International Trade Committee on Nov. 17th, 2010

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Could you tell us whether or not the American products sold to Panama cost less as a result of this agreement?

[Andrew Casey]

This is not obvious at present, however it is clear that if we were able to remove the 15% tariff that is in effect, that would give us a leg up.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

With respect to the United States?

[Andrew Casey]

Exactly. This would be with respect to the United States.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Blackburn, is this more or less the same situation for you?

[Robert Blackburn]

It is the same scenario. Hence it is a good reason for us to have an agreement when our competitors already have one. In Chile, we are ahead of the game because we got there before the Americans. It is an advantage for us to have agreements that provide us with the same level of access, and I cannot see any drawbacks.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Chair, I have no further questions.

[The Chair, Conservative, Lee Richardson]

Mr. Allen.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Chair, and thank you, gentlemen.

The chair said earlier, Mr. Casey, that perhaps I wouldn't be as forthright as other members who have been here before, but from our perspective, free trade has not been kind to your industry when it comes to the American market. It seems to me you're facing another battle that has just raised its head in the last couple of weeks, when it comes to the pine beetle, cutting that timber down, and trying to find a market when the U.S. is resisting once again--albeit for me to remember how many times it is...quite frankly, it's been too many to remember.

From the perspective of folks I know who work in that industry, through my association with the union, they've not done well when it comes to workers in this country and softwood lumber. I hear you say that free trade is a good thing for the forest products industry; I'm not so sure that workers on the ground.... You pointed to two mills, one in B.C. and one in Quebec, and I'm not sure which one makes paper to send to Panama. I think you would find the majority of mill workers across this country are not in step with you in believing that the free trade system has done them a great deal of good. I think a lot of them say it's done them a great deal of harm, and a lot of communities would probably say the same thing.

I've made the statement and I'll let you make a quick comment. Where do you think the free trade agreement will have an impact, specifically with the latest irritant that's come up between the softwood lumber companies and what we see? It leads to a bigger question about whether free trade really works or not, in the sense of where you see this going when it comes to this most recent irritant you have with the U.S. market.

[Andrew Casey]

Absolutely. Thank you.

I think the latest irritant.... Let me rewind the clock a little bit. We ship $24 billion worth of our product outside of our borders. About 70% of that goes to the U.S.; the U.S. remains our most important marketplace. However, it's also one of great dependence, and as the softwood lumber dispute highlights, sometimes it's a little dangerous to be too dependent on one marketplace.

There are a number of factors that go into the softwood lumber dispute, and I don't think we need to go into that. I would also note that softwood lumber was exempted from NAFTA, so it's not really part of the free trade agreement. But let's just move on from that for a second.

The deals we sign outside of this country and the markets we open up outside of this country—even if we forget about free trade agreements and we look at markets like China and India—alleviate the pressure or the need for the industry to depend so heavily on the U.S. marketplace. It's all a function of supply and demand, and that's what's driving the dispute between ourselves and the U.S.

When the market prices go up to a certain level, there is no dispute anymore. Once they reach $350 per thousand board feet, there is no dispute anymore. The only way to do that is to broaden the market, so that the supply is going elsewhere and we're less dependent on that U.S. marketplace. These types of agreements help us to broaden our marketplace in that regard.

[Malcolm Allen, NDP, Welland, ON]

Fair enough. I recognize that.

That is the position that has being articulated by business groups quite clearly from the time this started, and that hasn't changed, nor has our position that we don't believe they're of a net benefit to Canadian workers. I think that's the differential, and I think it is a bridge that needs to be found and built. Perhaps Mr. Blackburn's company can help us build that. I say it tongue firmly planted in my cheek, Mr. Blackburn.

I have just one last comment, Mr. Casey. You actually said—and I'm sure you didn't mean it—that there was a free trade agreement with Panama. It's not ratified actually at this point in time. The U.S.--

[Andrew Casey]

Sorry. Yes.

[Malcolm Allen, NDP, Welland, ON]

I just simply wanted to make sure I put that on the record.

