International Trade Committee on March 23rd, 2022

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting to order. Welcome to meeting number 10 of the House of Commons Standing Committee on International Trade.

Today's meeting is taking place in a hybrid format pursuant to the House order of November 24, 2021.

Measures regarding the use of masks in the House of Commons precinct have been extended until June 23, 2022. Please note that masks must be worn in committee rooms except when members are at their place during parliamentary proceedings. However, it is strongly recommended that members wear a mask even when they are at their place during parliamentary proceedings.

All those inside the committee room should follow best practices of maintaining proper hand hygiene by using the hand sanitizer provided.

As the chair, I will enforce these measures, and I thank you for your co-operation.

To ensure an orderly meeting, please note that you may speak in the official language of your choice. At the bottom of your screen you have the choice of floor, English or French. If interpretation is lost, please inform me immediately, and we will ensure interpretation is properly restored before resuming the proceedings.

When speaking, please speak slowly and clearly. When you are not speaking, your microphone should be on mute.

All comments should be addressed through the chair.

Today we are continuing our study on the Canada-United States relationship and its impacts on the electric vehicle, softwood lumber and other sectors.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, January 31, the committee is resuming its study on our relationship and its impacts. Today's meeting pertains to the softwood lumber sector.

With us today by video conference is Mark Warner, counsel, Pilot Law LLP, as an individual; from Alberta Forest Products Association, Jason Krips, president and chief executive officer; from the British Columbia Council of Forest Industries, Susan Yurkovich, president and chief executive officer; from Forest Products Association of Canada, Derek Nighbor, president and chief executive officer; from Québec Forest Industry Council, Jean-François Samray, president and chief executive officer, and Michel Vincent, director, economics and trade; and from the Quebec Wood Export Bureau, Sylvain Labbé, chief executive officer.

Welcome to all of you. I apologize for the delay.

We will start with Mr. Warner for an opening statement of up to five minutes.

Go ahead, please.

[Mark Warner, Counsel, Pilot Law LLP, As an Individual]

Thank you Madam Chair for the invitation to be here with you today.

As you know, my name's Mark Warner. I'm a Canadian and American trade lawyer. I have been associated with the softwood lumber file for many years, dating back to before I was a law student. I worked for the late Professor Alan Rugman at the University of Toronto. I worked as an American lawyer at various law firms that represented Canada, and then as legal director of the Ministry of Economic Development, Job Creation and Trade in the Province of Ontario. I've seen this from multiple different perspectives as an academic economist, an American lawyer, a Canadian lawyer, as someone who pays the bills for the lawyers in the United States and someone who gets paid by Canadians in the United States to talk about softwood lumber.

The interesting thing is that this file has been around forever. The way that I look at this file, as I've looked at it over a great many years, it seems to me that it's not really the kind of trade dispute that lends itself to fundamental, permanent dispute resolution. Fundamentally, what is going on in this file is a battle of conception of trade law and policy. To the American mind, they look at practices in Canada around lumber, timber and forest management, and they see non-market economics. We may not agree. To us, we look at a bunch of trade agreements and say, as Canadians, “We've negotiated these trade agreements with you and we think that we can go through a series of trade dispute fora, whether it's under the old NAFTA—now the CUSMA—or the WTO, and we can win narrow, technical victories based on legal or accounting issues, and then, we can fight again”.

I don't see really an end to that, unless we find some mechanism to make the American producers cry uncle. My guess is they probably won't do that, even with all of the best arguments about the cost of houses and all of that.

The American trade system—not unlike ours, because we have the same fundamental base—is a system that's based much more on producer interests than on consumer interests. In the American perspective, as well, there are some processes that American producers can launch. We always take that in Canada as being the launch of a political process. From the American perspective, it's just the producers following their law. Their rule of law means that they go through a process.

If we think today about how softwood lumber fits into where we are, it seems to me that the fundamental question for Canada is whether we are okay with this. Do we want to keep on going on, having disputes that we settle through these various international trade fora, or do we want to find some way of negotiating some kind of a market access solution or rules to buy some measure of peace? I get that, with the most recent situation with the economics on both sides of the border, the answer to that is no.

