International Trade Committee on Nov. 27th, 2024

[The Chair, Liberal, Judy Sgro]

Yes, go ahead.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Although I'm learning French and trying my very best, I do respect the right of all members to use that language. I think one of the ways that we can ensure that members are not penalized is if our chair—and it's not a challenge, but a suggestion—would stop the clock and then allow the member...as in the last case. I think that was the concern that our Liberal colleague, Ms. Fortier, had.

When those instances arise, perhaps our chair could stop the clock and maybe use her discretion to then ask them to put the earpiece on.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

I think the best idea is, at the very beginning of the meeting, to ensure that the witness.... He was told to put it on, but he chose not to. In the future, I will start by making sure they have theirs so we don't lose time. Otherwise, I would stop the clock.

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

Thank you.

[The Chair, Liberal, Judy Sgro]

We have with us, from the Quebec Forest Industry Council, Jean-François Samray, president and chief executive officer. From Sinclar Group Forest Products Ltd., we have Greg Stewart, president. Both are appearing by video conference. Welcome to both gentlemen.

Mr. Samray, you have up to five minutes, please, to speak to the committee.

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

Thank you, Madam Chair.

Let's move on now.

The Québec Forest Industry Council represents all lumber, veneer, panel manufacturing, pulp and paper, cardboard and engineered wood companies, as well as merchandise and equipment producers and research firms. All of these activities enable the Quebec forest sector to support 130,000 jobs in Quebec, produce exports valued at $12 billion, contribute $17.8 billion to the gross domestic product, generate tax and other levies amounting to $6 billion of which $2 billion goes to the federal government, and support the economic activity and vitality of over 900 municipalities in Quebec.

We are here today to talk about the fifth softwood lumber dispute, which started on November 25, 2016, with the filing of the petition by the US Lumber Coalition. We are thus entering the ninth year of this dispute. To date, that amounts to very nearly $10 billion in duty deposits for all of Canada and over $2 billion for Quebec.

Despite all this time—for nearly eight years—there has been no judgment to bring back the portion of the duty deposits that was very unfairly paid by Quebec and Canadian mills. Despite all the provisions made in the North American Free Trade Agreement and the Canada—United States—Mexico agreement, and despite the provisions calling for 315 days between when a complaint is filed and when it is heard and analyzed and a decision issued, nearly six years have passed since 2017‑18 and not a single dollar has come back yet.

This is hurting the economies of Quebec and Canada. The companies have had to spend money to produce their wood that was exported to the United States, but they have not received the revenue that should have resulted, because that revenue has been blocked at the border since 2018, 2019, 2020, 2021 and 2022. The years have all added up, and the total for the years as they pass is hurting our social safety net, because the governments of Quebec and Canada have been unable to collect tax on those funds and use it to support our social model.

We find ourselves today in a situation where no decision has yet been made. There is definitely a problem with the way the panels work and Canada's ability to appoint people to hear cases. I have even recommended that there be a school to train people to play this role, the problem is so bad. If there is no panel, there is no decision.

Behind it all, the dispute is also hurting American consumers. Because the United States is not self-sufficient in lumber, cardboard, paper and panels, Canadian products are needed there. Despite what the US Lumber Coalition may say—that a small number of new mills actually have been opened in the American industry—the net effect is that the industry meets about 70% of Americans' needs. The United States therefore needs wood and products from Canada.

Black Friday, the festival of cardboard boxes, has just ended. Christmas is around the corner. Christmas without wrapping paper, without boxes, without all the trimmings that come from the forest industry, is difficult for the economy. During the COVID‑19 crisis, we saw the importance of the forest industry for meeting our society's basic needs. So this presents a problem for jobs in Canada, for the communities in our country, and for Canadian consumers.

I would say that it essential to be able to appoint people to sit on panels and enforce the agreement signed by both parties. It is essential for the Canadian economy.

I will be happy to answer questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We now move to Mr. Stewart for five minutes, please.

[Greg Stewart, President, Sinclar Group Forest Products Ltd.]

Thank you, Madam Chair.

Thank you for the opportunity to appear before you today.

My name is Greg Stewart. I'm the president of Sinclar Group Forest Products. I'm also the co-chair of the British Columbia Lumber Trade Council. Kurt Niquidet, the president of the BC Lumber Trade Council, presented at an earlier meeting, so my comments will be focused on Sinclar Group Forest Products and the impact of the unwarranted duties on our operations.

Across Canada, the forest sector generates 382,000 jobs and contributes $25 billion to GDP. British Columbia is a key player, accounting for 40% of Canada's softwood lumber exports to the U.S. and supporting approximately 100,000 jobs.

