International Trade Committee on Dec. 2nd, 2024

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I call the meeting to order.

Welcome to meeting number 130 of the Standing Committee on International Trade.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, September 23, 2024, the committee is resuming its study of recent developments concerning the Canada-United States softwood lumber trade dispute—how appropriate.

We have with us today Kevin Lee, chief executive officer, Canadian Home Builders' Association; and Derek Nighbor, president and chief executive officer, Forest Products Association of Canada. By video conference, we have Lana Payne, national president of Unifor. It's nice to see you again, Ms. Payne.

Welcome to you all.

We will open with Mr. Lee, with an opening statement of up to five minutes, please.

[Kevin Lee, Chief Executive Officer, Canadian Home Builders' Association]

Thank you and good morning.

I'm happy to bring perspectives to you from the Canadian Home Builders' Association on your study.

As I'm here on behalf of the CHBA and our 8,500 member companies from coast to coast, I'll focus my remarks on how the softwood lumber dispute impacts the residential construction industry. However, of course, it doesn't impact just the industry, but also all Canadians. As you are well aware, we're in a housing crisis. In order to address this crisis, the federal government has estimated that to restore housing affordability, we need to build 5.8 million homes over the next decade, and a lot of lumber would be required to build those homes.

During the pandemic, lumber prices skyrocketed, and lumber was in short supply. While prices have come down from those record highs, they still haven't returned to prepandemic levels. Really, any volatility in the lumber industry impacts residential construction, adding costs for builders and renovators, delaying construction times and closings, and exacerbating housing affordability challenges for consumers.

According to the CHBA's housing market index, a leading indicator of the current and future health of the residential construction industry, our 2024 Q3 results show that, for a 2,400-square-foot home, lumber costs are still about $26,000 more than they were prepandemic. Meanwhile, other construction materials surged as lumber costs waned, and normal rates of inflation for building materials continue to compound the cost increases, further eroding housing affordability.

South of the border, in the U.S., price escalation on lumber has been made even worse thanks to the U.S. tariffs on Canadian lumber. Our American counterpart, the National Association of Home Builders, NAHB, continues to fight these tariffs, given their impacts on construction costs in the U.S. The NAHB continues to call on the U.S. government to suspend tariffs on Canadian lumber imports and to move immediately to enter into negotiations with Canada on a new softwood lumber agreement that will eliminate those tariffs altogether.

As the dispute lingers on, the CHBA asks that the federal government support the lumber supply chain to maximize supply security, output and delivery and, of course, seek a timely resolution to the trade dispute that serves Canada well, which, while difficult under the circumstances, is paramount.

The CHBA also asks that the government work with the domestic lumber producers to maintain, and in the future be able to ramp up, production by working with other levels of government to ensure more responsive and certain access to raw materials. We encourage continued collaboration with the lumber industry on key issues of securing certainty for sustainable lumber supply for domestic fibre.

It's also important to understand that there is a need for liquidity for the lumber industry to survive this tariff period, and there is likely a role for the federal government to play there. However, we will leave that to our lumber industry colleagues to detail, so I'm glad to see Mr. Derek Nighbor here today from FPAC.

It's also important to recognize that all industries, including lumber and home building, are facing more and more excessive red tape. There is a growing fatigue within the Canadian business climate that ever-growing amounts of red tape, regulation and bureaucracy continue to be compounded, and this frustration is causing the business environment to move capital elsewhere. With regard to lumber, it's investing in other countries. With regard to homebuilding, investors are looking at other countries with more attractive opportunities for purpose-built rentals and even condo and land development, rather than in Canada. We need those investment dollars to build the 5.8 million homes that Canada needs, and to that end, we need regulations streamlined.

With regard to homebuilding, the federal government has just launched a consultation on a proposed tax on vacant land. This concept shows a clear misunderstanding of the realities of the land development and homebuilding sector, and it is an example of inefficient regulation that could cost homeowners and homebuyers a lot of money in the future. We also need to loosen up all of the red tape restricting getting more homes built in general. There are some good moves afoot with regard to policy change, which is good, but we'll need more.

