Mr. Chair, ladies and gentlemen, I want to thank you for giving me the opportunity to speak to you about a sector that is vital to Quebec's economy but also extremely vulnerable because of trade barriers that could limit our products' access to the U.S. market.
My name is André Tremblay, and I am the President and Chief Executive Officer of the Quebec Forest Industry Council, an organization that represents more than 90% of the softwood lumber production in Quebec.
To illustrate the importance of the forestry sector in Quebec, it should be noted that the sector provides direct employment for about 60,000 people in all the regions, including Montreal. The sector has a wage bill of over $3 billion. Including secondary and tertiary processing, the province's forestry industry posts revenues of approximately $15 billion a year and has a trade balance of more than $7 billion.
The softwood lumber industry is once again in a precarious situation because of the threat to its U.S. market access. With exports of more than $3.2 billion out of a production of $5.5 billion—or nearly 60% of our production—the U.S. market is critical to the survival of Quebec sawmills.
In 2006, despite repeated Canadian victories in the last four disputes, as Mr. Garneau pointed out earlier, the Canadian government decided to forgo free trade for an agreement designed to offer trade peace and predictability. In hindsight, this alternative proved costly for Quebec's industry.
On the other hand, the Quebec government took a proactive approach and, to allow Quebec producers to be exempt from future export restrictions—and this is one of the key pillars of our new regime—it opted for another alternative. It decided, shortly after the entry into force of the 2006 softwood lumber agreement, or SLA, to attack the problem at its source and introduced a forest regime with pricing based on open market rules that compared favourably with those in similar systems throughout North America, including, of course, in the United States.
Since 2013, Quebec has had a forest regime in which all timber volumes from the public forests are traded directly through auction or re-allocation.
The new forest regime resulted in substantial increases in the value of standing timber from $7 per cubic metre to $10 per cubic metre, making Quebec lumber some of the most expensive in North America. This is ironic, since Quebec trees are the smallest on the continent, and should therefore sell for less.
Because the new regime is based on open market rules, Quebec producers want open access to the U.S. market. They made the changes the U.S. demanded and have assumed the financial consequences since 2013. This situation must now be recognized.
The Quebec system took effect well before the expiration of the 2006 SLA in 2015. The agreement had a clear provision to assess changes to the provincial forest regimes. Despite numerous requests from Quebec industry since 2013, the Canadian and U.S. governments have never shown any interest in addressing Quebec's situation.
As I mentioned, Quebec cannot afford to enter into a new agreement that will restrict downstream access to the U.S. market, while constraining its upstream fibre supply by a substantial increase in supply costs.
U.S. protectionism cannot refute the logic that complies fully with the most stringent requirements: foreign exporters should be subject to the same rules of free competition as U.S. companies on their markets. Our forest regime was established to respond to this logic. As I pointed out earlier, we have a market-oriented system based on rules that go beyond those in the U.S.
Quebec industry members are following the discussions between the Canadian and U.S. governments with equal parts attention and apprehension. Discussions so far have focused on finding a solution, relegating Quebec's situation to the background.
Therefore, we are reiterating Quebec's basic requirement that our forest regime, which responds more than favourably to the most stringent requirements of the open market and healthy competition, must allow Quebec producers to be exempt from export constraints on their products and that, to this end, the forest regime be studied with the scientific rigour it deserves. This must be part of Canada's demands and constitute a prerequisite for the continuation of discussions between the two countries.
In closing, I would like to point out something that is unique to Quebec.
A number of border businesses are traditionally supplied from the U.S. In such circumstances, they should not be part of the discussions aimed at restricting trade to the U.S. They already benefit from an exemption that must be considered.
Therefore, we remain confident that the Government of Canada—and especially Ms. Freeland and her team, with whom we are in constant contact and who are aware of our system's particularities—will manage to conclude an agreement with the United States that will allow us to be exempt from the export constraints.
Thank you for your attention. We are ready to answer any questions you may have.