Sinclar Group Forest Products is a third-generation company based in the central interior of British Columbia. We have three stud lumber sawmills and a pellet plant. Over our 62-year history, we have taken pride in working in the communities of Fort St. James, Vanderhoof and Prince George. We have benefited from and grown because of our long-term relationships with our first nation partners. Sinclar has advanced social and environmental initiatives, like the Prince George downtown renewable energy system, by deploying technology and partnering with local stakeholders.

We employ 450 employees across our five operations, which is a small fraction of the federal and provincial forest sector's total employment. However, Sinclar Group's experience is representative of small and medium-sized lumber operations across the country. With over $10 billion Canadian in cash deposits being held at the U.S. border, the Canadian industry is being harmed by the continued imposition of unjustified duties. The duty payments for small and medium-sized enterprises in the forest sector have a significant impact on our ability to finance our operations.

In addition to paying the duties, we are required to post bonds of at least 10% of the expected annual lumber duty payments. Without these bonds in place, Canadian companies are not able to ship to the United States. If we exceed the bond's limit, we cannot expand its capacity. Rather, we have to post a new, additional bond. It is difficult to determine the exact amount required in the coming year, so it is not uncommon to post bonds 10% to 20% higher than is needed just to avoid saturating the bond. These bonds must remain in place until the border shipments are processed and liquidated.

Given the ongoing legal proceedings associated with the softwood lumber dispute, as very clearly communicated by Mr. Samray, no duties have been liquidated. Rather, the bonds continue to accumulate for small and medium-sized businesses.

The financial burden is projected to increase dramatically in 2025, when duty rates are expected to rise from 14% to approximately 30%. This will threaten the viability of the Canadian lumber mills and significantly impact rural communities. This threatens the established partnerships and the continued economic, social and environmental progress in forestry-dependent rural communities.

For small and medium-sized lumber producers like Sinclar, the best possible outcome is being able to negotiate a settlement to the softwood lumber dispute. Reaching a desirable long-term agreement needs to be the priority. However, it takes two parties to negotiate. Given the pending change in the United States government, it's unlikely the Canadian government will be able to negotiate a settlement before the imposition of higher duties in 2025. Given the significant impact that an anticipated 30% duty will have on lumber mills and the communities, urgent federal support is needed to prevent mill closures and job losses.

This support should include financing solutions such as a loan program for the punitive, unwarranted duties, as well as federal programs through agencies like EDC that could be deployed to minimize the financial burden of the additive bonds for small and medium-sized companies. These programs should be prioritized ahead of the 2025 budget.

Thank you again for allowing me to speak. I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Mr. Zimmer for six minutes, please.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Thank you, everybody.

It's good to have you back again, Greg. My questions will be for you.

This is from a press statement of the BC Council of Forest Industries' response to the latest mill closures, from September 5, 2024:

COFI calls on British Columbia to work with the federal government to put in place a durable solution to the long-standing Canada-US softwood lumber trade dispute. Urgent action is required to defend BC producers, workers, and communities from the disruptive impacts of these unfair and unwarranted tariffs.

Greg, you just referred to them. After nine years and three U.S. presidents, we still don't have a softwood lumber agreement. Because of that lack of action, we saw softwood lumber tariffs double this summer to 14.5%. We have heard that it's going up another 11%, and you just said it's going up to 30%.

How have these softwood lumber tariff increases affected forest families in B.C.?

[Greg Stewart]

First and foremost, obviously, the continued holding of the duties at the border.... That's a significant amount of money for small and medium-sized businesses, not to mention for large businesses. Obviously, for a small or medium-sized business that doesn't have easy access to liquidity or the ability to finance operations, it has really prevented the ongoing investment in those communities and providing that increased certainty for workers and employees in those towns and in the companies.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Thanks, Greg.

I will quote another article, from BIV, entitled “Canfor's B.C. mill closures prompts call to stabilize timber supply”:

What's been limiting the timber supply lately is government policies, he said, including a moratorium on logging old growth stands...tenure transfers, a 30 by 30 conservation goal, and eco-system based land management.

You referred to the people in your mills. I've heard you tell stories about your dad, and I've even heard from the people who used to work in the mills. They still remember your dad walking through the mill and getting to know them and their families. The Sinclar Group was, and is, very much a family company. How devastating has this softwood lumber shutdown been for you, your business and other businesses?

[Greg Stewart]

It's been significant in terms of the impact. You referenced, actually, my grandfather. I'm still trying to keep up to the standard that he set for me in the mills.

The challenge we have is that we are very community-based. We focus on our communities and believe the solutions are in our communities. The hard part, with these duties, is that they're being done by a foreign entity—the United States—and it's out of our control. It creates an incredible amount of uncertainty and prevents us from making long-term decisions for the operations, because we don't know how long this is going to continue and we don't have access to that cash flow.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Specifically, Greg, you have to face these folks who used to work in the mills—and I know you've been directly affected by mill closures. You have to face the families and tell them, “I'm sorry, but we don't have any more work for you.” I know it impacts your family too, because you're the one who has to face them and tell them, “There's no more work for you.” I'd say that, even in Prince George at large, with other mills that are beside you in that corridor, mills that have closed already, after operating for 50-plus years, the impacts on the community can't be overstated. We talk in dollars and cents, business and the economic impacts of it, but there's a personal impact on the community.

