Evidence of meeting #14 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
9:10 a.m.
Liberal
The Chair Liberal Mark Eyking
Thank you, sir. Thank you, Mr. Dhaliwal.
We're now going to move to the NDP for five minutes. Go ahead, Madam Ramsey.
9:10 a.m.
NDP
Tracey Ramsey NDP Essex, ON
I'll be sharing my time with my B.C. colleague, so Gord Johns will be doing the questioning today.
9:10 a.m.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you, Mr. Chair, and thank you to the presenters from British Columbia. It's nice to see some people from the west coast here.
Before I get started, I want to echo Susan's comments about the importance of this agreement and this industry to British Columbians. Coming from a community on Vancouver Island, Port Alberni, where forestry is the job creator, I know it's the driving economic industry in our region.
I come from a long history in forestry. My great-grandfather was a papermaker up in Ocean Falls and my uncle was a forester, so I really understand not only the impact on jobs today but also that it's really part of our heritage, it's part of our economy, and it's what built British Columbia.
Maybe before I get started, I think that all British Columbians know how important our relationship is with aboriginal peoples in British Columbia. One of the great aboriginal leaders in forestry, Nelson Keitlah, passed away on Sunday, and I think all British Columbians here at the table understand how significant that is and how that changed our relationship with aboriginal people. I just wanted to recognize that.
I have a question on the impact on jobs in B.C. if a deal doesn't happen and what that would look like. I also want to know what components of a deal would ensure that our domestic market can access good quality wood for our sawmills. I think it's really important that we ensure we're getting access to fibre.
I'll let you kind of divvy up the third question. The 2006 softwood lumber agreement included a binding dispute settlement process with a final dispute settlement body composed of three commercial arbitrators appointed by the LCIA. What changes would Canadian softwood lumber producers like to see made to the dispute settlement process in a new softwood lumber agreement?
Susan, do you want to lead, and then maybe Duncan can follow?
9:10 a.m.
President, B.C. Lumber Trade Council
I'll start with your question on jobs.
I think obviously if we move into a world where we are making significant deposits, doing that places a financial burden on all the companies that are operating within Canada right across the country. If they're paying countervailing duties or anti-dumping duties, those deposits can strain the ability of companies to invest in plants and equipment as well as to do training and bring new people in. Therefore, if we are heading into a very long battle over softwood lumber and difficult financial constraints for companies that have already had very difficult circumstances post-2008 from which the industry is still recovering, it's certainly going to have an impact on jobs and employment and the ability to invest in plants and equipment, doing which, of course, would have a long-term benefit in terms of keeping people employed in our province.
9:15 a.m.
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
Trade litigation, which is what happens in the absence of a deal, is a very blunt instrument designed to weaken one side of a negotiation, whereas a negotiated treaty has the ability to protect certain interests that can't be protected during litigation. It affects the B.C. industry probably more than any other industry across the country because of the value of the timber species and the lumber products that are produced in British Columbia.
Litigation will put a pro rata duty on all products regardless of product value. When you get into some of the high-value cedars on Vancouver Island and throughout the B.C. coast, those operators will pay very high absolute-dollar duties to access the traditional market in the United States, whereas under the SLA there was a cap on product value that helped to protect those operators.
The other area that's badly hit is the independent remanufacturers, which help to create a more vibrant industry than would be the case with strictly the primary industry only. There were provisions in the 2006 SLA such that remanufacturers that purchased product from a primary would pay duties on access to the U.S. market based on the cost of their inputs as opposed to the cost of their outputs, so the high-value producers and the small independents are more at risk from a litigation process than the bigger, better-capitalized major producers. I think that's something we need to be very cognizant of from a public policy standpoint as we move forward to discuss litigation versus a renewal of the SLA question.
That's number one.
9:15 a.m.
Liberal
The Chair Liberal Mark Eyking
Unless you want to say something short, their time is up, but go ahead and finish up your thought.
9:15 a.m.
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
I'll pass on the fibre issue; that's a constant matter. I'm not sure it's directly related to the SLA.
With regard to the third issue, dispute resolution, there are ways for us to accelerate the pace of it. It's a long, cumbersome, and very expensive process. There are ways to shorten that, and I think one of the things the U.S. has on the table now is that they'd like to see a modernized mechanism to help accelerate that process to resolve disputes under the SLA. I think there's some merit to that.
9:15 a.m.
Liberal
The Chair Liberal Mark Eyking
Thank you very much, Mr. Johns.
We're going to move to Madam Lapointe for five minutes.
Go ahead.
9:15 a.m.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you, Mr. Chair.
I would like to welcome the witnesses appearing today.
A few weeks ago, we heard from lumber producers in Quebec. You will understand that I represent a riding in Quebec.
