Thank you, Mr. Chairman. Good afternoon, madam, gentlemen and colleagues in the forest industry.
Mr. Chairman, I begin by thanking you for the opportunity to address your Committee.
As you know, the Quebec Forest Industry Council is the principal spokesman for the forest industry of Quebec. It represents virtually all businesses. I say that because I saw the reporting on Monday. It's as though someone who represented barely 4% of Quebeckers was the representative of all Quebeckers. We represent 96% of the Quebec forest industry. We represent virtually all sawmills, all pulp and paper businesses and rotary cutting, sawing and hardwood businesses. The topic on your agenda today is crucial for our industry. Quebec's forest industry depends heavily on its exports to the United States.
I know that you wish to know what we think of the agreement in principle. For us, it is a simple answer: we have long been in favour of a negotiated settlement as long as it respects the following four principles. First it must be asymmetrical to account for the different realities which apply in different Canadian regions. The agreement in principle seems to achieve this. Second, the agreement must take into account the favourable judgments we have obtained to date. We do not yet know if the final text will meet this requirement but we still hold to it. The agreement must avoid “Lumber V” long enough to allow a return to stability; this seems to have been the common goal but recent drafts raise concerns on this point. Quebec must have a fair share of Canadian softwood lumber exports. That's the fourth principle.
Our members voted in favour of the agreement in principle of April 27, 2006, because these four goals of ours seemed to be met or to be achievable. You certainly must be aware that our industry is going through a serious structural crisis and that it is high time that our members be able to devote themselves to the advancement of their businesses, with stable horizons, rather than all becoming experts in international law.
Some were surprised by the support we so clearly showed on April 28 last, and in the days which followed. Having lived through the process which brought us to that decision by our members, I can tell you that there are several different explanations for that support. Many thought the agreement was a good one, while others felt that they had simply had enough. Some businesses are living through great difficulty; others felt that it would simply have cost too much to go all the way to the end of costly and demanding litigation. Finally, some simply had an urgent need for air, at any cost.
Now, we are at the crucial step of drafting the legal text of the agreement. So far, the Canadian government has allowed us to comment on some drafts, though often with too little time to react properly. Some of the changes we have proposed have been accepted.
On the other hand, there remain amendments which seem to us necessary. I would go so far as to say that they are essential if QFIC is to be able to continue to support the government in its search for a settlement. I comment here mostly on the Canadian drafts we have seen. The American draft is on a great many points thoroughly unacceptable, and we believe that the Canadian government will have to collaborate closely, and directly, with industry to be able to come to an acceptable ground of agreement.
Here are the main issues. First, let's talk about Option B. Those regions which choose Option B, that is a mix of quota and tax lower than in Option A, must have some flexibility to be able to avoid having their commercial relations unduly disturbed. A cap so hard as to disallow in any circumstances whatsoever any over-quota shipment whatsoever is unacceptable.
A dissuasive tax on exports exceeding the quota ceiling would discourage exports beyond Quebec's share, but would allow a company to respond to pressing and time-sensitive customer demands. We should also ensure the possibility of carry-forward and carry-backward of quota from period to period.
Such a provision was in the softwood agreement of the 1990s and worked well. Very few companies saw the need to pay the dissuasive tax. We believe a tax would accomplish the purpose here. In this way, we might accommodate commercial reality without violating the spirit of the April 27, 2006, document, which did not deal with the choice of method of enforcing the ceiling.
Now I'll talk about the subject of policy exit ramps.
For years now, we have been discussing a settlement which would allow provinces to escape the confines of managed trade by way of «policy exit ramps», policy changes which would reassure the American side that we are right to say that our lumber is not subsidized. We are surprised, then, to be shown confidential drafts which remove any hope of even a serious discussion down this path, and which even provide that agreement as to desirable policy changes would not prevent Lumber V allegations that those very changes create a subsidy. This must change.
The anti-circumvention provisions which the American side now seeks would freeze for seven or nine years any modification of Quebec's forestry policies, since any change would expose us to arbitration, with circumvention to be decided by an inflexible test, and then to the rebirth of border duties. This is not the trade peace which the agreement was meant to deliver.
Another essential element for us is the equitable treatment of remanufacturers. The texts we now see provide for differential tax treatment depending whether the remanufacturer is affiliated with a holder of forest rights. Our Quebec government never tires of asking our industry to develop downstream, value-added transformation, but this kind of aberration would take us in the wrong direction. This must be corrected, and all remanufacturers should be taxed on a first-mill basis.
These, then, are some points which illustrate the challenges ahead of us, in ongoing negotiations which must lead us to an acceptable agreement. We are well aware that the task is not an easy one, but we do sometimes have the impression of having to negotiate with our own government before a proposal is even submitted to the Americans.
If the Americans have a problem with our suggestions, why not leave them the pleasure of saying so? We hope very much that Canada will be able to arrive quickly at a commercially viable agreement, acceptable to the entire industry. The government can count on our support, if the essential changes I have mentioned are made. We, for our part, hope to be able to count—and I won't hesitate to say this as an ex-politician—on all Canadian political parties for their non-partisan support of a valid agreement for the Canadian industry as a whole.