While more housing, if successful, means more use of Canadian lumber, which is good, I should also add that the move to more and more mid-rise and high-rise construction doesn't necessarily correspond to the same increase in lumber usage. While we are introducing tall wood into the building codes, we still have to find a way to make it more cost-competitive. In the absence of better cost competitiveness, we will see steel and concrete continue to dominate taller construction. We also need to clear the way for more low-rise construction, which can still be higher-density. It is primarily wood-based, and it is the type of housing most Canadians prefer.

The ongoing uncertainty between Canada and the U.S. on the softwood lumber dispute can have major impacts on lumber prices and supply here in Canada. Instability with supply and prices will impact residential construction jobs and the sector's contribution to economic activity, and it will continue to exacerbate housing affordability challenges for consumers. CHBA urges the government to continue to fight hard for a positive resolution to this dispute.

Thank you. I'd be happy to answer any questions you may have.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Nighbor, you now have up to five minutes, please.

[Derek Nighbor, President and Chief Executive Officer, Forest Products Association of Canada]

Thanks, Madam Chair.

Thank you for this opportunity. I'll say, on behalf of our sector and its people, that we do appreciate all the dialogue and efforts being made on both sides of the House. It's a really difficult time for our sector. I'm happy to talk a little bit about the landscape and then take your questions after that.

FPAC, as you know, represents Canada's wood, pulp, paper and wood bioproduct manufacturers across the country. We are a $97-billion industry that exports more than half of what it makes, directly employing some 200,000 Canadians.

I am grateful that Lana and Kevin are here today. CHBA and Unifor are two key partners and thoughtful voices for employees and the broader forest sector value chain.

Despite the increased tariffs, closed mills and jobs lost to date, make no mistake about it—this sector has a lot of promise. There's much more we can do, and many more jobs we can create. While the realities of today are sadly against the backdrop of decline and massive trade risk, it doesn't have to be this way. I view this testimony as an opportunity to get our federal government to think about us more strategically and to end the game of whack-a-mole policy development that runs counter to how forest-based economies in other countries are growing, countries like the U.S., Brazil, Finland and Sweden.

The World Bank forecasts that global timber demand will quadruple by 2050. Where do we want to get this timber from? It is driven by global population growth and the want to build towns and cities around the world with clean, renewable materials. Global demand is growing. International customers value wood products coming from Canada. Our industry should be getting bigger, not smaller, as we consider the global opportunity over the next couple of decades. We're the only building materials sector whose products grow back.

Another unique thing about our industry—I can't be here without talking about our pulp and paper industry—is that our sawmills need our pulp and paper mills. If I think about Ontario, for example, back in 2000 we had 15 pulp and paper mills. We now have three. These pulp and paper mills are a critical off-ramp for our sawmills to sell their chips and other residuals to, ensuring that every part of the harvested tree creates value.

We're not running out of trees, and yet from 2004 to 2022 we've seen nearly a 40% reduction in wood harvested in Canada—45% down in B.C., 50% down in Ontario, 38% down in Quebec and 66% down in Nova Scotia. Let's not forget that, as harvesting activity declines, it impacts forest health and resilience. There's an imperative to consider here, too, for improved public safety, a reduction in the number of community evacuations, an avoidance of declining air quality in the summer and a mitigating of the risk of more carbon emissions from fire.

Canada's national forest inventory report will show you that across Canada's boreal forest, more than 60% of the trees are now between 61 and 140 years old. These are trees and forests that are aging and approaching end of life. If harvesting volumes continue to fall, we'll face an even greater risk of catastrophic fire across the Canadian boreal forest in out years. Unfortunately, little to none of this has been considered as part of the climate and national adaptation plans of the federal government. It's a huge miss, and it's offside with how other leading forested countries are thinking.

In the Q and A, I look forward to discussing some of the big plays to address the current trade risks: getting those trade panels working and overcoming the ineffectiveness of legal challenges, which you've heard about from some of my colleagues in recent weeks; addressing the job impacts and financial burden of increasing duties; considering important regional trade plays, such as the relationship of B.C. and Alberta with California and the relationship on trade that Ontario and Quebec have with New York; working with Kevin and CHBA and others to make our sector a gateway to building more affordable homes; making Canada a global leader in mass timber manufacturing; and driving value and supporting heat and power generation by using low-grade wood.