[Andrew Casey]

Absolutely. I was not presumptive of the committee--

[Malcolm Allen, NDP, Welland, ON]

I know you were being accurate. I know you knew that. We all do that from time to time; it doesn't get wholly accurate. I just wanted to make sure it's on the record.

Mr. Blackburn, I was interested when you talked about LRDIs, which are local resource development initiatives, where you're actually training workers in the host country where you're developing projects.

This leads me back to the free trade agreements, where there are two side agreements, one on environment and one on labour. As both of you are well aware, as you both quite ably pointed out in the beginning—and you've been here many times—you've heard it over and over again. I'm certainly not pointing fingers at any one particular company. Your company has a great reputation, by the way, and I would be the first to acknowledge that.

That doesn't mean that all companies have great reputations in countries where they go. It is one of the things that I have been very clear about, based on my background as a trade union leader. When you develop contracts, which is basically what we do in collective bargaining, we have a contract...that it be in the body of the contract. When things are set aside beyond the contract, and the time comes to actually sit down and resolve those disputes, they tend to have less weight.

We can argue yes or no, but the bottom line is that that actually happens in a lot of cases around the world. Seeing that you've taken the initiative independent of this—because we don't have a free trade agreement and you're doing this now—can you see a sense of why we shouldn't just simply adopt the labour agreement and put it inside the main body rather than having it outside the text? Would you agree that perhaps if it's equally important to mention it outside, we should just simply put it inside, as the U.S. is now doing? It's not like they're not.

[Robert Blackburn]

I'm not a treaty lawyer. I don't know why they structured it that way. Whichever way it's structured, we'll live by whatever the provisions are, and I think we're already probably exceeding a lot of the generalities that are usually said in agreements like that.

I'm sorry. I really can't answer your question with any particular knowledge.

[Malcolm Allen, NDP, Welland, ON]

I appreciate the answer, but I guess I'm going to push this.

You asked for other specific things in the agreements that are helpful to your company. What I'm saying to you, sir, is since you have a company that is, I would say, ethically minded when it comes to its workers around the world, I would ask you to then push back on that as well and say that as part of your push to have a free trade agreement. You're here to actually ask for that, so you should simply say, “You know what, we're going to do well as a company. We want to ensure that workers we hire do equally well as well, so why not, as part of that deal, insert it into the contract?”

That's really what I'm asking you to now ask the government to do.

[Robert Blackburn]

You mean inserting in our commercial contract that we make with our client?

[Malcolm Allen, NDP, Welland, ON]

No, no, in the free trade agreement, sir, not in your commercial contracts, because you're already doing good work, Mr. Blackburn. I acknowledge that.

That would simply ask corporations to push for it. You push for the other pot. You push for the chapter 11 piece to make sure it's a level playing field and it's in the box, it's legal, and it has the rules. So if something goes amiss, you have an opportunity to basically sue for compensation. What I'm saying is, you're asking for certain things. To say that you can't ask for the labour component seems a little off balance to me, but then again, I acknowledge where my background lies.

[The Chair, Conservative, Lee Richardson]

I'm sorry. We're out of time there.

Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman. Welcome to our witnesses.

My first question is to Mr. Casey. It was an interesting discussion on the potential to increase dimensional lumber sales and paper sales, certainly. It's also interesting, our market share vis-à-vis the Americans. On paper, in particular, we know that the Americans have subsidized their industry to a much greater extent than we have. That's really the imbalance in the export there.

I want to look at another part of it. That was your point about seeking foreign markets. Traditionally, in eastern Canada we used to export, prior to NAFTA, about $900 million worth of dimensional lumber to Europe. That dried up overnight because of pine bore nematode, which I'm sure you're familiar with, and some poor practices on behalf of the mills, quite frankly. Because of the dollar and because of a whole bunch of issues, that dimensional lumber that was going east overnight went south, and the mills became dependent on that. Since softwood lumber, as you correctly pointed out, is not under the NAFTA agreement--it's a separate agreement totally--I think we've suffered from that. Every one of these free trade agreements that we sign worldwide opens another door to lessen our dependency on a sole market that occupies 70% of our exports. We've seen that with our increased paper sales to China, increased paper sales to India, and the ability to export dimensional lumber.

