International Trade Committee on March 23rd, 2022

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Everyone has to do their part. As you clearly explained, if access to Quebec and Canadian lumber was guaranteed at a reasonable price in the U.S., everyone would win, not just the U.S. lumber industry. It would help consumers and young families who are looking to become homeowners or need housing. The housing crisis is practically a western, even international, problem.

[Jean-François Samray]

Everyone would indeed win. The issue is finding a way for the coalition to see its interests as being met, because if it doesn't sign off, the U.S. government won't be able to conclude the negotiations with Canada.

In short, reaching a deal would be in Canada's interest as well as the U.S.'s, not to mention their respective populations.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you for your answer.

I think the chair is about to tell me my time is up.

[The Chair, Liberal, Judy Sgro]

Yes, thank you very much.

We're on to Ms. Zarrillo for six minutes, please.

Welcome to the committee today.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Thank you, Madam Chair, and I'm here for Brian Masse today from the riding of Port Moody-Coquitlam. I'll acknowledge as well that it's on the unceded and traditional territory of the Kwikwetlem. I also want to share with the committee and for the French-Canadians or the Quebec Canadians here today that at one time in the early 1900s it had the largest lumber mill in Canada and the second largest lumber mill in the world, the Fraser Mills, which was populated by Quebeckers moving west and also the East Indian community, the Chinese community and the Japanese community. Fraser Mills is now under a rebuild as the area Fraser Mills for residential housing and industry and is no longer a mill, but I wanted to recognize the history of the riding.

My first question is for Ms. Yurkovich, and it's just around the points that you laid out that need to be addressed.

I wanted to ask around targets or metrics in relation to the fact that we're not at a point where we have an agreement. Do targets or metrics exist outside of agreements as negotiations go on?

[Susan Yurkovich]

I'm not really sure about metrics per se. Certainly the U.S. is looking at market share, and they're looking at whether the share of Canadian lumber coming across the border is growing or not.

I would say that we've seen demand in the U.S. grow quite substantially over the last few years. The U.S. industry has put on five billion board feet more of lumber. The trouble is that they can't catch up. We have consistently had a gap of about 14 to 15 billion board feet. It was 16 last year because lumber demand was so high. We certainly are watching that.

In terms of the metrics for when would we get back to table, I don't think there are metrics, but there are a couple of things. I've been around this business for about 25 years. It's not my first rodeo. I was around when we were in other negotiations. We've had a number of litigation processes under our belt, usually with some wins. We had a terrific win with the WTO last year. The trouble is you can't appeal it to anyone, because the U.S. won't appoint their folks to the appellate body.

So usually there's a little litigation water under the bridge. There are usually a number of dollars on deposit. The last time it was $5 billion. This time it's already at $7 billion, so that certainly is something that, in my experience, we get back to the table about.

Then there's something else. It was mentioned by someone that lumber isn't really the top priority for the U.S., and certainly right now in the post-pandemic world and with geopolitical instability it won't be at the top of their list, but they'll want something else, and so it becomes a matter of negotiation.

In my experience those are the three things that have to be there. And ultimately, when we get a deal—and when we've gotten a deal in the past—it means the leader of Canada and the leader of the U.S. get together and say we're going to get this resolved. We just haven't seen that yet.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Thank you.

My next question will be for Mr. Warner. I'm going to take advantage of some history here, if you don't mind.

I just wanted to ask if, historically, our first nations were involved in the creation of the trade agreements. Have they been involved in any negotiations going forward to resolve any of the current disputes?

[Mark Warner]

I don't know, and to be honest with you, I don't think so.

I think there have been consultations as part of the process. In the last round I think there were consultations with first nations. But I can't say, going back to the original Canada-United States Free Trade Agreement back in 1987, or whatever it is, or NAFTA back in 1993, that there was any formal type of consultation with indigenous communities.

I just don't think we were at that stage yet in terms of the politics of the various trade agreements. I guess the short answer is “probably not”.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Going forward, Mr. Warner, do you think there's an opportunity for a different approach in relation to having nations at the table or even doing some of that negotiation?

[Mark Warner]

I'll tell you this. I've worn many different trade hats in my life, and one of them was also working at the OECD in Paris and watching Canada negotiate there and at the WTO.

I hate to tell you the truth, but for most trading partners Canada is an annoying country to negotiate with, because they already have a hard enough time negotiating with the provinces and the federal government. Every time anyone sits down with Canada and they want to talk about something they want to do, the first thing Canada says is that it's in the provincial jurisdiction. That's the problem. If you add on indigenous communities, I think you'll just make it even more complicated, to be very honest with you. It's hard enough now.

But I definitely think there are creative ways where you could build more consultation mechanisms into it. I just don't know how that would play out and whether that would make it easier or not.

It seems to me the issue here is large corporations on the American side that have an interest in negotiating a certain way, trade laws that work for them and American congressmen and women who are elected every two years—and they answer to their constituents. So I don't see that that force is going to change very quickly.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Thank you.

Mr. Krips, I wanted to ask you about stability in workers. I'm wondering if there's anything the government could say and do differently at this point to stand up for workers and to bring some stability through these difficult times to your communities?

