not the first time that the softwood lumber industry has been subjected to such political will. In 1986, we had entered into an agreement to stop the investigation at a stage far less advanced than it is at the moment, because the two governments did not want to have this softwood lumber issue on the table when they were negotiating or were starting to negotiate NAFTA, which is a much broader issue.

I think that to some extent the softwood lumber industry has suffered because of the political will in Canada to improve our relations with the United States.

[The Vice-Chair, Bloc, Pierre Paquette]

Thank you, Mr. Grenier.

Mr. Merrifield.

[Rob Merrifield, Conservative, Yellowhead, AB]

I want to thank the panel for showing up and giving their input on this important issue. It's a very important one for me and my riding. I don't think there's a community in the riding that isn't impacted by the softwood lumber deal, so it's paramount to the riding I represent.

All the panellists have suggested that this deal isn't perfect. I've never heard anybody on either side of the border suggest that it is. I hear Atlantic Canada saying they could live with it; I hear Ontario saying that they're nervous because of the details and that they don't have enough information to say one way or the other; and I hear Alberta saying the same, with the caveat that we don't have surge protection for a paramount problem: the pine beetle. I know it's coming across the border now into our riding through the Jasper area, Willmore Park, and other areas.

Perhaps the words of the minister a while back were right: the devil is in the details. It's the details we're trying to work out, and I think that's what the committee is hoping to be a catalyst for, to be able to get some of these details and voices heard, so that the details of the agreement can take this situation into consideration.

But I'd like to go back to the pine beetle issue. Is it true or not that the pine beetle is actually mutating somewhat, and potentially into the jack pine? If it comes across into Alberta and then into jack pine, it can flood into Saskatchewan, Manitoba, Ontario, and Quebec. What kind of projected timelines could we see?

Can you have a quick answer on that, Trevor or Murray?

[Trevor Wakelin]

Yes. I think what the entomologists have indicated is that the pine beetle is not going to stop in the lodgepole pine. It will continue. Jack pine is a very close cousin of lodgepole pine, and if there isn't aggressive action taken in Alberta, it won't take long before the beetle moves from the eastern slopes, which are on the western side of the province, to the eastern side of the province into the jack pine. Once that occurs, it's pretty much an unlimited food supply for the beetle right through Atlantic Canada.

In terms of time, we've seen a massive explosion in populations in British Columbia over the last few years. In the last year, it's come across into Alberta. I suspect that over the next few years, without the aggressive action by the Alberta government, we could see populations increase exponentially, and they could soon spread across the province.

[Rob Merrifield, Conservative, Yellowhead, AB]

Let's go back to the agreement, because the agreement in British Columbia recognizes surge mechanisms brought on because of the extra cutting because of the pine beetle. Correct me if I'm wrong on this, but are you suggesting that anything over 110% would trigger the 150% duty on the entire export tax, on the entire shipment of the Alberta export to the United States?

[Trevor Wakelin]

Correct.

[Rob Merrifield, Conservative, Yellowhead, AB]

If you could get anything above the 110% allowable cut as a penalty for overcut, would that satisfy the industry in Alberta?

[Trevor Wakelin]

I can't say that would satisfy it.

[Rob Merrifield, Conservative, Yellowhead, AB]

That's not perfect, but....

[Trevor Wakelin]

There are a number of options that could be considered if we could have the opportunity to have that discussion, but so far we haven't. We would welcome the opportunity to sit down with the federal negotiators and discuss the circumstances surrounding Alberta and the beetle, and how we could get some relief from what's being contemplated, as it's being written into the agreement.