Would you like to expand on that a bit? Ms. Brown, who is sharing my time, has a question, so perhaps you could be brief. The ability for that new market to help the industry is critical for our future.

[Andrew Casey]

There's not much more I can add. You're exactly right. It goes to the point I was making with Mr. Allen before, which is that we've got to grow the pie, and it's a global pie.

The other factor that came into the equation of your story of how the product shifted south of the east coast is that over the years a significant number of new players came onto the market. We used to be kind of unique out there and we were able to dominate the marketplace and dictate the terms of where we were going to send our product and at what cost. Certainly, when the dollar was low, we were able to do that, and energy prices were low. The world has changed. We now have countries like Chile, Brazil, and of course Russia, which is a lot closer to Europe. They're sending a lot of product around the world, so we're competing with those countries.

One of the things we're finding as we seek out these new marketplaces is that we need some sort of competitive advantage. If we're going to avoid subsidizing the industry--as you pointed out, that did happen in the U.S., and we don't want to get into that game. The only other way to do it is to knock down the trade barriers that are out there. Most of them are in the form of tariffs in other countries, and that's what these deals do.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you, and thank you, Mr. Chair. Thank you, gentlemen.

I am a new face here, just filling in for my colleague, so thank you for obliging me. I appreciate it.

Just so you know, my riding is called Newmarket—Aurora. I am pleased to be here, because I think it aptly says what we need to do for our corporations.

I just have a question for you, Mr. Blackburn, if I may.

And, Mr. Casey, if I may say, prior to my election, my company had a very large contract with one of the members of your association who worked in the softwood lumber area, and we had a great rapport with them. It was a great contract. We got to know a lot about the softwood lumber industry, and I have great respect for the people in your industry.

Mr. Blackburn, if I might ask you, last year I had the opportunity to be in Africa and I visited Zambia, Botswana, Benin, and Burkina Faso. When I was in Zambia and Burkina Faso, I met with people who were in the mining industries, Canadian companies working in the extractive industries there. One of the things they talked to us about was the incredible number of infrastructure projects that went on as subsidiaries to the mining industry. What I saw in Burkina Faso with IAMGOLD up at the Essakane mine was an enormous project to provide roads, hospitals, and schools for many of the people around there. So we're talking about the corporate social responsibility that goes along with these industries.

I wonder if you can speak to your experience specifically in Panama with the projects you've done, and just about your experience globally. Will a free trade agreement enhance what Canadian companies are doing in these other areas?

[Robert Blackburn]

As I was saying before, this project in Panama has just been won and was just announced. It was a competitive project. Part of that will be our local resource development. We're doing that consistent with labour and also environmental objectives in the agreements that accompany the free trade agreement. As I mentioned, I think it's also true in Madagascar, where we're working right now on a very large nickel mine for Sherritt Gordon. We have a 5% part of it. About half the cost is the mine itself and the crusher or concentrator. The other half is infrastructure: a power plant, roads, port, slurry lines. A terrific amount of infrastructure goes around a project like this, and they tend to take place in fairly remote areas, so it opens up the area. If you've gone to Guinea, there's a lot of negotiation going on among various companies to develop iron mines there, and part of the development will be a major railway development in the country, which will serve other purposes as well. So it always happens.

Whether a free trade agreement impacts directly on this, I would say that one of the things you observe immediately when there's a free trade agreement--we saw it in Mexico, we saw it in Chile--is that all of a sudden you have a lot of interest from Canadian businesses. Government tries to develop more SME exporters. A terrific attraction goes along with negotiating and signing a trade agreement. All kinds of Canadian companies that never thought of it before now think of it. So you could say you would hope that in most cases these companies are going to take Canadian business practices and values with them when they start working abroad. In that sense, it provides an advantage.

Whether it has a specific impact on deal by deal is hard to identify.

[Lois Brown, Conservative, Newmarket—Aurora, ON]

Thank you.

Thank you, Mr. Chair. I think I'm out of time.