The question I have is where this issue of softwood lumber fits into the larger trade relationship between Canada and the U.S. It seems to me that if we're looking for a political settlement, as opposed to continuing on the legal route, you're going to have to rely on the goodwill, to some extent, of the various players in the United States at the government level. I have some concerns that we have, perhaps, been a bit more bellicose in the way we go about trade policy. Part of that is understandable, in relation to the last occupant of the White House, but it has carried forward into this new Biden presidency. It seems to me that we have our elbows up as we go into the corners a lot. At least, I think that's the perception in Washington.

The question then is whether there is an opportunity here to look for a grand bargain, where we can say to the Americans, “If you help us with softwood lumber and Keystone” or whatever it is, “we will make some concrete attempts to deal with some of the issues that are front of mind to you, having regard for the global trade situation of supply chains and critical minerals.”

There, I think that probably means doing more than talking about critical mineral supply, but actually figuring out how we can be more like the Australians. How can we actually get the critical minerals to market quickly? That's what I think.

I'd add that although the Canada-U.S. softwood lumber dispute dates back a long way, the other piece that I think is less well understood in Canada is that we're now tied into a much larger debate between the United States and China. As we can see by all of the events going on in the world today, that's front and centre for Americans in terms of their foreign policy and their foreign economic policy.

It just so happens that the issues at the centre of the dispute in terms of dumping and that sort of thing go to the heart of the American dispute with China in terms of the use of what we call “zeroing” in the practice of anti-dumping and countervailing duty cases.

That's part of what I would just put out there. As difficult as it has been over the last 35 years to deal with this issue, it's even harder now to find an opportunity for the Americans to find a trade law solution that is specific to Canada without implicating their larger trade law disputes with China.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Warner. My apologies. I have to interrupt. Thank you for your comments.

Mr. Krips, you have five minutes, please.

[Jason Krips, President and Chief Executive Officer, Alberta Forest Products Association]

Thank you very much, Madam Chair.

Thank you very much for the invitation and to your committee members as well. I really appreciate the opportunity.

As mentioned, my name is Jason Krips. I'm the president and CEO of the Alberta Forest Products Association.

I'd first like to begin by acknowledging that I'm coming to you from Edmonton, which is situated on the traditional territory of the people of Treaty 6 as well as the ancestral land of the Métis. In addition to this, our industry operates on the traditional territories of the people of Treaties 7 and 8. It's important that we acknowledge the deep and rich partnership we have with indigenous, first nations and Métis communities in our forestry sector.

With respect to softwood lumber, in Alberta one thing we've seen in our industry is that it contributes to the resiliency of our communities. The Alberta forest products industry is in over 70 Alberta communities. We have an economy in place that booms and busts—this is well known in Canada with the energy prices—but communities that also have forestry are markedly different. They have the extra layer of insulation of well-paying jobs that are stable. In fact, our industry contributes over 40,000 jobs to the Alberta economy, with many of those in rural Alberta, with an $8-billion economic impact to the province of Alberta.

The challenge with trade actions taken by the United States government is that they undermine this economic stability. They create uncertainty and they suck money out of our communities.

It's not just Alberta or Canada that is suffering from the ramifications of these actions. It's communities in the United States as well. Hundreds of thousands of American jobs are dependent on transporting, selling and building with our products. Millions of Americans need housing prices to be affordable in order to afford shelter.

The irony of the actions taken by U.S. Commerce is that it's their own citizens who bear the brunt of this impact. We're living right now in a time of absolutely serious inflation—inflation we haven't seen in decades. Costs both for industry and for our households are growing at an unsustainable rate.

The softwood lumber dispute is exacerbating this phenomenon by stifling competition, interfering with supply chains and contributing to massive spikes in the price of lumber.

For our members, tariffs add a significant set of costs that get passed on to the consumers when the markets are strong. When the market weakens, they contribute to things like mill curtailments and job losses.

I've outlined the problem and now we want to turn to see what some of the solutions are. As Mark mentioned, unfortunately there are no silver bullets and no argument that we can make to United States Commerce and U.S. industry that will cause them to lay down their arms in this dispute.

To that end, we continue to see value in Canada using the legal challenges like the WTO and CUSMA appeals processes, which Mark had mentioned, to fight for our rights.

