International Trade Committee on March 23rd, 2022

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

Mr. Samray, what will it take to ensure that Canadians pay less for their two‑by‑fours?

If we proceed with limiting access to the resource in order to protect the woodland caribou, prices will inevitably increase. Is this an issue in terms of our international competitiveness?

[Jean-François Samray]

Actually, the price of lumber is determined by the North American market. The softwood lumber tax imposed by the U.S. influences the price Canadians pay. On one hand, the softwood lumber dispute has to be resolved if the price of lumber on the continent is to come down. On the other hand, we have to find ways to increase supply for consumers. That brings me back to what I was saying: it's important to establish conservation areas, even though that is already happening in some places, but it's also important to send a very clear message to the industry that areas will be set aside for sustainable production, in accordance with industry forest management practices. That is crucial.

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

To date, in what way and how often has the Canadian government consulted Canada's forest sector and other affected stakeholders regarding the current softwood lumber dispute? In other words, what are stakeholders recommending and saying?

[Jean-François Samray]

That may be a good question for my counterparts, who have been around longer than I have. I can tell you, however, that since I took this job 18 months ago, we've had a few working meetings with the minister and her staff to start thinking about a Team Canada approach, which we support.

I know that Ms. Yurkovich and Mr. Nighbor have been around a while, so they may have more to say.

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

Thank you.

My next question is for Mr. Labbé.

How can Canada provide more support for forest product exports? You talked about market diversification in your opening statement, so if you could provide more detailed information on those opportunities, I would appreciate it.

[Sylvain Labbé]

I would say two aspects come into play. The federal government offered a program called the expanding market opportunities program, and it should be renewed soon. It had two main components for market diversification: maintain access to export markets and develop value-added products in the U.S. or elsewhere.

The government needs to keep the program in place, but every province needs to participate with its own system. As I said, we are looking at two very hard years from a price standpoint, and exporting our products will be difficult because our production level will only just meet demand in Canada and the U.S. That will all change afterwards, though, so we need to keep the doors open. It is essential that the government keep the program going.

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

Thank you, Mr. Labbé.

I think that's all the time I have.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Labbé.

We'll move on to Mr. Virani for six minutes, please.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you very much, Madam Chair.

Thank you to all of the witnesses for this very helpful testimony on where we are in the current situation.

In response to Monsieur Martel, I can inform the committee that the minister was at a round table with members of the softwood lumber industry as recently as January 13.

I'm going to ask a question of Ms. Yurkovich. You mentioned the importance of a team Canada approach. That's critical to what the minister has been doing, along with the Prime Minister and Minister Wilkinson, in raising this issue in as many instances as possible.

Minister Ng was accompanied by some members of this committee from opposition parties in Washington in December to raise this issue. During that trip, she also met with the National Association of Homebuilders, which was referenced by several of the witnesses in their testimony.

Minister Wilkinson has also been engaging his provincial and territorial counterparts. At the North American Leaders' Summit in November, the Prime Minister engaged on this issue directly with Joe Biden.

The question I have for you, Ms. Yurkovich, is that we are where we are. We're sensing a bit of intransigence on the part of the Americans to reopen this. Do you have any creative solutions as to how we could influence them to make it a priority for reopening and get back to the negotiating table? We all believe, as does Minister Ng, that a negotiated solution is in the best interest of Canada.

[Susan Yurkovich]

“Intransigence” is one word for it.

I am pleased. I know the government has raised this, and governments before of all stripes worked on this file. I really believe, as some of my other colleagues said, that the team Canada approach is the only way to go forward. Currently, the minister is employing that same kind of approach. That's really important.

Unfortunately, the difficult thing about this file is if the Government of Canada went to the table, they could bind this industry here in Canada. That's not the case in the U.S. Mr. Warner talked about the trade laws being used, and they are being used. They are what they are, and the U.S. industry uses their trade laws against their competitors.

The difficult part of this file is, even if the U.S. government comes to the table, if you don't have the U.S. industry there—which is protectionist by nature—you can't get an agreement. That's the really challenging thing, because what we need under their system is for those companies to say they are not being injured. When we got to the last agreement in 2006, that's what occurred. You need a certain percentage of those companies to say they're not being injured. While the U.S. industry doesn't have a veto, per se, that is effectively a veto and it makes it very difficult.

I understand and appreciate the government's efforts, as governments before have tried to raise this issue. There are some things that are really important. We've talked about affordability. We've talked about green building. Those things are really important to the Government of Canada and governments across the country, frankly. They are also important to the Biden administration and I think we can push on those.

They are making things less affordable, and they're allowing their industry to do that.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you, Ms. Yurkovich. I wholeheartedly agree with you, particularly on the synergies on green infrastructure and building greener in both countries. That's a priority for both of us, so that should hopefully be persuasive.

We know where we are, and we know that we've actually deployed a number of tools under a number of different mechanisms to challenge decisions that have been taken. We've been successful at every turn. Sometimes those decisions take time and some of them are still pending. At the WTO there is a total of three that are pending right now. Under the old NAFTA chapter 19 there are three instances of litigation that are still pending, and under CUSMA chapter 10 there are four instances of decisions that are pending.

I know it's not the ideal situation, because we would like to not be in litigation, but I'm conscious of the fact that when we were brought into renegotiating NAFTA and turning it into CUSMA, we heard a lot from parties in the chamber, including Her Majesty's official opposition about resiling from things like imposing a strong dispute resolution mechanism. That mechanism is actually clearly in play given that there are no fewer than four disputes currently at play under CUSMA chapter 10 right now.

