International Trade Committee on May 31st, 2006

[Guy Chevrette]

We'll try to be brief. I'll start with the second question and answer it quickly.

You can do things fast and well, since, as they say, whatever is left lying around just gets dirtier. However, we don't like things done at the last minute. That addresses your first question.

If we have three hours to respond to legal documents, that's obviously not enough. We have our lawyers, we regularly monitor the issue, and we think we should take at least 48 or 72 hours to respond to a serious legal document. Our lawyers can react quickly.

Two-hour ultimatums aren't going to work, particularly on weekends off. I think you have to get serious, and we have to live a long time. If we want to go quickly, let's at least provide for a mechanism that can solve the problems that may arise because we were forced to expedite matters. We can take 60 days to draft an agreement we're going to have to live with for nine years. If we want to take 30, let's at least take the legal precautions so that we don't subsequently wind up in an avalanche of disputes. There are clauses that our lawyers can suggest to us to obviate the need for this rush, which an cause us problems of another kind.

[The Vice-Chair, Bloc, Pierre Paquette]

Do other speakers wish to answer Mr. LeBlanc's questions? Mr. Lopez.

[James Lopez]

I wouldn't mind responding to the second one, the issue of a rush to get a deal. I was quoted by a journalist a few weeks ago that I thought it would be a herculean task to get this thing done by June, which I know was a stated target by some.

I believe the government does need to maintain a sense of urgency to get this deal done, now that the framework is done. Momentum is important in getting the deal done, because you get people on both sides agreeing to principles that they're maybe not 100% comfortable with—and there is some compromise on the American side here. That being said, we should not compromise the quality of the deal to get it done quickly. As I said, we need a sense of urgency, but not at the expense of getting a bad deal.

[The Vice-Chair, Bloc, Pierre Paquette]

Mr. Feldman.

[Dr. Elliot Feldman]

I'd like to answer with a couple of quite specific examples.

We get no warning when the next document is going to be in play. Over the weekend we received the U.S. draft. Monday night we received the annexes. We were told to have our analysis in by yesterday at noon We were given an extension until noon today. Since I had to be on a plane to come here, I left the office at 1 o'clock in the morning while writing an analysis of the U.S. terms and red-lining the terms and the annexes, with no warning, and with a few other things perhaps on my schedule to do. That's happening to every lawyer in Washington. There's no warning, and there're 24-hour fire drills. Now how good is what I produced? I have no idea, because I never proofread it; I never went back and looked at it. I pushed all the buttons for e-mail at 1 in the morning, and they were gone.

As part of the rush, last week in the U.S. Court of International Trade in New York, the counsel for the Coalition for Fair Lumber Imports told the panel of three judges that he understood that it was an undertaking that this deal would be done by June 15 and be signed. He certainly gave the impression that there was a promise made by the Government of Canada to the Government of the United States. More knowledgeable than all the Canadian counsel in the room, he announced that this House would rise on June 26 and that there must be legislation that goes through the House to complete the deal.

[The Vice-Chair, Bloc, Pierre Paquette]

Monsieur Cameron.

[Russ Cameron]

The answer to the first question is that the consultation has been wholly inadequate, and I think that's because of the answer to the second question, which is that it's just way too fast to have consultation.

[The Vice-Chair, Bloc, Pierre Paquette]

Monsieur Allan.

[John Allan]

Honourable member, I'd like to answer your question from a different angle. I agree with everything that's been said before, but what we've been missing so far, in my view, is someone on the negotiating team who has the commercial interests of the industry at heart, who has that expertise and can translate the term sheet into commercial terms that would best fit the industry going forward. I think that's maybe the missing ingredient, notwithstanding the rush.

Everybody here is working flat out trying to respect timelines. We have asked for extensions; we have received them. Notwithstanding that, it is a fast process and everybody is trying to do their best within it. But the frustrating part for me is not to see, shall I say, the business aspects of the industry recognized in these technical details that many people here have spoken about, which will govern how we do our business for the next seven to nine years.

[The Vice-Chair, Bloc, Pierre Paquette]

Do you have any further questions?

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Chair.

I just have a brief comment and then two questions.

I get a flavour, even from Mr. Higginbotham and Ms. Goodman, that the deal is far from being perfect, which has been mentioned time and again. I would suggest it's less perfect for Canada than for the United States. I mention that cued by Mr. Higginbotham's comment, as I understand it, that of the $760 million sitting somewhere, his company will receive back only $460 million. That's my understanding. So it's with very grudging, grudging reluctance that Mr. Higginbotham's company, I presume, will accept this deal that will cost the company $300 million. Ms. Goodman has indicated that her company opposed the trade action. So it rather seems that Canada is relatively blameless here.

But I would ask Mr. Feldman to expand on his comment about $3 billion and how that math is applied.

Mr. Cameron, if I could ask you about the six to 24 four months that you mentioned, I presume you were talking about the hoped-for conclusion of litigation within that time.

So if I could ask you gentlemen to comment on those two points.

[Dr. Elliot Feldman]

Thank you.

[The Vice-Chair, Bloc, Pierre Paquette]

Please be brief.

[Dr. Elliot Feldman]

Thank you, Mr. Chair.

The first question is complicated and I'll try to give you a very abbreviated answer.

The $3 billion refers roughly to the accumulation of deposits between the time the money started to be collected and the time we got a final decision and notice of final panel action completing a NAFTA process, and concluding that the money had not been collected lawfully. It should never have been collected in the first place.

In the window of that period, under the U.S. interpretation, that money is lost. The United States keeps that money, but it gives you the money subsequently. For example, in the annexes that have been drafted, the United States has drafted two sets of liquidation terms, one that runs through the period up until November 4, 2004, and the other that runs subsequently as a ratification of its interpretation that November 4—the date of filing of a Timken notice—is a date segregating the money that was collected before and after. The money collected before, in the interpretation that NAFTA panels only have prospective authority, means that the NAFTA panel can't give you back the money retrospectively, which a court would.

