International Trade Committee on Aug. 18th, 2016

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

I picked up on your comment that this is a negotiation unlike others, in the sense that the two parties aren't necessarily going to be the American government and the Canadian government. You indicated that the U.S. industry has a tremendous amount of weight in these negotiations.

First of all, technically, how will this agreement come to be if we're successful in coming to an agreement? Does the U.S. industry need to sign on? How does that work from a technical standpoint?

[Martin Moen]

What happened the last time, and what we've been advised by the U.S. government would happen this time, is that the agreement would proceed as a sole executive agreement. That is, it's an agreement that would be entered into by the U.S. side under the president's authority. There would be no legislative changes made and there would also be no role for Congress to approve the agreement. In order to do that, they have to work within existing U.S. law. U.S. law provides certain rights to producers of the products covered: a right to petition for countervailing duties, and a right to petition for anti-dumping duties.

In the previous agreement, what happened was that the companies in question representing, I think at the time, well over 60% of U.S. production—but the bar was 50% at least—signed what they called “letters of no injury”, in which they effectively stated that the agreement provided the necessary protection and, therefore, that they were willing to waive their rights. That's the same sort of thing we'd require this time. We've been advised by the U.S. government that they would require similar assurances, similar letters, from companies or unions representing at least 50% of U.S. production. Obviously, some of the finer details of how that would be characterized would have to be worked out, but that conceptually is what we're talking about.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for clarifying that.

Mr. Brookfield, I have a quick question regarding any potential litigation in the absence of an agreement by the end of the standstill period.

Have you or your department taken steps to quantify that and to put a number on what the potential exposure might be and what steps can be taken to mitigate any exposure?

[Robert Brookfield]

Do you mean exposure to the Canadian economy?

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Yes.

[Robert Brookfield]

Honestly, it's essentially a mathematical question: what percentage would be found to be countervailing subsidies or anti-dumping, and what the volume of trade is. That's something we can't necessarily quantify. We're taking steps to reduce that as much as possible. There are various techniques to try to make sure that certain numbers aren't used to add....

If you look at the past history, 20% or 30% has been the first finding, and so that's been the rate that's been charged. Through litigation at NAFTA and the WTO, we've managed to bring that down. The last time it went from about 20% on countervail down to de minimis. In other words, it's gone by the end of five years.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you for that.

[The Chair, Liberal, Mark Eyking]

The time is up, sir.

Thank you, Mr. Peterson.

We're going to move over to the Conservatives. They have five minutes.

My understanding is that you're going to split your time, Mr. Hoback.

[Randy Hoback, Conservative, Prince Albert, SK]

Yes, thank you. I'll split the last minute.

First, very quickly, can I ask you to table the list of consultations you've had, with whom, and how many times you've met or talked to those individuals or groups. Perhaps you can tally that list and table it with the committee.

I have a second question. How are you working with companies such as Interfor that have 80% of their operations in the U.S.? How can they not be in a conflict of interest when they're advising you on how to move forward? How do you ensure that they're not doing what's best for them, which one would expect them to do, and not what's best for all Canadian producers? How do you take those big four companies that have these huge investments in the U.S. into consideration as you're seeking advice from them on how to move forward?

[Martin Moen]

There are two important elements to the answer. First of all, we're consulting with a broad range of companies. So, yes, of course, we do meet with companies like Interfor, Canfor, and West Fraser, which have—

[Randy Hoback, Conservative, Prince Albert, SK]

These four companies were part of a special meeting at the USTR, and all the rest weren't included. Can you explain that?

[Martin Moen]

First of all, one of the companies in this meeting with USTR, Tolko, is a major producer in B.C. and has no production in the United States.

Second, the meeting was at the request of the U.S.; it wasn't a meeting that we set up.

[Randy Hoback, Conservative, Prince Albert, SK]

So is it fair to say they're lobbying both sides of the border then, not only here in Canada, but also offering advice in the U.S.?

[Martin Moen]

I don't know what advice they may be offering in the U.S. What I do know is that the U.S. government requested this meeting with these companies.

[Randy Hoback, Conservative, Prince Albert, SK]

Were you part of those meetings?

[Martin Moen]

I was there as an observer, yes.

[Randy Hoback, Conservative, Prince Albert, SK]

So you were included, representing Canada.

[Martin Moen]

As an observer.

[Randy Hoback, Conservative, Prince Albert, SK]

All right.

I'm just looking at consensus across Canada. You have to present a Canadian perspective, including big producers, intermediate and small producers, and aboriginal groups.

Do you have consensus across Canada? Have you sought consensus? Is there a position made on whether we should go with quotas or duties, or what they should look like? Where are we at on that?

[Martin Moen]

First of all, there are some big regional differences. For example, it would be fair to say that in the Atlantic provinces, producers large and small believe that their system justifies an exclusion.

[Randy Hoback, Conservative, Prince Albert, SK]

Correct me if I'm wrong. If they don't have an agreement, they are now under tariffs, are they not?

[Martin Moen]

Whether or not the Atlantic provinces would face duties in the future would depend on the nature of the investigation. Right now there are no duties being charged on lumber products.

[Randy Hoback, Conservative, Prince Albert, SK]

Again, that was because of negotiations; we negotiated them out. Now if we don't have a deal, one would assume they're going to treat Canada as a whole. That means they will now be facing tariffs; that industry will be hit.

Quebec, for example, has changed their policy on how they collect stumpage. How is that being impacted? That was one of our recommendations, that it should be one of the considerations. How is that being considered, and how do you negotiate with no consensus? How do you move forward when you don't even have consensus within the industry? It must be tough.

[Martin Moen]

As I was explaining, there are different regional perspectives, but it is possible to have those reflected in the agreement, and that's an approach we're taking. In terms of consensus, I think there are some exceptions, but there is very broad support for a negotiated outcome. The question of the finer details of what should be included—

[Randy Hoback, Conservative, Prince Albert, SK]

The devil's in the details.