Perhaps I'll ask this question to Mr. Krips. Could you let us know where you think we'd be if we didn't have a dispute settlement mechanism under CUSMA through which to litigate some of these disputes?

[Jason Krips]

We certainly very much wholeheartedly believe in dispute mechanisms that are out there. I think the importance is to make sure that we continue to encourage both sides of the table to have panels and members being appointed to those. We want to make sure that those panels are used in good faith, and in order to have those done in good faith we need the appointments to continue and for the cadence of those panels to increase.

But I wholeheartedly agree, whether it was under NAFTA, or now under CUSMA, the panel mechanism is vitally important for us to have one of those tools in the tool box to continue to pursue the parties to get back to the table to negotiate.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you.

In the brief time I have left perhaps I could ask a question of Mr. Nighbor.

You mentioned the aspect of the overall economic value of the industry. You also mentioned indigenous ownership, indigenous entrepreneurs and indigenous employees. I know we are funding the softwood lumber industry to the tune of about $251 million over a span of three years, and some of that includes money for the indigenous forestry initiative to the tune of $12.6 million.

Do efforts like that help you in terms of the work you're doing on advancing reconciliation?

[Derek Nighbor]

Yes, definitely. Those dollars go directly to those indigenous communities and businesses, and that's the way it should be. We hope that the indigenous forestry initiative is renewed in the upcoming budget. I think that's part of a suite of very beneficial products that support our sector.

I come at this from a national perspective, so I'm seeing activity in all the provinces. I think the other important thing to realize is it's so critical that our companies on the ground are working and respecting the wishes and values of those local indigenous communities, because some communities want to plant trees, some want to run the log yard, some might just want revenue sharing and some might want a significant employment program.

I think what's really important is there's no one-size-fits-all in terms of it needs to be up to those local communities, and that discussion and those decisions need to be made at that local community level.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Monsieur Savard-Tremblay for six minutes.

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

Thank you, Madam Chair.

Good afternoon to my fellow members, and thank you to the witnesses for being here.

Mr. Samray, you did a good job of explaining the potential of forests, themselves, as a tool in the fight against climate change, namely through carbon capture. That is a secret no more. The Amazon rainforest is known as the lungs of the planet for that very reason.

Can you talk about how the use of wood in the construction sector also has the potential to help with climate change?

If you could keep your answer brief, I would appreciate it because I have more questions for you.

[Jean-François Samray]

Yes.

According to the Intergovernmental Panel on Climate Change's last few reports, we need to plant more trees and enhance sustainable forest harvesting—two things we are already doing in Canada—and make much more use of trees and forest products in the construction sector. A cubic metre of wood stores about one tonne of greenhouse gases. As a material, it's very important, and we have it in Canada. The use of wood in the construction sector is imperative if we are to reach our targets.

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

Thank you for that information. Wood is a material that is good for the environment, then. When we talk about trees, we are talking about oxygen. Studies even show that people are happier in neighbourhoods that have more trees. Everything is connected, as they say.

I'd like to hear your comments on the fact that the oil and gas sector receives billions of dollars in support, while the forest sector gets just a few million.

Again, I would appreciate it if you could keep your answer brief.

[Jean-François Samray]

I don't want to speak for the oil and gas sector. As my colleagues have mentioned, programs are vital for the industry to modernize and be competitive.

For instance, to help the pulp and paper sector with conversion, the government offers the investments in forest industry transformation program, which supports the development of new products as alternatives to things like single-use plastics. Through the program, the government invested $50 million over two years. However, to meet the significant needs of the industry, the government should have invested $500 million, even $1 billion plus, not $50 million. New products need to be developed to meet demand. A program of that scale would make Canada a leader in the sector.

We have the wood, but now we need the investments to support conversion activities. As Mr. Labbé and Ms. Yurkovich mentioned, export programs are also crucial.

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

Thank you for that information.

I have another quick question for you, and a yes or no answer will do.

Is it true that, in Quebec's forest regime, the auction-based pricing system, where the market determines the price, was actually reworked and amended to be compliant with the trade agreements?

[Jean-François Samray]

Yes. The WTO ruled that it was entirely compliant.

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

Earlier, my fellow member, the parliamentary secretary, brought up the possibility of one day renegotiating NAFTA. Do you think that unique feature should be built into the agreement?

[Jean-François Samray]

If that's the missing piece to reach an agreement, I think the Quebec industry would be willing to discuss it. Instead of having a regime in a trading system with taxes and restricted market access, the industry would prefer an agreement that creates a free trade environment for materials.

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

Tariffs in other sectors were recently lifted. That was the case for some foreign markets that were exporting to the U.S., so it's not inconceivable that the tariffs on our products might be lifted as well.

Generally speaking, trade tribunals end up ruling against the U.S., but the costs along the way are high, with lost jobs and revenue.

Ultimately, there has to be a dialogue.

Does that sum up your message today? Did I get that right?

[Jean-François Samray]

On one hand, there has to be a dialogue, as Mr. Warner and Ms. Yurkovich pointed out. On the other hand, the U.S. coalition has the ability to veto the final decision. One thing is for sure: the American administration can significantly lower the tax rate on lumber if it wants to. It is under no obligation to impose a rate of 18%, 22% or 33%. It could just as easily set the rate at 0.5% or 1%. Obviously, the president's office and the Department of Commerce have a role to play.