International Trade Committee on Dec. 2nd, 2024

[Derek Nighbor]

I'll say—and to Lana's point as well around this—that there has been some.... There's not always absolute unanimity across the lumber sector in this space. That's the way it's always been, but the companies are working together with their value chain partners and with the government to try to build this team Canada approach. I'm happy to see the dialogue that's happening there. I think that's absolutely critical.

We also need to remember the role the provinces play here. More than 90% of the land that our foresters operate on is under the purview of the provinces. Those provincial voices become very important as well.

Again, I'm very careful about not negotiating against ourselves and not doing that publicly, but I will say that it is a really dire time right now, especially for a lot of our smaller and mid-sized mills. I think you heard that from my colleagues from Ontario and Quebec last week.

[The Chair, Liberal, Judy Sgro]

Mr. Savard-Tremblay is next, for six minutes, please.

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

Thank you, Madam Chair.

Ladies and gentlemen, thank you for your opening remarks. I also thank you for sounding the alarm on this issue. It has sounded so often over the past 40 years that it has almost become background noise, sadly.

It never seems to get resolved. Let's hope it happens this time.

Mr. Lee, I assume you're in touch with the Canadian Home Builders' Association, as well as the National Association of Home Builders in the United States, which is vehemently opposed to the increase in tariffs. That association is also said to be particularly close to the Republican party—much more so than to the Democrats, in fact.

Have you been told about concerns regarding the new situation or, conversely, about things that might give rise to some optimism? What is the Americans' current state of mind?

[Kevin Lee]

Thank you for the question.

I don't know how many positive things there are to say about that situation.

With our discussions with the NAHB, I think it's pretty common for most industry associations to typically be more aligned with a republican government and those smaller government-type situations. They are unwavering, though, in their recognition of the importance of Canadian lumber to the U.S. homebuilding market. I don't expect that this will change their calls for a complete elimination of the tariffs.

There's no question that the number one damage done by the tariffs is actually to the U.S. homebuyer and then, in turn, to the U.S. home builder, who can sell fewer homes, as Derek was alluding to. If we see high lumber prices—and don't forget that these tariffs result in higher prices in the U.S. across the board, not just on Canadian lumber; it allows the U.S. lumber industry to charge much more—I expect a continued call.

By the same token, though, recognizing the challenges, we have seen a call for more diversification of the U.S. market to look to other countries. We are seeing that, which is obviously dangerous for Canada as well. They're being realistic, much like we in Canada need to be realistic about diversifying how we handle our lumber industry, add more value and create more opportunities to export, because the challenge will continue.

To the point earlier that this has been going on for a long time, yes, it has been, and it will probably go on into the future. Hopefully, we'll get that trade settlement. The next time it comes to renegotiating, it will probably be back to the same business, so the more we can do to solidify our own situation, the better, moving forward.

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

Thank you.

We know that softwood lumber from Canada and Quebec is essential for the United States. This is particularly important for their construction projects and to avoid skyrocketing costs, at a time when, as we know, many Americans are unable to access home ownership or housing.

I would be curious to know one thing, on the Canadian side. Here, in housing construction, what is the ratio of local lumber versus imported lumber?

[Kevin Lee]

I don't have those statistics close at hand. We could definitely look for them. Derek might know a bit as well.

Do you have them, off the top of your head?

[Derek Nighbor]

I don't, but it's mostly Canadian. We saw a bit of a surge of EU lumber coming in a little while ago, but the large majority is Canadian lumber.

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

How can we further explain the negative link between the tariffs and your building projects?

We understand the principle: when our industry is in trouble, it has an impact on your industry. However, one might think that this problem is mainly external, related to the United States.

Could you expand on that link?

[Kevin Lee]

The thing about the lumber industry in North America is that it's a North American market. Despite the fact that we have these tariffs and everything else—or as a result of the tariffs—it really is a North American market, so our prices fluctuate accordingly. We saw that through COVID. When there was so much demand, both north and south of the border, lumber prices went way up.

When we look to the future, the biggest danger here would actually be a Canadian lumber industry that suffers so much that we see a shrinking of the Canadian lumber industry, and then when things pick up, we don't have the capacity in our own lumber industry to supply Canada properly and the opportunities south of the border.

