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.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
That leads to my other question. Maybe Mr. Edgson might be particularly well positioned to answer this, based on his perspective from the east as well as from the western industry.
Can there be an agreement without this optionality component that would satisfy the entire Canadian lumber industry, or would the lack of optionality favour one region over another?
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
I don't think the optionality is an issue in terms of favouring one region over the other. The problem with a quota-only discussion is that you have to start with what the number is. Without trying to be too glib, if it is 100%, then quota works. If you could tell me somewhere between zero and one hundred, then we can start to have a discussion. However, there are far too few details for a quota-only system to be able to get to a serious discussion around whether that would work.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Okay.
There's been some consolidation in the B.C. industry over the past decade or even more recently. Would this consolidation, this new investment, and even the processing happening now south of the border change the sort of ideal agreement that we could come to at this stage, and how would it change?
I presume it would, but maybe it wouldn't. If it would, what changes do you think we would like to see in this agreement that weren't in the 2006 agreement?
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
I don't think the changes in the structure of the industry—which have been really on the margin, as opposed to fundamental, including investments by Canadian companies in the U.S.—change what we would think would be an appropriate agreement in any way, shape, or form.
Member, CLTA, President and Chief Executive Officer, Eacom Timber, Canadian Lumber Trade Alliance
I would echo that. As well, there's been significant investment in the east in modernizing the sawmills, and I don't think that changes the structure or the requirements of the new agreement.
President, B.C. Lumber Trade Council
I might just add to that.
This is a global business. To have all your assets in one jurisdiction is not normal in a business that competes globally. I know people are saying it's all different and this is really changing; I think businesses that operate in a global environment tend to have assets in more than one jurisdiction, so I don't really think it's abnormal.
Liberal
The Chair Liberal Mark Eyking
You only have half a minute, but you can give it to the Conservatives if you want to.
Liberal
Kyle Peterson Liberal Newmarket—Aurora, ON
Just so I can get an idea of the industry here, the Canadian dollar is obviously relatively low now. What impact does that have? Is that already factored into the way you conduct business? Can you just illuminate me on that a little bit?
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
It's built into the way business is conducted, but it's the elephant in the room as it pertains to trade agreements.
When markets are weak and the Canadian dollar is weak, it results in a change in the location of the cost curve of Canadian producers, and if you look at all the statistics since the beginning of time, you'll see that it's when markets are weak and currency is weak that Canadian producers are able to ship volume into the U.S. market, capturing market share and pushing prices low. That's the fundamental issue at the heart of the softwood lumber dispute.
Finding some way to equalize or at least take some of the extremes off the movement in the currency would be a significant step in the right direction. The 2006 SLA did that indirectly through increasing tiers at the bottom of the market, and we say the best route forward is a modernization of the 2006 structure. It would be to take into account some of the changes that have taken place from a currency relationship standpoint, and as a result from the pricing standpoint, in the new agreement going forward.
Liberal
The Chair Liberal Mark Eyking
Thank you very much. You've gone way over time, but that's fine. The comments were well received.
We're going to move over to the Conservatives now.
Mr. Doherty, you're up. You have five minutes.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Thank you, Mr. Chair.
Thank you to our guests.
Susan, I'm skipping the formalities because we know each other. Can you explain the issue that B.C. is facing with timber supply and the challenges that some of our producers are having in terms of the availability of our timber supply, the proximity to their operations, and some of the other conditions and challenges our B.C. producers are facing?
President, B.C. Lumber Trade Council
Sure.
For those of you who are not from British Columbia, we've had a large infestation of the mountain pine beetle that peaked in the 2004-2005 time frame. That timber is getting to the end of its useful life. We've been spending a lot of time moving that wood out as quickly as we possibly can. The result is we had an uptick in our annual allowable cut in order to bring that out as quickly as possible, but now we will have a reduction in AAC, or annual allowable cut, as we move forward.
What that does is force mills to go farther afield to feed themselves. They have to travel greater distances, which means the hauling costs are higher. They're also moving into places where the economics of bringing that wood out are not as good, so as we are moving farther afield, our delivered log costs are moving up as a result.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
That's great. Thank you.
We are also seeing a considerable number of our major producers divest themselves of their Canadian operations. Is that correct?
President, B.C. Lumber Trade Council
No, I wouldn't say that.
We've had some changes in ownership. There was a period of consolidation in the late 1990s and into the 2000s. There was quite a bit of consolidation. From time to time, assets do change hands, but in the last couple of years there has not been an exodus from the industry.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
Okay.
In your comment earlier you said in the ever-changing global environment it's not normal to see all our operations remain in one place. I would agree with you that it would make sense for businesses to expand and to expand their global interests as well. We are dealing with the softwood lumber agreement, and we are seeing that a considerable number of our major producers have considerable interests on the other side of the border, which could be perceived as a conflict of interest.
For my question, I'll turn to Mr. Davies. Mr. Davies, how many of your company's operations would you say are in the U.S. versus Canada?
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
Two-thirds.
Conservative
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
Yes.
Conservative
Todd Doherty Conservative Cariboo—Prince George, BC
That would mean if there were any export tax levied against Canadian producers, your company would be a net beneficiary of that.
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
Not necessarily.
Conservative
Co-Chair, BCLT, President and Chief Executive Officer, Interfor Corporation, B.C. Lumber Trade Council
It would be a negative pertaining to our Canadian operations.