Thank you, Mr. Chairman.
Mr. Chairman, members of the committee, let me begin by expressing our appreciation to the committee for providing this timely opportunity to testify on a matter of importance to Abitibi Consolidated. Let me begin with a short overview of Abitibi Consolidated.
As Canada's largest forest products company, we are North America's leading producer of newsprint and groundwood papers. As well, we are a major producer of wood products—the largest, I might add, east of the Canadian Rockies. Our 13,500 employees in over 40 manufacturing facilities in four Canadian provinces and multiple locations in the United States supply our customers in close to 70 countries. However, the United States is our largest and most critical market, for all of our products. We are also North America's largest recycler of old newspapers and magazines and are committed to sustainable forest management of over 40 million acres.
Over the last five years, we have been impacted by significant increases in stumpage and harvesting costs, a 100% increase in energy costs—I'm sure all of you are aware of this when you fill up at the gas pump—and as manufacturers have had to absorb an unprecedented strengthening of the Canadian dollar, from 63¢ in January of 2002 to approximately 90¢ today.
But let's focus on the reason we're here today. That's the impact of duties levied since 2002 and continuing to this day. For Abitibi Consolidated they amount to $231 million U.S.
As a company we have weathered this “perfect storm” by setting our sights on being a low-cost producer. As a result, we have made some difficult decisions to strengthen our portfolio of assets by closing marginal mills; we've had to sell selective assets, aggressively cut costs, significantly reduce our debt, and develop new products, all in our continuing effort to meet the challenges of our time and restore our company to profitability.
Having said all this, as CEO I remain confident in our future. Our industry in Canada can and will rebound. Paving the path for our future requires pragmatic decision-making. It is in that vein that I appear here today, a voice of support for the softwood lumber framework and with admiration for the steps taken by government. We thank you for moving forward and building on the previous government efforts at both the federal and provincial levels, which contributed to this framework we have before us today.
The framework is a practical solution. Negotiations require give and take. No side gets all it wants; it would be nice, but it is not realistic. The draft is “what the traffic will bear”. It provides orderly trade for seven to nine years and a return of approximately 80% of all Canadian deposits and it establishes clear rules for future trade, which we will never have if the dispute continues. It reduces business risk by eliminating current unpredictability. It provides stability and represents regional differences within Canada, bringing practical solutions and flexibility.
For example, options A and B represent a pragmatic approach to provincial concerns, a creative solution that should bring the provinces together. The framework is designed to provide for the needs of east and west. We can live and hopefully survive under its terms.
Of course, it remains critically important to continue discussions and negotiations to be sure we safeguard our interests. The framework is an important and constructive step, and we need to be sure we see the process through with vigilant focus on details. There is much yet to be done, and we continue to rely on government to give industry a fair and just final agreement, which will allow us to grow and prosper under its terms. Until all the i's are dotted and the t's are crossed, we must maintain maximum leverage and not compromise on our legal bargaining position.
Those who seek to debate abstract principles and legal theories miss the point. This protracted dispute has been far too damaging. The fact is, we must be practical and accept reasonable solutions to the problems we face if we are to ever put them behind us. It is not enough to be wrapped in principle. The framework is not perfect, but we live in a real world, not a perfect world. It is time for the Canadian industry to hold together and secure the details of a final accord.
Details need to be negotiated, such as the caps for option B and true arbitration of the anti-circumvention clause. We cannot afford to be purists, but we can be practical and tough negotiators.
Cut a deal now, because our negotiating leverage is highest. This deal in fact builds on previous proposals and reflects our legal victories. We have won the Byrd amendment. We have won the NAFTA countervailing duty case. We have won cases at WTO that will benefit us beyond the softwood lumber dispute.
This is the right framework at the right time. If we don't move toward settlement now, this occasion may not present itself again for a long time, at a high cost to Canada. Again, the softwood lumber framework positions the Canadian industry on a sound base for years to come, with a much more predictable trading climate. The timing is right.
Thank you very much for your time today. I look forward to joining the panel in addressing your questions.