We also see value in working to educate American consumers about what this dispute is costing them.

Finally, we see value in continuing to tell the story about Canada's forests. Our unique legacy of public lands in much of the country means that our very high forest management standards are consistent. Our industry is able to harvest in a way that causes zero deforestation because harvesting on public lands comes with the obligation to regenerate through activities like replanting. In fact, in 2021, Alberta's forest industry planted over 100 million trees. That's three trees for every one harvested in 2021, which we take a lot of pride in.

Telling our story will help to promote access to markets around the world and give consumers here at home reassurance that the product they are buying is produced in accordance with world-leading standards.

As Mark mentioned previously, there aren't any huge silver bullets. We need to continue to work with both the legal challenges as well as the political challenges. At the end of the day, unless and until we have a willing dance partner in U.S. coalitions to come to the table, I think we're in this fight for a while.

Madam Chair, thank you very much for your time.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Krips. You are right on time.

Ms. Yurkovich, please, you have five minutes.

[Susan Yurkovich, President and Chief Executive Officer, British Columbia Council of Forest Industries]

Thank you, Madam Chair, and committee.

As president of the B.C. Council of Forest Industries and the Lumber Trade Council, I have the pleasure of representing the majority of forest product manufacturers in British Columbia.

These are big and small companies that make up about 50% of our country's lumber and pulp exports, including half of our nation's softwood lumber exports to the United States.

I am joining you from the traditional territories of the Coast Salish people, and we do appreciate your interest in our industry and in this issue.

A bit like Jason, I just want to talk for a minute about the industry here. In B.C., the forest industry has an economic impact like no other in the provincial economy. It contributes over $13 billion in GDP, and about $4 billion annually in taxes and fees that support the health care, education and social services that we all count on. Importantly, direct, indirect and induced jobs are about 100,000 in British Columbia, in urban and rural centres.

Forest products make up about one third of our exports; 21% of all traffic through the Port of Vancouver; and 11% of the rail traffic in western Canada.

For us, as an export industry in a small, open economy, strong trade relations and diversified markets are critical to our industry's success. While the U.S. used to be the top destination for B.C. forest products, over the last 20 years, working in co-operation with government, we've been expanding our markets into Asia and reducing our dependence on the U.S. where we continue to face these unwarranted tariffs, which of course is what we're talking about today.

As mentioned, this is a dispute that has long legs. It's been under way for more than 40 years. We sit here in the midst of what we affectionately call “lumber five”. Both “lumber three” and “lumber four” were disputes that ended in Canada's favour, with neutral international tribunals forcing the U.S. Department of Commerce to rescind the unsupported subsidy findings.

We're confident that we'll prevail again because Canadian lumber is not subsidized, and the claims by the U.S. protectionist producers are baseless, but until it's resolved, this protracted battle continues to consume massive amounts of time, energy and both human and financial resources. What's really frustrating and hard for me and many others to understand is the fact that the U.S. needs Canadian softwood so desperately.

In 2021, the U.S. demand for lumber was 51.6 billion board feet. U.S. domestic producers could only supply 35.6 billion board feet of that, leaving a 16-billion board foot shortfall, of which Canada filled 14 billion board feet.

The U.S. demand for softwood, as mentioned, continues to be strong, and that's because American families are looking to repair and remodel their homes and, in some cases, to build new ones. We've seen record demand in the last couple of years as people spend more time at home over the pandemic and as housing starts are moving higher after years of under-building following the market crash of 2008.

We expect this trend to continue, and that's because a large demographic group is now entering the household formation age bracket. That's a group that, interestingly, is larger than the baby boomers, and they're looking to buy or build their first home. As they do this, as Jason mentioned, they're going to be facing those inflationary pressures, a lot of them caused by the supply chain disruptions of the pandemic. These pressures are exacerbated by the protectionist tariffs that are driving up prices and putting the dream of home ownership out of reach for some.

More importantly, as mentioned, this dispute creates tremendous volatility and uncertainty in Canada, impacting our workers, our families and the communities that are supported by the export of softwood lumber.

