Thank you, Mr. Chair.
Thank you for inviting me here to testify today and for giving me the last word among your panellists today.
By way of introduction, the Forest Products Association of Canada is the voice of the forest products industry nationally and internationally.
Our members operate pulp and paper and forest product companies in all provinces of Canada.
I'd like to make three points today.
First, the forest products industry is one of Canada's most successful export industries, and we believe, in general, in the value for Canada of both multilateral and bilateral trade liberalization. Second, the Korean market, in our view, has upside potential for the forest products industry. Finally, a free trade agreement between Canada and Korea has the potential to offer significant benefits to this industry over time.
Let me take each of these points in turn.
First of all, as a large exporter, we see the benefits of bilateral and multilateral trade liberalization every day. The forest industry exports about $38 billion in products a year. We are not only one of Canada's largest exporters; we are far and away the largest exporter of forest products globally. Just by way of comparison, the next largest exporter of forest products is the United States, and we export almost twice as much in any given year as our American competitors.
We're also the largest Canadian exporter to Korea as well as to other non-U.S. markets, such as India, China, and Japan. As a major player in Canada's trading relationships, we have a broad perspective and a great interest in trade issues.
We believe that as a small export-dependent nation, it's in Canada's interest to pursue trade liberalization. Over time, bilateral and multilateral trade agreements have played a significant role in expanding and protecting market access for Canadian products. Tariff reduction, trade rules, and dispute resolution mechanisms are essential components of the fabric of international trade relations.
We have strongly supported the government's efforts to promote global free trade through the Doha Round discussions of the WTO, and we have taken leadership globally within the forest products industry to aggressively pursue a sectoral agreement to reduce trade barriers for forest products worldwide. But given the uncertainties of the Doha Round and the speed at which other countries are conducting bilateral agreements, we believe that bilateral agreements, such as the agreement the Government of Canada is pursuing with Korea, are critical supplements to multilateral trade talks.
My second point is that we believe the Korean market has promise for the Canadian industry. In 2006, we shipped about $500 million in forest products to Korea. This was a 13% increase over the previous year, and exports are already up another 12% in the first nine months of 2007.
The majority of our current shipments are pulp, but where we see the greatest growth potential in Korea is on the solid wood side. Shipments of solid wood products to Korea have increased by 36% since 2005-06. The reason for this is that Korea has a long culture of building with wood, and our experience in market development in Japan, China, and Korea has taught us that this is a key factor in driving market potential for Canadian products.
The industry is working hard in Korea, supported by the Canada wood program and by provincial governments, to develop this market. We have developed partnerships with Korean wood-producing organizations—the Korea Wood Building Design Association and the Korea Log Builders Association—to address issues such as worker training and co-development.
Another factor that makes us believe that in the medium term this market has solid potential for Canadian wood products is that Korea has recently issued a national economic plan in which they've signalled their intention to move from their current housing situation, in which about 75% of their available housing stock is in high-rise buildings, towards a housing market in which they would have about 50% of their housing in high-rises and 50% in low-rise multi-residential buildings. These are precisely the sorts of buildings that lend themselves to construction with wood.
My final point is that we believe that the Canada-Korea FTA could have a number of benefits for our industry in pursuing further trade with Korea.
First of all, on the tariff side, tariffs on Canadian wood products going into Korea are currently between 5% and 8%. For these products, which we're already shipping from a distance, this can be an important price disadvantage. As our major competitors, such as the U.S. and Chile, negotiate free trade agreements with Korea, it's essential that we have parity with them.
Second, on the non-tariff barrier side, Korea, as do most countries, has its own building codes and standards. If we want to supply their market, we will need to meet these standards. We can substantially reduce the cost of meeting these standards if we can have mutual recognition of test results, for example, for acoustical and fire standards between Korean and Canadian test facilities. This is an area where the Government of Canada has been working closely with the industry to develop a proposed approach to have mutual recognition of test results as part of an eventual Korea-Canada free trade agreement.
Finally, subsidies. We have had concerns in the past with subsidization through the banking system of new capacity, particularly going into the coated free sheet paper industry in Korea. As we operate in global markets, subsidized capacity depresses markets and prices for all participants. Strengthened measures to constrain capacity subsidization would certainly be a welcome feature of a Canada-Korea FTA from our perspective.
In conclusion, there are three points. As a major trader in a small country, we believe that strong trade rules, both bilateral and multilateral, are essential to Canada's continued economic prosperity. We see strong growth potential in the Korean market, and we believe that a Canada-Korea FTA could deliver results for the forest products industry by reducing tariffs, addressing NTBs, and constraining subsidies.
Thank you very much.