Mr. Davies, you touched earlier on the issue of an updated agreement. Since you represent the industry across Canada, what would you like to see in this regard? I would like to hear about the difference between the industry in Quebec and that in British Columbia.
We have heard from representatives from Quebec. They would ultimately be prepared to operate under a free trade agreement, without necessarily having a written agreement like the 2006 one. I would like to hear your views, Mr. Davies. I would then like to hear from you, Mr. Edgson, on the same matter.
9:15 a.m.
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
I would like to see free trade too. I just don't think it is a possibility, because this is U.S. trade laws at work here, and the U.S. authorities are utilizing their trade laws to protect their market. Our assessment of the situation is that free trade per se is not an option. It is either managed trade or litigation, one of those two. Some people differ from that view, but history tells us that our assessment is correct. That's number one.
Number two is that with respect to the modernized agreement, there are ways to take the structure of the 2006 SLA and improve its effectiveness. That is what we would like to see happen under a new arrangement. It would mean taking into account the changes in economic circumstance, whether it is through currency, improvements in information flow, or changes in dispute resolution mechanisms, to make it a more effective agreement that would work for producers on both sides of the border, for consumers in the U.S., and for communities in British Columbia and the rest of Canada as well.
9:20 a.m.
Liberal
9:20 a.m.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
I think free trade is a fantastic principle, and one worthy of discussion, but as Duncan said, it is impractical.
The problem is that if you stand on a crosswalk when the bus is coming and say, “I have the right of way”, you are dead wrong. The risk to our industry, to the people who work in it, to the small communities in Quebec and Ontario and across the country, is that we stand on principle and we throw down the drain all the jobs, revenues, and resources that can be a key part of the climate change dialogue as we go forward. I think what the rest of the industry, as represented by the CLTA, has said is that it is time to talk pragmatically about what a solution looks like.
9:20 a.m.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
You said earlier that the President of the United States and the Prime Minister of Canada would like to sign a long-term agreement. With the upcoming U.S. presidential elections in the fall, do you think we will be able to conclude such an agreement? We were told the time limit would be 100 days. In your opinion, would it be possible to conclude such an agreement?
9:20 a.m.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
One moment, please.
You lost me about halfway through. Could you repeat just the latter part?
9:20 a.m.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
The time limit is 100 days. With the upcoming presidential elections in the fall, do you think we will get an agreement by then?
9:20 a.m.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
We can reach an agreement if both parties want to be practical and reasonable, and I believe that within the Government of Canada and within the majority of the industry there is a willingness on this side. What I am not sure about is whether the counterparty is interested in being reasonable. If they are not, then we have to go down the path of protecting our industry against a sovereign attack.
9:20 a.m.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Very well.
If no agreement is concluded, we would be headed for trade disputes like the ones we have seen in recent years. That is what you are saying, isn't it?
9:20 a.m.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
There would be litigation. What we need to recognize, especially in the east, is that there has been a lot of work to try to rebuild that industry. It took a disproportionate hit in the last downturn. There has been a lot of investment, especially by the majors within that sector, but we are far from being stable and strong, and therefore we are not in a place, yet, to be able to protect ourselves through a competitive approach. An uncompetitive approach is litigation.
9:20 a.m.
Liberal
The Chair Liberal Mark Eyking
Thank you.
That's the first round. We are going to the second round and we are starting with the Liberals.
Mr. Peterson, you have five minutes.
9:20 a.m.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Thank you, Mr. Chair.
Thank you, everybody, for being here this morning. We appreciate your taking the time and providing your information to us.
I have a couple of questions.
Under the former agreement, I think Canada's exports were allowed to be about 34% of the American market, and there were clearly two regions, I think, that were called option A and option B. My understanding is that option A regions paid a higher export tax on the U.S. shipments, and option B regions had quota limits but paid lower tax rates. How does the quota-only U.S. proposal now compare to the expired agreement and that facet of it?
9:20 a.m.
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
We haven't seen the specifics of the U.S. proposal at this point. They have not tabled what would be called “the key feature”, which would be a market share arrangement.
That aside, the fundamental difference from what existed under the 2006 SLA, in which there was a choice between option A and option B, is that the U.S. proposal would offer only an option B approach, with a volume restriction. From the standpoint of British Columbia, certainly, and the other provinces that operated under the option A provision of the 2006 agreement, we do not believe that a volume restriction in isolation is a prudent approach to managing trade between the two countries, and so we are not in favour of that approach.
9:25 a.m.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
I would counter or add that optionality was a key part of the last agreement. It worked well for all regions, and the lack of details around a quota-only approach has resulted in either uncertainty or disagreement clear across the country. It affects regions in the east that were exempt. It affects Quebec, which has a separate view in terms of what should happen. Ontario, which had quota, is unsure in terms of what that means, and in the west, there is a preference to have a structure that allows them to be most competitive in the world market.