Right now our markets are strong, but this is a cyclical business. We need to be prepared for the next down cycle and for the opportunities that are ahead of us. We need to invest and innovate, to explore new market opportunities to train our next generation of workers, to employ technology that enhances sustainable forest management and to invest in partnerships with indigenous nations across our country.

This takes resources and very significant capital. Sadly, right now there is over $7 billion from Canadian companies that is sitting idle in cash deposits. That's money that could be used to invest in plants, equipment, workers and communities.

As we look ahead, we see an incredible opportunity to help meet the growing demand for forest products, which are the renewable, low-carbon material of choice. Whether you're doing mass timber framing or fibre-based packaging, these products are helping to tackle climate change while supporting jobs here at home. We can help supply that from the sustainably managed forests. We can help meet demand, and we can even help the Biden administration as it moves to implement its trillion-dollar green infrastructure program.

How do we do that? There are a couple of things.

First, we need to resolve this issue. We need the U.S. industry and government to get to the table and negotiate a durable resolution to this dispute.

With geopolitical tensions and protectionism high in the U.S., we don't see that opening yet, just as Jason said, but with a strong demand and continued supply constraints, that may now be exacerbated by the war in Ukraine. There will be opportunities for dialogue in the weeks and months ahead but until then we have to continue to vigorously defend our industry.

Second, a team Canada approach is critical. This is the way it's been for decades. Regardless of who formed government, Canadians have really benefited from the united voice across party lines. Strong, cross-partisan and intergovernmental co-operation has been possible because we share a common cause and because eliminating tariffs is good for everybody. We really appreciate that Minister Ngand her team, are continuing with this approach, as did her predecessors.

Third, as a trading nation, we need to have strong, effective and efficient trade agreements in place and organizations that are going to help to ensure that they're respected and enforced. This includes having a polling with WTO dispute settlement mechanism, having a well-functioning appellant body, and having mechanisms that ensure timely resolutions to disputes.

[The Chair, Liberal, Judy Sgro]

Okay. You're over time.

[Susan Yurkovich]

Can I make just one more point?

[The Chair, Liberal, Judy Sgro]

Yes, please finish.

[Susan Yurkovich]

Finally, as we look to the future, we also need to continue with our market and product diversification. B.C. has led the charge in developing overseas markets, and we've done that in partnership with NRCan. I have to say that the expanding market opportunities program is a gold star example of how to work in partnership and deliver results, but that takes time and it takes years to develop product familiarity—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Yurkovich.

Maybe your last comments can be added on in response to a question from one of the members.

Mr. Nighbor, go ahead, please.

[Derek Nighbor, President and Chief Executive Officer, Forest Products Association of Canada]

Thanks, Madam Chair.

My name is Derek Nighbor. I'm president and CEO at Forest Products Association of Canada. I am participating today from our FPAC head offices here in Ottawa, built on the unceded Algonquin Anishinabe territory.

Canada's forest sector is a $76-billion sector that brings over $34 billion worth of sustainably sourced Canadian products to the world each year. We're across more than 600 forest-dependent communities across the country and directly employ just under 230,000 Canadians.

I know a number of members of the committee. I see MPs Sheehan, Martel, Masse and Hoback, who know us pretty well, but for those of you who don't know, we're a world leader and are unique in many ways in our approach to sustainable forest management. I had the privilege of chairing my global colleagues from 28 countries around the world, and one of our big differentiators in Canada is our public land component. Over 90% of the lands that forest operations happen on are under the purview of provincial government laws, regulations and policies. Operating on provincial Crown land brings with it significant obligations and commitments to use local science, secure input from indigenous and non-indigenous communities, make sure these local values are incorporated, and manage for dozens of important values from biodiversity conservation to flood and fire risk mitigation and supporting birds, mammals and fish that call the forest home. Plans are developed on the land base considering 100-to-200-year time horizons. Not many industries plan in those cycles. As I said, those plans on public land are approved by provincial governments.

Our sector sees a lot of alignment with the federal government's priorities and ready-made solutions, as Susan and Jason spoke to, to help decarbonize our economy, to support effective conservation, to sustain and create well-paid jobs in rural and northern Canada especially, and to advance reconciliation with indigenous peoples.

