International Trade Committee on March 23rd, 2022

[Susan Yurkovich]

I think Ms. Gray asked that question as well, what the impacts are.

It creates uncertainty. It takes money out of the industry that could be spent on plants and equipment. It's destabilizing. The duty rates move around because of the administrative review process, and so it's very hard to plan. Of course in different parts of the country, I would say—and Jean-François, you might want to speak to this—duties are higher with some of the mandatory respondent companies than they are with others. That's destabilizing across the country. There are a lot of impacts. In addition, it creates price inflation, not just for U.S. consumers but also, because it's a North American market, for Canadian consumers.

Jean-François, I don't know if you want to jump in.

[Jean-François Samray]

Madam Chair, I'm going to ask our chief economist to fully answer the question.

[Michel Vincent, Director, Economics and Trade, Québec Forest Industry Council]

Susan is right. Mandatory respondents have their own rate, following each administrative review.

We have one company here in the eastern part of Canada that has a huge rate. The other two respondents are located in British Columbia. They also have their own rate. The whole of the industry, the rest of the industry, which is the vast majority of companies, has what we call the “all others” rate.

Basically that's the way it works.

[Wilson Miao, Liberal, Richmond Centre, BC]

To follow up further, considering that U.S. imports of Canadian softwood lumber are at a record high, how has the current application of tariffs by the United States impacted the United States own softwood lumber industry?

That's open to all.

[Susan Yurkovich]

We've had strong demand in the U.S. and we see demand being strong going forward. What you're seeing is that U.S. producers are putting more capacity online. They're building more sawmills, but that takes time.

As I mentioned in my remarks, there was about a 16-billion board foot gap in 2021. That means they're underproducing. They're not able to meet their own customers' demand in the U.S., so they're looking to us. They are increasing their supply for sure, but they're not doing it fast enough.

With keeping these tariffs on, they do benefit from those tariffs because of course they get higher prices and they're bringing production on slowly. It's the laws of supply and demand. If we don't have enough supply, there's price pressure.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Savard-Tremblay for two and a half minutes, please.

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

Thank you, Madam Chair.

My question is for Mr. Vincent, the economist from the Québec Forest Industry Council.

Have you done any estimates in terms of a scenario where processing was the focus of increased investment, an adequate level of investment, let's say? Would that give the industry a lot more breathing room in the face of this trade war?

[Michel Vincent]

Yes, clearly that would help the industry, even if just to reduce Canada's dependence on the primary wood processing industry in the U.S. and to protect against American protectionism. Investing in secondary processing would certainly be a way to guard against that dependence.

In 2006, when the government refunded a large chunk of the softwood lumber deposits to companies, a wave of major investment swept the country. That money is currently frozen at the border and isn't available for investment, even though the industry is badly in need of that investment. That is the case in Quebec, but the story is probably the same all over Canada. The industry needs that money. In the current climate, the conditions are hardly conducive to investment.

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

You think public investment could help create a more attractive business environment right now. Is that right?

[Michel Vincent]

I was actually referring to private investment. There's no doubt that the programs in place to help stimulate investment are very useful. As the president of the council said earlier, to meet the needs of the industry, the government's $50‑million program could be made into a $500‑million or even $1‑billion program. Government programs are certainly helpful, but the bulk of forest industry investment comes from the private sector.

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

Very good. Thank you.

I have no further questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Ms. Zarrillo, you have two and a half minutes, please.

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

Thank you, Madam Chair.

Mr. Nighbor, I am going to ask you a question around workers.

We're talking today about a team Canada response, but I'm hearing regional differences. How do these differences affect compensation, stability for workers and their ability to move, live and find work across Canada?

[Derek Nighbor]

There are a couple of things. On the work front, the area where we're seeing the biggest pressure point is on trucker shortages. We are short about 23,000 trucker positions. That's been extremely challenging, especially during the scare with the CP work stoppage and the fact that we have a number of mills not running right now because they can't get CN railcars. The transportation supply chain pressure point is a real one.

There are very much regional differences. We've observed that when the oil and gas sector in places like in northern Alberta hit a tough period of time, some labour freed up for us. They were an adjacent community, so were able to come over. I think of some other communities where mines might be booming and at that point in time the dollars might be more lucrative there. We have some pressure points in terms of losing the staff there.

In most parts of the country, we're very much a northern and more rural industry. Recruiting people to those more rural and remote areas can be challenging. I can send through the clerk some of the numbers in terms of average wages across the board, but there are better than average, family supporting, multi-generational jobs in our sector. One of the biggest gaps we do have is continuing to be able to get those bodies into rural and northern Canada.

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

Thank you, Mr. Nighbor.

I'm going to ask a similar question to Mr. Labbé around workers and just the mobility and the ability to move in and out of province. Is that possible with the way the forestry sector is right now?

[Sylvain Labbé]

I think the problem actually in Canada is not necessarily mobility but the lack of workers. That's a big problem that we face now, and for the commodities that are located far away from the city centres it's even tougher.

I don't know what program we can involve regarding workers from abroad, maybe bringing Ukrainians—that would be good timing. Also, a more sustainable solution is more robotization of factories, fewer workers producing more. That is what we are developing in this value-added industry. That's the only way today to build more capacity with the same workers.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Labbé.