Just speak to that, Greg, if you would.

[Greg Stewart]

Absolutely. In the earlier session of this meeting, there was a lot of discussion about communities as well. One impact on communities is that, when a decision like that is made, it is final. Unlike in a larger community, where there's other employment and other reasons to keep people in the community, when a mill is closed, oftentimes it is fatal for that community, in that people have to move away and try to find jobs elsewhere. Being able to reopen installed assets is very unlikely, and it makes it very difficult to bounce back from a closure decision.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

It was said before by other members, and I interviewed a bunch of people, just in Fort St. John. There's nowhere else for these folks to go.

This is from a mill manager in northeastern B.C., who wishes to remain anonymous. He said, “The main reasons mills have had to close are political decisions. The trees are still there to support a vibrant, sustainable forest industry. However, access to those trees has been heavily restricted. The combined impact of these political decisions is estimated to have reduced the area available for harvesting by 50%, and based on where these areas are located, the impact on the annual allowable cut will be even greater than 50%.”

My question is, will there be any forestry jobs left in northeastern B.C. if the federal and provincial governments' restrictions and closures continue?

[Greg Stewart]

I'm not as familiar with northeastern B.C., so I can't necessarily speak to the specifics of that.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Let's just say northern B.C. Let's include Prince George in this conversation.

[Greg Stewart]

The reality of it is.... I believe there is a future for forestry. I think that we're going to have to look at forestry a bit differently too. Forestry is a great way to combat climate change. It gives us an opportunity to manage forest health so that we can prevent wildfires. All of that relies on the forest industry being an active participant in managing the land base. I think it takes a lot of dialogue and discussion among the various stakeholders with special interests on the land base to really understand and communicate how we can all work together to achieve the multivariable values from the land base.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

We go to Mr. Sidhu, please, for six minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thanks, Madam Chair.

Thanks to our witnesses for taking the time to be with us today.

Canada has long-standing agreements with international partners: CPTPP, CETA, CUSMA and about a dozen other trade agreements. Besides the North American market, where does your industry see the greatest potential?

Maybe we can go to Mr. Samray.

[Jean-François Samray]

It will be my pleasure to answer the question.

First of all, we have to realize that Canadian companies are exporting.... I would say Quebec exports half of its production to the United States, which is 25% less than the normal manufacturing company. We're already diversifying when it comes to pulp and paper and cardboard, so there are exports that are done.

If we want to go somewhere else, if we want to develop markets, it takes a long-term perspective. It takes some support and it also takes certainty on the volumes you're going to get. Seeing that all the rest of the world is going to the best market, which is the United States, having them next to us is a great advantage. Exporting 50% is already a diversified market, in a market that is paying the best price and that is not self-sufficient.

There is some initiative, and value-added products are exported, but it is not something that you do overnight. Some programs, like IFIT and refunding heavily IFIT, just like Finland is doing on their side, could be a way of having a long-term perspective, but it's certainly not something you do overnight.

[Maninder Sidhu, Liberal, Brampton East, ON]

Perhaps I can hear from Mr. Stewart on this, about diversification into other markets and where you see the greatest potential.

[Greg Stewart]

Sure. Again, I would reflect the same comments. The United States is the single largest softwood lumber market available to us, and we're very fortunate to have them just south of our border.

I think part of the answer to that really depends on the types of products that we are able to produce in the various regions, and what the actual application is for the species, the size of the lumber and so forth.

In our case, we produce stud lumber at all three of our mills. Just for reference, stud lumber is the vertical member that goes into a wall panel. We've intentionally moved in that way because of the size and profile of the logs in our area. When you look at the markets available for stud lumber, it's really dependent on those markets that are very similar to Canada in terms of the building codes they have, which is Canada, the U.S. and Japan.

We also have value-added products. We produce pellets for sale. Historically, they had been going over to Europe, and more recently, they're now almost 100% going to Asia. I think that value-added products do open up some other opportunities in terms of different markets that we could potentially explore, but the challenge is the volumes and being able to move volumes around. Just like Jean-François just mentioned, it does take time to develop those other markets and make sure that the transition is done effectively so as not to cause too much disruption.

[Maninder Sidhu, Liberal, Brampton East, ON]

You spoke about Canadian needs here in Canada. Our government has an ambitious plan to build 3.9 million homes within the next 10 years, working with provinces, municipalities and industry. What impact would that have in terms of local lumber supplies? Do you have enough supply to provide to the local market as we build these homes across Canada?