In terms of indigenous peoples and their engagement, those communities are core to the success and the future of our sector. It is not only the indigenous youth who are representing that significant cohort in terms of talent in the future, but also today indigenous peoples also directly control 10% of Canada's wood supply, and that continues to trend upward. There are also numerous joint ventures, co-management arrangements, employment programs and revenue-sharing agreements within indigenous communities across the country, not to mention over 12,000 indigenous workers and over 1,400 indigenous-owned forestry businesses operating from coast to coast.

Susan alluded to the net-zero-carbon economy opportunity, and as Jim Carr used to say when he was minister, there's no path to net-zero carbon without Canadian forestry and forest products. Our solutions are across the value chain, and they include everything from mitigating fire risks that are carbon spewing, to producing lumber and wood products that lock in carbon for generations and also using what would otherwise be wood waste—whether it be sawdust, bark or wood chips—to make things like paper, biofuels, bioplastics and to power electricity grids and district heating systems.

We're pretty blessed in Canada—there are over 9,000 trees for every Canadian, and Jason talked about that 3:1 planting ratio in Alberta, and how replacing more than we take ensures we're going to keep our forests as forests forever.

There's been a lot of talk today about softwood lumber. I'm going to talk about another trade issue that's facing our lumber sector and our pulp and paper sector. It and its potential impacts are things I think this committee and the Government of Canada need to be clearly aware of. I'm talking about discriminatory pieces of anti-Canadian forestry legislation that are currently active on the floors of the state legislatures in California and New York. They are designed to restrict Canadian forest exports to those states through state procurement channels. When I took this job a few years ago, I didn't anticipate needing to do advocacy work in Sacramento and Albany, but here we are. As I said, if these bills were to pass, the precedent-setting nature and what some of the activists would try to do to influence U.S.-based customers and other state governments would be disastrous for Canadian forestry families and communities.

I'll give you a little more of the specifics. Over the past year, we've been working in collaboration with industry, labour and indigenous partners against bills in California by Assemblymember Kalra. One bill was vetoed by Gavin Newsom, the Governor of California, only to be reintroduced weeks ago along with a bill by State Senator Liz Krueger in New York State. When we saw the bills emerge one right after the other with very similar language, we knew there was some kind of coordinated effort, and it's become clear to us that the U.S.-based anti-Canadian resource organization Natural Resources Defense Council has been instrumental in drafting these bills.

I want to raise these bills. We're very concerned about the potential impacts on our workforce and our ability to operate on the land. The discriminatory nature has clearly been called out by industry and labour partners, and we need the federal government to stand with us to ensure that we don't have even more trade problems with our neighbours to the south.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much for that extra information. It's very much appreciated.

Mr. Samray, you have five minutes.

[Jean-François Samray, President and Chief Executive Officer, Québec Forest Industry Council]

Thank you, Madam Chair.

Committee members, my name is Jean‑François Samray. I'm the president and CEO of the Québec Forest Industry Council, or QFIC. I'm joined today by Michel Vincent, our chief economist.

As the main advocate for Quebec's forest industry, the QFIC represents the interests of softwood and hardwood sawmilling, peeling, pulp, paper, cardboard and panel companies and Quebec engineered wood manufacturers.

While working with governments, other stakeholders in the forest sector and the general public, the QFIC highlights the contribution of its members to socio‑economic development, the responsible use of natural resources, sustainable forest management and the ecological quality of products.

With respect to the topic under consideration today, the QFIC represents and supports its members in various ongoing litigation and gives the government approaches to ensure fair trade in softwood lumber with the United States.

Wood makes a tremendous contribution to the Canadian and Quebec economy. It's important to remind committee members that forests and the Canadian industry play an important role in the economy. The forest sector provides direct employment to over 230,000 Canadians from 600 communities. Over 12,000 industry workers are first nations members. The forest sector generates revenues of nearly $80 billion a year. In Quebec, the forest industry supports over 140,000 jobs and generates more than $20 billion in sales.

As a world leader in the production of many forest products, Canada exported $33 billion worth of forest products in 2019, of which about $10 billion came from Quebec. This figure has risen sharply since then, given the strong demand for wood in the construction and renovation sector.