We move on to Mr. Baldinelli for five minutes, please.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Thank you, Madam Chair. Thank you to all the witnesses for being with us this afternoon.

I want to follow up with Mr. Nighbor and some of his comments from earlier when he mentioned specifically that when he took his position he never thought he would be in a position of having to lobby state legislatures such as California and New York and some of the pieces of legislation that had been brought forward.

You even indicated that you thought they were some kind of coordination...and in a sense some of them are very similar.

One aspect concerns me, and maybe I can get your comments. Through the adjudication process we've been successful through WTO and NAFTA and so on, but on these actions taken through the states, is the federal government able to take action to rectify those types of injurious pieces of legislation?

Also, can you see these types of actions being expanded to other states? If so, are you now looking at doing any type of analysis on our job sectors and what impact it would have on jobs and our industry as a whole?

[Derek Nighbor]

I really appreciate the question, because this is a very frustrating one. As I mentioned in my opening remarks, I chair a global group from 28 countries around the world. I know how we stack up in Canada.

It's about what kinds of products or materials we want to build with and where we want to get those materials from. Do you want to get them from Thunder Bay, Prince George or Whitecourt, or do you want to get them from the Amazon or eight hours outside of Moscow? This is where we are on the global...and these are the questions we're asking legislators.

What we would like to see, and what should be happening, is recognizing that any forest product coming from Canada.... Over 90% of the lands are under provincial purview; they've been approved by provincial governments. On top of that, we have 40% of the world's third party certified forests here in Canada. That's another threshold above and beyond.

To your question of where the federal government can help us, it's through diplomacy. The trade offices of the provinces are very engaged in provinces like B.C., Alberta, Ontario and Quebec, which are the four provinces that are at the greatest risk in those two states. Our Global Affairs Canada officials are engaged on the ground, but we'd like to see a couple of more things. I'd like to see support from Global Affairs Canada to do a formal legal review of the bills. They've thus so far refused to do a legal review of the bills to clearly understand the impacts. We would also like higher political engagement and diplomacy to bring resolution to this silliness.

In terms of domino effects, 100% going to Oregon, Washington state.... However, the biggest risk is one state passing one of these rhetorical, sensational bills, and then those voices behind that bill going to the Home Depots or the Procter & Gambles, to some of our big U.S.-based customers, to try to cast some kind of a dispersion. These groups that are behind this bill are doing those very similar misleading campaign activities against some of our biggest customers. There's an existential threat here, for sure, and it's absolutely critical that in two of the biggest states, the Government of Canada and our provincial governments stand with Canadian forestry workers.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

Excellent. Just to follow up, are you seeing assistance from the federal government and our trade commission offices in actively helping to lobby and speak with state legislatures?

[Derek Nighbor]

That's correct. In both California and New York, we have had on-the-ground consular support. We've had tremendous support from provincial governments, as well. We're getting to a point here.... Governor Newsom vetoed the first bill in California because he said this is completely unmanageable and unworkable for any small business in California to figure out if you want to get into the procurement game.

A couple of months later, the same assembly member brought the same bill back. It's an election year in California, it's an election year in New York state, so we would like to see a little bit more senior political engagement on the file.

[Tony Baldinelli, Conservative, Niagara Falls, ON]

To my earlier question, and to get your thoughts, again, from a federal perspective, when working with the United States through the adjudication process—we've gone through WTO and NAFTA and CUSMA—but because these actions are taking place on a state level, is there anything that we can do to appeal those on more of a national level, or is it just our actions on the ground and what we can do?

[Derek Nighbor]

The diplomatic actions on the ground are the first step to get this fixed. If that doesn't happen, our review shows that if these bills are passed, they would violate trade agreements. I'm not a trade lawyer—Mark might be able to help here—but there would be mechanisms whereby governments could take action.

We'd prefer not to get to that point, and we believe through top-to-top diplomacy with our provincial and federal governments we can end the silliness.

[The Chair, Liberal, Judy Sgro]

Thank you.

I'm sorry, Mr. Baldinelli. Your time is up.

We're on to Mr. Sheehan for five minutes.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you very much, Madam Chair, and thank you to all of our presenters.

The softwood lumber dispute has been before us for many years. I'm from Sault Ste. Marie. The provincial Ministry of Northern Development, Mines, Natural Resources and Forestry is located in the Roberta Bondar building where I used to work at the Ministry of Labour, Training and Skills Development, and the Ministry of Northern Development and Mines, so I've had quite a few coffees with some of the folks who worked for the province in this dispute that was going on and on. They explained to me simplistically that in Ontario, and it would seem probably other places in Canada, some of the logs that are being forested are located on Crown property as opposed to the American— as they would call them—lumber barons, some folks, a small group of them, who have a monopoly. They really seem to control the political agenda, no matter what government seems to be there, through their efforts.

What's really unfair is what all this does.... The demand seems to be high, the Americans continue to build, they need logs, they need wood, they continue to purchase it with these American tariffs on it. What this results in is a tax. They're taxing themselves. They're taxing the middle class, as we call it, and the folks who are working hard to join it who are particularly hit hard.

Would any of you have any of the data on exactly how much, in dollars, these tariffs are resulting in for American houses? I don't know if Derek or anybody would have that, and if you don't, perhaps could you get it to us?