If I may very briefly answer the question that was really directed to Mr. Cameron about the duration of the litigation, on April 28, the United States should have revoked the countervailing duty order because of the results of the NAFTA panel. It filed on April 27, at five minutes to five, an extraordinary challenge, which the two governments then suspended—although there is no legal way to suspend. Had the process continued to its conclusion, it would necessarily have ended on August 10. Unlike the experience you had with the extraordinary challenge on injury, in which there was an interposed determination under section 129 of the trade law, here there is no interposition. There's nothing in the way. On August 10, if the process had proceeded, the United States would have had to revoke, by law, with no question, no appeals, no other way around, the countervailing duty order. The deposits that are now being collected would have dropped from over 10% to 2%. We think that needs to be compared with what you have in the deal.

[The Vice-Chair, Bloc, Pierre Paquette]

That's all the time we have for the first question.

Now we'll move on to the Bloc québécois.

If you allow me to speak here, that will save us some time, which I'll share with Guy André.

Mr. Chevrette—and I imagine this is also the case of the other industry stakeholders—you've had access to draft documents that we have not received. We don't exactly know the content of the various versions that you received, and to which you have to react quickly.

In your view, do the drafts that have been submitted to you comply with the spirit of the framework agreement of April 27, which most of you accept, and which you simply want to see enshrined in documents that will be to the advantage of all the parties?

Mr. Chevrette spoke about this specifically, but I don't know whether other businesses have had access to those drafts. Mr. Lopez, among others, has set a certain number of conditions, and you have all talked about recognition for Canada's legal victories on this issue.

Do the versions that you've received appear to comply with the spirit of the framework agreement of April 27?

[Guy Chevrette]

Yes on some points, and no on others. We have only singled out the points that do not comply with the spirit of the agreement. I'll give you an example.

In the first paragraphs of the American document—the only one I've officially seen—they clearly want us to agree that our industry is subsidized, which is false. We even won our case before the International Trade Tribunal. So that's a sentence that must quite naturally be struck out. That goes without saying.

The four important points that we want are priorities. We didn't want to get into the infinite details of the document, which is some 20 pages long, in addition to all the annexes, as Mr. Feldman said. Obviously, for us, the four points that we very specifically suggested concerned Option B. We absolutely don't want a company penalized when it comes to the end of its contract. I'll give you an example, ACI with Home Depot.

Let's suppose it's short a million board-feet. We wouldn't want it not to be able to serve its customer because the quotas are filled and Option B has been chosen. Levy a punitive tax on it because it's filled the quotas, but at least give it the opportunity to complete the commercial transaction. This agreement shouldn't cause our businesses to lose contracts. This is a very important point regarding Option B that should be clarified. Even an American business would not accept this kind of situation.

I told you about the exit ramps. Amendments are needed in order to enable the various governments to carry out their reform of forestry systems, which has begun in Quebec and elsewhere.

Anti-circumvention provisions are also necessary.

The last point concerns manufacturers. We consider them on a first-mill basis. We wouldn't want an independent remanufacturer to pay less tax than someone who remanufactures his wood himself. The latter would pay $200 for the same quality and type of wood, while the former would pay $100 because he remanufactured it independently. So it's a question of equity and justice for our businesses.

It's very important to clarify these four points with the U.S. government, and we think they can influence any subsequent decision.

[The Vice-Chair, Bloc, Pierre Paquette]

I'm going to ask you to respond briefly.

You're quite categorical in your document. On Option B, you say that a ceiling that permits no additional exports would be unacceptable in any circumstances.

Do you mean that, if this aspect were not in the final agreement together with other elements, the government should refuse to sign and should continue negotiations on this point? I want to know how far you're sticking to this.

[Guy Chevrette]

If I wrote it down, it's because this is serious.

[The Vice-Chair, Bloc, Pierre Paquette]

I know it's serious, but I want to hear you say it once again.

[Guy Chevrette]

It's stronger when you write it than when you say it. In our opinion, it's written and we think that the government will have to correct this document. That's clear. I won't speak on behalf of my members. I don't have that democratic habit. It will be up to our businesses to state their view.

[The Vice-Chair, Bloc, Pierre Paquette]

Thank you.

Mr. Higginbotham, go ahead. Then it will be over to Mr. Lopez.

[Ken Higginbotham]

I have a quick comment, Mr. Chairman, in regard to option B.

Our view would be that it's critically important that any quota be allocated on a company-by-company basis, so that at least we are in control of our own destiny, with respect to exports and to how much we may have available to go to customers.

I also wanted to clarify for Mr. St. Amand regarding his earlier question. The $760 million that we have on deposit is the total amount. The $460 million that I suggested we would end up with is net of our share of how much is going to stay in the U.S., but also net of taxes to the Government of Canada and to the provinces in which we operate.

We'd be more than happy to have those taxes reduced, of course, so that we'd have a larger amount left.

[Some hon. members]

Oh, oh!

[James Lopez]

I believe your original question was about these drafts that have come out since the initial framework. Are there some changes or are there some inconsistencies? I can say that in some cases, the drafts that have followed the two-page framework agreement. Some elements are consistent with the spirit and the intent of the original one, and there are other significant portions where the dilution has already started. We've already put a bit of water in our wine and a little more water. That's what we have to avoid. That's what we've been talking about here this afternoon. We cannot allow what we have in that agreement to be clawed back. As a matter of fact, we need to find ways to strengthen it.

[The Vice-Chair, Bloc, Pierre Paquette]

Mr. Cameron.