That's why it's so critical that we help our lumber industry survive. We expect that we're going to come out of our current state and we expect to start building more houses. If the mills have shut down and aren't capable of reopening, that's a huge issue for Canadian housing, for Canadian homebuilding and for Canadian house prices looking ahead.

[The Chair, Liberal, Judy Sgro]

You have 30 seconds.

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

We'll try to do that in 30 seconds.

I'm just trying to understand something, Mr. Nighbor.

We're having trouble exporting lumber because of these tariffs, but our hardware stores are selling American lumber. Can you explain why, in 30 seconds?

[Derek Nighbor]

The majority is Canadian lumber being sold. I can get the numbers for you off-line.

We run the risk, as we start losing capacity, about the opportunity to provide for ourselves in out years, which would be a shame, given the bounty of our forest resources and our commitment to sustainable management.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Desjarlais, you have six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Madam Chair.

Thank you for the very good statements made by the witnesses today—Mr. Lee, Mr. Nighbor and Ms. Payne.

It's good to see you in particular, Ms. Payne. I know that you have often been a champion for workers and for industrial strategy, which is something that New Democrats have been consistent on for decades, as a matter of fact. We deeply believe in this history we have in Canada where we have companies.... I come from Alberta, where we have a lot of these kinds of companies that are taking the raw resource and then exporting that raw resource. Albertans rightfully ask why we don't have our own refineries. Why not have our own manufacturing in order to make certain that we not only sell raw materials to other markets, but also sell those raw materials to Canadians with value added? I think that's something we deeply believe in.

When we think about gasoline, for example, the majority of that comes from the United States, if you weren't aware of that. Mr. Nighbor, you come from the west. You know that. We have these massive exports of our goods, and then we import them at a premium to Canadians.

Ms. Payne, you talk about this value-added industrial strategy that would, hopefully, meet management and labour, unite them toward a united position and put them on the same page, as you say, toward a common goal that would hopefully have the max benefit not just for Canadian industry and Canadian union jobs, but also for Canadians. It's a deep matter of affordability. It's a deep matter of planning our industries accordingly. It's something that Canadians need to do in a world and an environment that's hyper protectionist.

My first question, which is a basic one that I would like each of you to give an opinion on, is on this more recent change. In the last 40 years, we've largely benefited from free trade around the globe and in North America in particular. Now we're witnessing this very unfortunate reality where protectionism, particularly American protectionism, is becoming deeply ingrained in their political culture. We've seen that with Democrats just recently raising the tariff rate, for example, on softwood lumber to 14%. That was Democrats who did that. Now we're seeing Republicans, who are supposed to be champions of free trade, come in with the most historic and extreme version of protectionism we've ever seen, which is 25% on all goods.

This is extreme. This is a very disappointing position for us to be in, but I really take exception and benefit from Ms. Payne's remarks about the opportunity that's present. It's the opportunity to look at our industries here in Canada and to look at what our needs are. It's the opportunity to retool and save our industries.

Mr. Nighbor, you have mills. I've spoken to some workers in your riding, in particular on Vancouver Island. Two mills in particular are in deep water. They're in a tough situation. They've done a lot of things right. They've made certain that their workers are protected. They've made certain that these rural, northern communities actually have a chance, but what's not working for them is the fact that every market they try to get to is blocking them. We need to find ways to create security for them here at home.

My colleague Gord Johns, who's a fantastic advocate for you in particular and also for your industry and for many of the industries in British Columbia, speaks to us about the importance of a biomass tax credit in particular, which could soften the blow on biomass products.

Mr. Nighbor, can you speak to the importance of that and why a biomass tax credit today would be critical to ensuring that some of these businesses can keep their products, but also have an advantage for those products in the market?

[Derek Nighbor]

Yes, I appreciate the question.

When the U.S. Inflation Reduction Act came out a couple of years ago, one of the responses to that—we know we can't go dollar for dollar in tax credits with the U.S.—for our sector was an investment tax credit for heat and electricity generation and the use of biomass. We're still waiting. It's been over two years. That's just to deal with the IRA impacts, which we're two years in on, not to mention all these other diversifications. Let's move up the value chain. I'll say that the value chain is great. It's important, but you need a stable, solid primary industry to be able to grow up the value chain, and right now we don't have that.