I'll close on market diversification. In the past 20 years, Canada Wood has been the public-private partnership that has worked really well to help us diversify markets, with a big focus on Asia. I know that there's been some talk about diversification at this committee. Over the years, it's generated $15 of benefit for every single dollar spent, not to mention its support of over 14,000 jobs dependent on offshore shipments. Unfortunately, it saw its success met with a federal budget cut during last year's budget period, forcing Canada Wood to reduce its staff by 85%. Its once $12-million diversification budget is now at less than $4 million.

We have lots to discuss. We remain in the solutions space. Our employees and forest-dependent communities want action. I appreciate the committee looking at this with solutions in mind and meeting us where we're at.

I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Now we'll go to Ms. Payne.

[Lana Payne, National President, Unifor]

Thank you very much, Madam Chair.

Good morning to you and your fellow members of the Standing Committee on International Trade, members of Parliament, and, of course, my fellow presenters. I thank them for their comments this morning as well.

I'm Lana Payne. I'm the national president of Unifor.

We are Canada's largest private sector union, with more than 320,000 members across the country working in every major sector of the Canadian economy, including the forestry industry. Our 22,000 forestry sector members are spread across 10 Canadian provinces working in a variety of forestry and logging occupations, as well as wood product and pulp and paper-manufacturing facilities.

Quebec has the highest concentration of forestry membership in our union, accounting for about 55% of our overall sectoral membership, while Ontario and British Columbia account for 22% and 14% respectively. Of course, we have very important mills and operations in Atlantic Canada and the Prairies.

I'd like to remind the committee that, while the softwood lumber dispute poses a clear and present danger, Canada's forest sector continues to experience a perfect storm of repeated and intersecting crises. A combination of economic, environmental and global challenges continues to destabilize the broader forestry sector.

Forest fires were less destructive this year but still very bad. Important conservation efforts continue to complicate long-term planning for the sector. Volatile and flat prices are still making companies rethink their investments, and new EU regulations could negatively impact the ability of Canadian forest products to be sold in that market and around the world. All these crises have been disastrous for forestry workers, their families and their communities.

The recent doubling of combined tariff duty rates and the looming threat of further incoming increases are a devastating blow to Canada's forestry sector. We fear that we will see workplace closures as a result of these continued increases. This is without contemplating the additional 25% across-the-board tariff threatened by President-elect Trump, which, if imposed, would cause major problems in the sector. I think we all know this.

Forest sector stakeholders in Canada have not always formed a united front on this issue. This is particularly true of some of the forest companies themselves. For example, we are deeply concerned to see some Canadian forest companies divert investments into their U.S. operations while pulling up stakes here in Canada and abandoning their Canadian operations. However, it's important to recognize that playing the blame game won't help forestry workers and their families or the hundreds of communities across our country that rely on forestry for their survival.

The fundamental challenge we face is the overwhelming imbalance of power in our trade relationship with the United States. No amount of finger-pointing or blame shifting here in Canada will change the fact that the U.S. controls all the chips in this dispute at the moment, but certainly not all hope is lost. I agree with Derek on this.

Despite the increase in output by U.S. softwood producers, U.S. lumber companies still don't have enough capacity to meet all of that country's lumber needs. The U.S. homebuilding industry, as you've heard, still needs Canadian softwood, and these punishing tariffs are driving up construction costs and making home ownership less affordable for working Americans. We have allies in our fight, and we have reasonable arguments to be made in our favour.

It is critical that our elected leaders, governments across the country, forest workers and their unions, and other forestry stakeholders come together and focus on finding solutions to this unfortunate and unnecessary dispute.

I would like to close my comments on a note of hope and optimism, which are in short supply these days in the forestry sector discussions. The softwood lumber dispute drives home the simple fact that Canada's forestry sector is overreliant on first-order raw resource extraction. We have an incredible opportunity to promote, support and invest in higher-level production, where we can create value-added forest products and systems right here in Canada. Innovative products and systems like engineered wood products, mass timber frame construction, modular components and biofuels represent an incredible opportunity to grow the sector, create new forestry jobs and increase economic development and productivity. What we need is a coordinated, comprehensive and inclusive industrial strategy to help transform our forestry sector—an ambitious and bold redevelopment strategy, if you will.

This will require a whole-sector, team approach involving governments at all levels, forest companies, industry groups, indigenous communities, academics and experts, forestry schools and, of course, forestry workers, their unions and their local communities. This transformation will not only mean better jobs, more sustainable forests and more responsible economic development. It will also better insulate us from the ongoing threat of continued softwood tariffs.