On top of the economic aspect, the forest is also a powerful tool in the fight against climate change. Acting as a gigantic reservoir to capture and sequester CO2, it helps us fight global warming. The Government of Canada, through its purchasing policies, must play a key role in accelerating the use of wood as a material.

With regard to today's topic, softwood lumber exports to the United States are extremely important to Canada and are a strategic part of our industry's operations. Trade disputes date back to 1981, well before the 1994 free trade agreement.

Yielding to protectionist demands from private forest owners and American sawmills, the United States Department of Commerce methodically filed complaints against Canada as lumber trade agreements made over decades expired. To date, international tribunals have never found that Canada subsidized its industry or harmed the American market. The recent and lengthy unanimous decision of the World Trade Organization in August 2020 is on this list.

However, clearly these unilateral American trade measures are currently hurting American citizens by increasing the price of the products that they buy. The measures are also hurting Canadian consumers who must live with price increases, which are set on a continental basis. These taxes are rampant in a market where demand for housing and lumber is overheating and where American producers are struggling to meet 70% of the domestic demand.

Why do these measures exist? According to the response provided by the American coalition in legal documents, these measures give American producers an economic environment conducive to investment. However, the same coalition says publicly that its members don't intend to produce an additional foot of board to meet local demand. In this type of situation, how can a tax provide any hope to American or Canadian consumers? The question comes up. The reality is that these tariffs imposed on Canadian softwood lumber serve only to increase the profits made by American lumber producers, period. The National Association of Home Builders keeps reminding elected officials in Congress of this.

Unjustified trade measures on softwood lumber artificially inflate its price, fuelling inflation for many products. By imposing tariffs on Canadian exports, the United States Department of Commerce is increasing the price of a two‑by‑four by $1.20 U.S. right now. The American producers, who aren't paying the fees, are content to pocket this increased price.

The American administration may be talking about its made in America policy or build back better program. However, without Canadian wood, the American construction sector won't succeed. Without the presence of Canadian wood completely free of compensatory measures, President Biden can't make progress in the fight against inflation.

The retaliatory measures against the Russian economy applied by western countries add to this and will reduce the volumes of European timber in North America. A reduction in supply combined with strong demand will push the price of this strategic building material higher. By giving in to domestic producers in the United States, the Biden administration is making homes less affordable for Americans, fuelling rising inflation, and quietly killing the American dream. This isn't what we want for our American neighbours.

The QFIC and the other Canadian associations, as Ms. Yurkovich said, believe that a Team Canada approach is the best way to resolve this dispute with the United States. The forest industry, as well as the provinces and relevant stakeholders, must be consulted on the best course of action to end the dispute with our largest trading partner, the United States.

Together, we must tell our American friends that there's a better approach to the softwood lumber trade. We need to help the American administration fend off, little by little, the softwood lumber lobby, which is found in a few states—

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Samray. I'm sorry. The time is up.

[Jean-François Samray]

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Mr. Labbé, please go ahead.

[Sylvain Labbé, Chief Executive Officer, Quebec Wood Export Bureau]

Thank you, Madam Chair.

Good afternoon. My name is Sylvain Labbé. I'm the president and CEO of the Quebec Wood Export Bureau, an association of manufacturers that focuses solely on export development in the softwood and hardwood lumber sectors, as well as in three other industry sectors.

I'll talk to you today about two issues that affect lumber. First, I'll explain the current impact on our markets as a result of the war and sanctions, and the impact on the American market. I'll then provide some ways to resolve this matter.

You have all read the papers. Russia is at war with Ukraine, and Belarus is lumped in with Russia. Last year, Russia and Belarus accounted for one third of global softwood lumber exports, with 50% destined for China and about a third for Europe. All this ended when the sanctions began. For China, nothing has changed. However, the impact by market groups, such as Europe and Asia, was analyzed to some extent.

Europe will no longer receive the approximately eight million cubic metres that it used to obtain from Russia. It will send back what it normally exports to the United States, or about four million cubic metres. There will still be a European deficit, since demand will be greater than supply.

In terms of China, it's unclear where its partnership with Russia stands. The geopolitical situation is very unclear. That said, the Chinese will probably buy the rest of the Russian wood. We don't know how much they will pay, but it will certainly be much less than the market value. There will be an adjustment period before that happens. This will greatly reduce our competitive ability to sell our wood in China. We'll bring the wood back to Canada, where there will be a deficit. We'll lose the wood from Europe, which will no longer sell wood in North America.