[Jason Krips]

Maybe just approach it at the macro level and really encourage workers to recognize the forestry sector as a key economic driver and a key environmental driver. It's actually a great industry to be a part of. It is a sustainable industry. It is the top-end renewable industry. Just encourage workers to look at a career in forestry. It encompasses everything we're looking for as a country in trying to be on the renewable side of things.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Ms. Gray, you have five minutes, please.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you, Madam Chair.

Thank you to all the witnesses for being here.

Ms. Yurkovich, it's good to see you again. My first questions will be for you.

You mentioned in your testimony that you were around during previous negotiations over the last 25 years, during the 2006 softwood lumber negotiations, and then the extension in 2012, going to 2015. What lessons do you think can be applied now?

[Susan Yurkovich]

That's a really good question. You know, we have tried all kinds of things over the years. I can't remember who raised this, but this has really been a producer issue in the U.S., where the producers have a lot of power. The consumers don't seem to have a lot of power in this discussion, when they actually are the ones who bear the brunt of it.

I would say in the early 2000s we really tried to engage with the consumer side in the U.S. It was very difficult, because at that time lumber prices were really a relatively small portion of the cost of a house being built. Prices were very low. Now I think it's different. One thing I think we should be thinking about is how to really engage in a broader way with the consumer lobby in the U.S. and with consumers to let them know what their producers—their American friends and neighbours—are doing to actually push many of them out of home ownership territory.

The federal government led that initiative at the time, working with industry. I think that's one of the learnings I have that we should maybe consider. I also think we have to look for areas that are maybe not specifically lumber-related that might be levers in this discussion with the Biden administration.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. Thank you.

Ms. Yurkovich, would you say that the lack of a softwood lumber agreement is contributing to inflation?

[Susan Yurkovich]

Well, for sure, because when you're paying tariffs, those tariffs get priced into the lumber. It's a commodity market. It's a North American market. It is having an inflationary effect.

Of course, under the first administrative review, we were paying about 20%. The rates now are a bit lower, but we're already in administrative review number four, so we will have different rates again. We'll have a different rate in August.

It definitely adds to the price of lumber. There's a lot of pressure on pricing right now, largely because of supply chain issues that are not unique to our industry. Certainly, this is really something that exacerbates it and is totally unnecessary.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

Actually, just tag on to your supply chain issues, have you heard of any supply chain issues or shipping issues that might be related to the vaccine mandates we have at the border with the U.S., with truckers?

[Susan Yurkovich]

Well, certainly when there was all of the action, and the borders were closed to traffic.... That's not helpful. You know what a year we've had. We've had fires. We've had floods. We've had tremendous disruptions in our supply chain. We are an export industry in an export-driven province, so it's critically important that we get our products to market. The flow of that product over the border by truck, by rail and of course containers is critically important.

That wasn't the biggest interruption. The bigger interruptions have come from, number one, the natural disasters, but also just the disruptions in the supply chain as a whole and the inability to get containers to take our product to market.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. Thank you.

Now, we know just how important the softwood lumber industry is for those of us in B.C., and all the jobs that rely on it. Would you be able to touch on the impact that the lack of a softwood lumber agreement since the end of 2015, which was seven years ago, has had on your members? Has it resulted in some lost potential in expansion of our softwood lumber industry and in jobs in British Columbia?

[Susan Yurkovich]

Well, it has for sure. Prices are very high right now, so the industry is doing okay, but we don't have to look back very far.

In 2019 there were 144 curtailment announcements in the province of British Columbia alone, because we are a high-cost environment, and that had a massive impact. We have a declining fibre supply because of our beetle issues of 20 years ago, and so that was creating a ton of disruption. When you add on the instability created by not having an agreement in place, it's very difficult for planning purposes. Duties can be 10%, 15% or 20%. In some cases, companies are paying upwards of 30%. When you have that kind of instability, it doesn't allow you to plan.

I would say the other thing is the $7 billion plus. More than $7 billion is on the sidelines, and that is money that could be spent in British Columbia and, indeed, across the country, investing in workers and communities, transforming industry and applying technology. That is a real loss for our country.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We will go to Mr. Miao, for five minutes.

Go ahead, please.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Madam Chair.

Before I start my question, I'd like to have this on the record. Our government included indigenous groups and their voices during our renegotiation of CUSMA.

According to Statistics Canada, in 2021 British Columbia, Quebec, Alberta and Ontario exported the highest value of softwood lumber products to the United States, up over 30% since the same time of reporting in 2020.

I'd like to address the following question to Ms. Yurkovich. Considering that in 2021 many of Canada's largest softwood lumber markets saw record-high exports to the United States, what can the high value of trade be attributed to?

[Susan Yurkovich]

There's a difference between volume and value.

The actual volumes that have shipped over the border were up slightly between 2020 and 2021, but it's the value.

Of course we've seen prices that in 25 years.... I would say that anybody who's been in the business has never seen prices like we are seeing right now, and that's because we had a massive disruption in 2020. The whole world shut down. Everybody stayed home. All of a sudden everybody wanted to do projects and move farther away. Now with telecommuting, people can live farther away. We've had tremendous demand, and so the value has gone up very significantly, but the volume is up only slightly.

I have those numbers, which I'm happy to share with the clerk of the committee afterwards. I can send you the chart to look at both the volume and the value of trade over the last few years.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you. That value will be very appreciated.

To date, what have been the domestic impacts of the United States' current application of tariffs on certain Canadian softwood lumber products? How do those impacts vary across provinces and communities?