I don't think you're going to get any opposition in our industry about the opportunity to do more and add value here in Canada, but we're in a fundamental position now where the primary industry is unstable and we have to stabilize the industry. We can walk and chew gum at the same time, but we have to stabilize where we're at right now.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

In many ways—I don't mean to be facetious—deep roots are required here for our industry in order to make sure it's stable, so that by the time we can reap the benefits of that immense labour and good production, we actually see the max benefit.

Ms. Payne, I'd like to speak to you about the importance of ensuring that we have workers represented in the discussion, at the forefront of the discussion and at the centre of all of this work. Canadian labour is really what's most important here, in my mind. You mentioned some of the risks that were related to some of the companies and how they're managing this risk. They're offshoring their domestic revenue to their American bases, which isn't very good for workers here. It's not good for jobs here. It's not good for Canadian affordability here.

Why is it so important to make sure that workers here in Canada are at the forefront and centre of any plan that would unify us toward our negotiation position with the United States for these tariffs and others?

[The Chair, Liberal, Judy Sgro]

Give a very brief response.

[Lana Payne]

We need to make workers central to all of these discussions. These are their jobs and their communities, after all, that are at risk.

I do believe that if we focus on developing industrial strategies in the climate that we're in, we're going to be much more resilient in Canada. Our economy will be much more resilient, and so will those sectors in which we do this great work. We need more industrial strategies now.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Martel, go ahead for five minutes, please.

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

Thank you, Madam Chair.

Thank you to the witnesses for being here.

Mr. Lee, I have a question for you.

Canadian softwood lumber producers who are directly affected by these tariffs can raise their prices to offset export losses.

How does that affect housing affordability, especially for low-income people who want to buy a home?

[Kevin Lee]

Certainly, fluctuations in lumber price affect everybody. Those at the lower end of the affordability spectrum tend to be impacted more, of course.

The strange thing about the way the situation could work is that, in some cases, tariffs might end up lowering prices initially in Canada because of lack of demand. The problem then becomes having to shut down mills just to balance the supply-demand equation, and then prices will stabilize or start to go up. Then, hopefully, at some point, we're looking to increase housing supply, and then there's more pressure on lumber prices in Canada and they go up even further.

It's a very tricky and precarious position that we're currently in, and it affects everybody on the spectrum. It affects the lower-income Canadians. It affects anybody looking to move up. It affects those looking to provide affordable housing and social housing, because their costs go up exactly the same way. It's definitely a big challenge.

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

Mr. Lee, the government says it wants to make housing affordability a priority, but it is failing to resolve critical issues like softwood lumber. Do you believe these contradictions undermine industry confidence in federal policies?

[Kevin Lee]

Definitely there's the good and the bad when it comes to policy at all levels of government.

Right now, we look at the lumber dispute that's been ongoing, and it's challenging. There's no question it's challenging. When we have a new election, I'm sure it will be at the top of the list, no matter who's in power next, to be pursuing this. We really need all hands on deck, but as we've heard from everybody, it's complicated.

On the housing policy front at large, we need all three levels of government playing their parts to increase housing supply and to address affordability. Could we do more? Of course we can. Are there are more policy levers that we need to make use of? Of course there are.

We appreciate the attention to the subject, and we expect a lot more to be done moving forward.

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

If the tariff situation remains unchanged, what long-term effects could it have on the building industry in Canada and on that sector's workers?

[Kevin Lee]

Again, that depends a lot on how the lumber industry reacts to the situation. There's no question that we're a wood-based homebuilding industry. We rely heavily on Canadian lumber. I don't have the statistics exactly, but I know that, as Derek alluded to, we have really high numbers in terms of Canadian lumber. The impacts on affordability and access to housing are going to be very much a function of how well the industry can survive and can balance the equation in terms of supply and demand. The types of supports to keep our industry moving forward are going to be absolutely critical.

If things don't go well—to answer your question—and if mills start shutting down and everything, that would be disastrous for Canada in the long term. We would become, ironically, reliant on importing lumber, which seems unthinkable in this country. However, there comes a point where that could be a greater possibility. Our supply and the percentage of Canadian lumber in houses would go down, which would be catastrophic for all.