Ultimately, we'll end up with a reduced supply of about 1.25 million cubic metres in North America compared to today. This will put upward pressure on prices over the next year or in the years to come. This price increase will be even greater than the current one. This comes on top of rising oil and home prices. The cost of living will change drastically.

The other issue is whether Russia will return to the market in the future. The Russians nationalized the factories owned by foreigners. I think that it will take a few decades before someone reinvests in sawmilling factories in Russia.

We're experiencing a crisis, and two things are important to people: food and housing. Food isn't an issue. Housing, however, is a major problem in Canada and the United States right now. There's a lack of housing everywhere, especially social housing.

My first recommendation is to meet with our American friends and tell them to immediately remove the softwood lumber tax. This is a great time to do so, given the crisis involving commodity and lumber prices, which will continue to rise in the coming months, and the housing crisis. When the house is on fire, it's time to remove the tax on water and firefighters, because it doesn't help anyone. This is a great time to negotiate something, given that there will be an obvious shortage of wood in the coming years.

In addition, since we've been living with this issue for 40 years, we must diversify our markets to ensure that we don't solely depend on the American market. That's my second recommendation. It ties in with what Ms. Yurkovich said earlier. To do this, we have two options. Either we sell our commodity product, the two‑by‑four boards, outside the United States, or we process that product to create value, whether this involves structural products or industrialized home building products.

Over the short term, obviously exporting to China or elsewhere will be somewhat difficult. However, we must keep our options open. This crisis could be completely different in two years. If Putin were to leave, everything would start again and Belarus would need to be rebuilt. The situation could change completely. The price of oil could exceed $150 a barrel and lead to a recession that would completely change the situation, as well.

We can't depend entirely on the American market. We must keep our options open.

In addition, we need to maintain our current investments in our secondary processing products, made from our two‑by‑fours, which we'll certainly sell in the United States, in the short term, or perhaps elsewhere. When we process our wood, we increase its value by four or five times, which creates wealth in Canada.

Of course, we must also change our construction practices, because our system is a bit archaic. Building with—

[The Chair, Liberal, Judy Sgro]

Mr. Labbé, I'm sorry. The time is up.

[Sylvain Labbé]

Okay.

[The Chair, Liberal, Judy Sgro]

We will now move to questions from our members.

Mr. Martel, you have six minutes, please.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Thank you, Madam Chair.

I want to thank all the speakers.

My question is for Mr. Samray.

Before we speak directly about the challenges of exporting to the United States, I want to know more about the forest industry situation in Canada. Specifically, I want to know whether the federal policy on woodland caribou is a concern for QFIC members.

[Jean-François Samray]

Good question.

First, how is the Canadian forest industry doing? You have heard my colleagues speak about this topic. I think that the industry is doing well. There were some challenges in British Columbia with the flooding, but things should be back to normal now that the CP strike has been averted. Demand is strong. We need predictability in the coming years to make investments that will prepare us to be even more competitive. This is fundamental.

As Mr. Nighbor said, in our industry, we make plans a century in advance. Regarding tree planting, Mr. Krips said that three trees are being planted for every tree harvested. We're doing this for the next century.

The industry needs some predictability for the upcoming decades. The discussions on woodland caribou affect that predictability. Everyone in the industry will say that there's room for conservation areas in Canada, but that there must also be intense production areas. The key is to know where to establish each area and where the industry can work to create other areas in order to generate economic benefits and meet the needs of Canadians and Americans. I think that this is fundamental. In all the discussions, there must be room for conservation, of course, but also for production.

[Richard Martel, Conservative, Chicoutimi—Le Fjord, QC]

Mr. Samray, is the woodland caribou a concern for your members?

[Jean-François Samray]

Obviously, the members are concerned about the woodland caribou situation. A number of them have taken very proactive steps to get out of certain areas, be it through compensation or other things. They're living with this reality as FSC or SFI certified companies. They must take steps to make sure that the cohabitation is as good as possible. Obviously, this is a concern for us.