Thank you very much. I welcome all of your questions.

[The Chair, Liberal, Judy Sgro]

Thank you to the witnesses.

We're moving on to Mr. Seeback for six minutes.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Thank you very much, Madam Chair. It's nice to be back at the international trade committee after a brief hiatus.

What's interesting to me is that we did a study on softwood lumber when I was on this committee over a year ago. That updated a study from a few years before on softwood lumber, which updated a study from a few years before that on softwood lumber. Despite all of this, there's been zero progress on resolving the softwood lumber dispute. This has real consequences. It's had real consequences for workers—as you mentioned, Ms. Payne—and their families.

I'm wondering if you have any thoughts about what the benefit to workers would be if the dispute were resolved and the $9 billion in tariffs returned to companies, which could invest in the bold redevelopment strategy you just talked about.

[Lana Payne]

Obviously, because of these other crises across the sector, adding tariffs on top of that—the new ones we just received, the potential 25% tariff the president-elect is talking about and, by the way, potentially another 15% next year.... The sector cannot carry on with these kinds of duties and tariffs looming over its head. I would say to you that, because of a whole bunch of factors—softwood being one of them—we have businesses, right now, that are on the brink. They have to reconsider whether they can make investments. That's the scary part.

To your point, if there was an additional $9 billion back in the sector, it would certainly help us maintain and sustain many of the businesses that are out there today employing a lot of Unifor members, thousands of them, all across this country.

In addition to that, I think that, as you mentioned, we have to look to the long term regarding how to have a coordinated development strategy for the sector going into the future. That's critical, too, so that we're not looking at this in a piecemeal way but rather planning it in a much more consistent fashion. This will benefit workers and the communities in which they live.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

Ms. Payne, I'm sure you're aware that the softwood lumber industry combined has called on the government to appoint a special envoy to try to negotiate a resolution on this. During the last study, we discovered, shockingly, that this request for a special envoy to be appointed by the Department of Industry sat on the minister's desk for 15 months without any kind of response.

In a committee report from 2023, there was a recommendation accepted by this committee and put to the government for the Government of Canada to appoint an official softwood lumber emissary to engage with the United States, in order to enhance Canada's efforts. It was designed to encourage the U.S. administration to negotiate a resolution to the current softwood lumber dispute. That was a year ago—plus the 15 months before that, when it just sat in limbo. Here we are today with no resolution.

Are you surprised at all by the government's lack of action on this recommendation of the committee, which has led to some of the challenges we're seeing?

[Lana Payne]

I think there are a lot of challenges right now in terms of trying to negotiate a settlement with the U.S. That was true of the past year and the past number of years. It's certainly going to be true going forward. Any and all efforts that can be put in place to try to negotiate something are important.

However, I also believe there is a role for us to play in Canada. When I say “us”, I mean the entire forestry industry and the unions that represent workers across the sector. We need to have a common approach. It's very difficult, I would say, for a government envoy to negotiate an agreement that benefits Canada if we can't get the industry on the same page. That has been part of the challenge.

Therefore, I think anything this committee and the government can do to help the industry reach a consensus on where a negotiating standpoint should come from would be helpful for getting this resolved. What I'm saying is that it's on all of us.

[Kyle Seeback, Conservative, Dufferin—Caledon, ON]

You mentioned in your opening statement a “bold redevelopment strategy”, not just for wood harvesting but for the industry as a whole. I'm sure you've conveyed your desire for that strategy to the government. Have you had any real response from the government? Are you seeing any action from the government on the “bold redevelopment strategy” that would benefit companies, workers and workers' families?

[Lana Payne]

We have been actually saying this about a number of key industries. We've been very front and centre on the auto industry, on the aerospace industry and on the energy industry. We have workers in every sector, forestry being one of the most important ones, and we've been promoting with all levels of government the need for a coordinated industrial strategy. That means the federal government working with provincial governments so that we can get there.

I would like to see a lot more progress than we've made on this front. There's a lot of work to be done, but we can't stop pushing here. There are hundreds of rural communities, particularly, in our country that depend on all of us right now to be able to get to a place where the industry can survive and thrive going into the future, and this means good union jobs for workers from one coast to the other.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Miao, go ahead for six minutes, please.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Madam Chair.

