Good afternoon. Thank you for extending me this invitation.
I am honoured by the opportunity to share with you some of the thoughts of the Ontario Lumber Manufacturers' Association concerning the possible settlement of the long-running softwood lumber dispute with the United States.
I note that there are no similar hearings in the United States Congress, for at least three reasons. First, the United States has no intention of introducing any legislation to execute or implement this or any other agreement, so Congress need not trouble itself. Second, this deal is much more important to us than to the United States. And third, the current configuration of an agreement appears to be uncontroversial in the United States and very controversial here, for several additional reasons.
Let me take each of those three points.
It has always been the position of the United States that Canada is guilty as charged of subsidizing softwood lumber exports to the United States. The United States has always argued that Canada, including the provinces, must change its forest policies, change the way it does things, and change its laws, because there is nothing wrong in the United States and everything is wrong in Canada. Open subsidies to their own lumber industry have never mattered, nor have even been admitted, such as the most recent tax arrangements announced in the last four weeks, which are designed specifically to assist timberland owners in the United States
It has not mattered that subsidies are a legal question and that the United States brought legal cases against Canadian softwood lumber exports in 1982, 1986, 1991, and 2001, yet has never proven its legal case—let me underline that: and has never proven its legal case—but has forced settlement twice, and is now about to force a third settlement.
The United States position has always been that it should change nothing, but that we in Canada must change. We have, but to no avail. Congress, on such understandings, doesn't need do to anything.
In the late 1980s Ontario and Quebec completely overhauled their stumpage systems to make them market-based, but the United States still alleged subsidies in 1991. British Columbia is overhauling its whole system now to make it more market-based, yet so far the United States refuses to accept that any of the changes in any of these provinces solve the alleged problem of subsidies.
In between, the Department of Commerce in 1982 and the free trade agreement and the NAFTA panels have subsequently concluded, according to the law, that there are no subsidies. But the allegations continue, and we continue to be expected to change our ways, never knowing what we can do to satisfy the Americans.
As long as the allegations are against us, we are supposed to change our practices and our laws. The United States is not expected to go to any trouble. So you have hearings and they don't.
The whole thing is more important to us. Our economy is one-tenth the size of the United States economy, and certain economic sectors and activities therefore loom larger for us than they do for the United States.
In our view, this issue ought to be as important for the United States because of its huge impact on homebuilding and housing starts, which historically have been the engine of the U.S. economy. But we also know the way American politics are organized, and consumers aren't heard very much. Our Canadian allies in this struggle are large and important. Among them are the National Association of Home Builders and the Home Depot Corporation, but they simply don't seem to have the same political clout as the timberland owners.
So while this struggle does have grave consequences for the U.S. economy, the American political system somehow cannot recognize or understand the consequences the way we do.
Finally, this deal is controversial here because of the way it is shaping up. All of us have expected that eventually we would have to reach some kind of settlement with the United States.
The industry in the United States is politically connected because of its influence over the Senate finance committee, which is the pivotal committee governing both taxes and trade. There's nothing of comparable influence in Canada. Government here does not do the bidding of the forest industry the way the United States Congress and the administration, under the influence of Congress, do for the U.S. industry.
Those political connections have meant that the U.S. administration has avoided and evaded the law, and forced Canadians time and again to yield their legal rights to political accommodation in the United States. We're here again, one more of these times, and we should recognize it for what it is.
We have experienced that influence over 25 years. Some may remember, as I do, that the free trade agreement between Canada and the United States was nearly blocked at the Senate finance committee because the chairman at the time, Senator Robert Packwood of Oregon, threw a fit over softwood lumber—it was 1987.
We already had caved in to the pressure and abandoned our legal rights when we entered the 1986 memorandum of understanding. When the five years of that agreement were up, British Columbia could no longer live with it and it was abandoned. We then negotiated the softwood lumber agreement in 1996 after we'd won at the 1991 case—it's important to remember that was a legal case won by Canada.
We'd won and there should have been free trade, but the United States refused to give us our money back, even though the law plainly required that we get it back. In order to get it back without another legal fight, we made a deal, and the United States is holding our money again this time, and much more of it. This time we've paid an illegal tax of 27%, whereas last time it was less than 12%.
People may forget, but I don't. We've suffered under the deal we had to make to get our money back. It imposed quotas that were never sorted out fairly in Canada. Some regions got advantages over other regions. Some companies within regions got advantages over other companies in the same regions.
The simple truth is that managed trade again didn't work and we wound up again in a legal fight, and again the United States changed the law. So again we had to prove that governments were not subsidizing lumber in Canada, and this third time around the Americans changed the rules again. Despite the rules change, we won again. We've proven, no matter how the United States changes the law, that we don't subsidize. And yet here we are again, making another deal.
I must tell you that my association is not opposed to making a deal. We recognize that despite the history, the United States may continue to force upon us restricted and managed trade. But we cannot accept a bad deal that will close our mills, put our people out of work, diminish our industries, and encourage other countries to take our place in the North American market.
British Columbia may be able to look to Asia, but we in central Canada cannot, nor can we very much look towards Europe. In fact, it's mostly the Europeans who want to fill the gaps created in the North American market when the Canadian trade is restricted.
So we must get it right here in North America. We must do it remembering what has happened before. Some of us have been in this business a very long time, and we remember. There's an important difference this time, though. In the past the United States has insisted that Canada could determine how provinces manage their forests, and tried to impose through the federal government penalties on the provinces. This time, for the first time, the design of the deal acknowledges that each province may require its own unique solution.
I remember that during the negotiations for the softwood lumber agreement in 1996, Quebec was negotiating policy adjustments, and British Columbia proposed a quota. This time British Columbia has been negotiating policy changes and an export tax, while Quebec has proposed a quota. Those shifts show that if trade is to be managed, different provinces are going to require different terms at different times. But they also—