Thank you, Mr. Chairman.
Honourable members, ladies and gentlemen, it's a pleasure to be able to speak to the committee this afternoon about the subject that's critical to my company as well as to a number of other people who are in this room today.
I am going to keep my comments somewhat brief, and I'll be pleased to answer your questions when I've completed them.
First of all, here's a quick overview of my company, Tembec. We employ approximately 10,000 people globally, and 8,000 of those people are employed in Canada, with about one-third employed in our lumber business. Tembec has significant lumber operations in British Columbia, Ontario, and Quebec, and we have other pulp and paper and engineered wood operations in Alberta, Manitoba, and New Brunswick. So we feel we are in a somewhat unique situation whereby we can talk about a pan-Canadian solution, because we touch so many provinces that this agreement is going to cover.
We're here to talk about the softwood lumber trade dispute. Some of us refer to it as “Lumber 4”, because it's the fourth time around for this thing. We all know that this dispute has gone on for over four years and has caused significant financial damage to a number of people, a number of organizations that are operating in this industry. It has gone on a long time, and a lot of people believe it needs to be settled.
I believe it can be settled, but it has to be settled fairly for the industry, fairly for our employees, and fairly for the communities where we operate.
Right now we have a framework agreement, and there is going to be a lot of discussion—I guess there was on Monday, and again today—about this agreement. Is it perfect? Of course it's not perfect. To me, perfect is unencumbered, unrestricted free access and free trade with the United States. That's what we all want, to the very person, in this room.
The challenge we have is we're not here today to talk about unencumbered, unrestricted access to the U.S. market; we're talking about a framework agreement that's ultimately, potentially, going to end up in a trade agreement that will govern how we trade softwood lumber with the United States for the next seven to nine years. The challenge is we have only two pages to work with; that was the initial framework. We have to take those two pages into dozens and dozens of legal and commercial documents.
I have stated publicly, representing Tembec, that I think an agreement is possible based on that framework, if we get the details and the mechanisms right and embedded with this agreement. We have to get it right the first time, because we won't get a second kick at the can.
How are we going to accomplish this? A loud message to government is that we have to have extensive and ongoing consultation with the industry: with our associations, with our legal counsel, and with the companies. That's the only way we're going to get it right, because we're the people who have to live with this thing for the next seven to nine years.
In doing this, first of all we must avoid any further dilution of our position. I think Mr. Elliot Feldman outlines it correctly. This industry and this country have had numerous victories through NAFTA and WTO, and it is a shame that in a sense we'll be throwing in the towel if we put this final agreement together.
But I think the reality, is if we're going to work within a framework that's going to ultimately get us a deal that will govern us, we have to get mechanisms in there and we have to take this one opportunity, this unique opportunity, to strengthen the mechanisms that are going to be put in this agreement.
Part of this agreement, we all know, indicates that we have to leave $1 billion behind to the United States. I don't know about you, but I find this extremely distasteful: $1 billion of our money, that is rightfully ours, is going to be left there. Some people are calling that the price of the deal, and I guess if you're pragmatic you have to say, yes, it is the price.
There are some good things that the $1 billion will go toward. For example, it is going to go toward building housing for people who need it in North America, and for this industry it's good because there is significant money that will go toward initiatives that will expand the market for lumber and other wood products throughout North America. Who can argue with that? My only argument is that we're paying for it. We think our American counterparts are going to benefit as well. We think they should chip in to pay for this initiative.
We think, given the significant compromise we make in leaving duty deposits behind, we cannot tolerate or accept what happened the last time we settled this trade dispute, which was a protracted period before this money was paid back to the companies. We insist, and we need the government to insist, that if we come up with an agreement that is liveable, the money comes back to the companies that have paid it within 90 days. I think we need to draw a line in the sand, ladies and gentlemen, and make that position very firm with the United States: 90 days.
I have a few other key points about the agreement. I agree with the people who have spoken here today and on Monday that Canada should work towards preserving our legal wins to date. They are significant; they are precedent-setting, and can serve this country well going forward.
This final agreement, if it comes to be, should contain concrete policy exits that will allow provinces to change their policies appropriately to get towards true market pricing mechanisms that we would all agree represent free and fair trade of our timber in the provinces. And we have to have a truly independent arbitration mechanism to judge whether the policy changes that are made can lead towards an exit and, ultimately, to free trade.
We also believe that Canada should continue all its litigation with vigour, as Tembec will do, until this trade deal is worked out. We do not think that we should compromise one bit on where we are with litigation and on the steps going forward, until we're certain we have a deal.
This trade agreement, or lack thereof, has cost my company $100 million a year for the last four years, up until the end of December, when the duties finally dropped. This has been significant to my company, to my shareholders, and ultimately to our employees, and has done financial damage to our organization.
But there is another issue I want to take the opportunity to highlight before this committee, even though it's not directly related to the softwood trade dispute. It reflects on our ability to trade in softwood lumber. We are extremely concerned about what's happened with the Canadian dollar. It's no secret that over the last two-plus years, the foreign exchange rate with the United States has increased over 40%. This change over the last two years has had an $800 million impact on my company alone. The trade dispute's impact has been $100 million, and foreign exchange $800 million. John talked about the perfect storm; that's our perfect storm.
We don't think that governments directly control foreign exchange rates, nor should they, but the Bank of Canada does have an influence on the foreign exchange rate by what they do with their monetary policy. And we think that the Bank of Canada has to understand that there are a lot of threats to the Canadian economy that are much greater than inflation at this point in time. So we urge the government to recognize, and we ourselves want to send a loud signal, that what's happening with the foreign exchange rate—albeit a trend that global markets are going to dictate—can be moderated with responsible monetary policy.
Thank you very much for the opportunity to address this committee. I'll be happy to take questions.