Thank you to all the witnesses for being here today.

I'd like to ask my first question of Mr. Lee.

The softwood lumber dispute has been an ongoing issue for over 25 years, and the WTO has typically favoured Canada's position. Would you agree that it has been a challenge for whichever government has been in negotiations?

[Kevin Lee]

Yes, I think it's been a non-stop play/repeat kind of thing every time the negotiations have come to the fore. The international tribunals seem to always favour Canada's position, yet the United States continues to do what it does. It's a big challenge, and it's not new.

[Wilson Miao, Liberal, Richmond Centre, BC]

What do you suggest would be helpful to Canadian officials in potential negotiations?

[Kevin Lee]

I do think that the team Canada approach is very important, and it's very difficult, in our federated model. I remember a few years ago we were strategizing with our American colleagues at NAHB, and they mentioned that one of the challenges is having the different provinces look to negotiate their own deals while also trying to negotiate a national deal. Bringing together a team Canada is hugely important. I think also making sure it's a good deal for Canada at this stage is hugely important, not only in the short term but in the long term.

Lastly, I would say, as you've heard from other witnesses, we really need to figure out what we can do to be less reliant on raw materials going to the States and find competitive ways to create a stronger industry here in Canada that supplies Canada, supplies the States and also looks to other markets around the world that are going to need more lumber products as well.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Would any of our other witnesses want to chime in on this? What about you, Mr. Nighbor?

[Derek Nighbor]

I agree with everything Kevin has said.

[Wilson Miao, Liberal, Richmond Centre, BC]

That's great.

Earlier, in your opening remarks, you talked about our housing crisis. I'd like to talk about the housing accelerator fund, which is a $4-billion investment and is expected to lead to the construction of over 750,000 new homes in Canada over the next decade.

Do you believe, for an association like yours, that the HAF would be a good investment in addressing the current housing crisis?

[Kevin Lee]

The most important thing about the accelerator fund is the way it's going after municipal processes and delays in zoning and all of those things. While the funds were sort of directed to municipalities to use in ways that they would choose, including for affordable housing and the like, the biggest problems we're seeing in getting more housing built are around municipal delays, development charges, permitting challenges, zoning—all of these things.

It's really important that we continue to use all the levers we have at the federal and provincial levels to ensure that municipalities do all they can to enable more housing to be built.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Next, I'd like to ask a question of Mr. Nighbor.

What do you believe the main challenge is in resolving the current lumber dispute? What do you believe an agreement with the U.S. that would benefit the Canadian softwood lumber industry should look like?

[Derek Nighbor]

Yes, I'll say that there's a lot of talk about getting a deal done, but it has to be the right deal for Canada, and that's the challenge here.

The other challenge here is that the folks on the other side of the border know how tough it is in Canada right now, and any time you're trying to negotiate and you know the other side is having a bit of a tough time.... That's a very difficult position to be in. I feel that for our mills, for our employees and for those communities.

I think we have to look at two tracks. I like what Lana was talking about. We have the here and now, the immediate. As you heard from other witnesses from the sector, we have some mills—especially the smaller, medium-sized mills and a lot of family-owned mills—that are really near the edge of the cliff right now. What can we do to help them? I hesitate to go into a lot of detail publicly about negotiating, because that's problematic as well. All I'll say is that I believe Global Affairs knows well the sensitivities there and the looming liquidity crisis that is before a lot of our mills in this country right now if this continues.

The other thing I'm worried about, in the longer term, depending on where the Trump tariffs go, is that our industry is very reliant on a strong U.S. homebuilding network to drive our businesses. We are expecting, getting into next year, that things will start to look better in terms of U.S. housing starts, but if we have broad-based inflation again in the U.S. over the next couple of years because of big tariffs, that's going to delay it, because those housing starts are not going to be where we think they need to be.

Those are a couple of the things we're watching.

The other thing, I would say—Lana talked about it—is market diversification, the promise of the forest bioeconomy: mass timber, government procurement and reinvesting in export market diversification. These are all.... We need to do the here-and-now piece, but we also need to do the piece for the medium term and the long term to sustain and grow our sector for tomorrow.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you.

Can you speak to the work that our government has done with the softwood lumber industry to develop a strong, unified Canadian negotiation position? How has this been vital to our engagement with the U.S.?