International Trade Committee on June 12th, 2023

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

I call the meeting to order.

This is meeting number 71 of the Standing Committee on International Trade.

Today's meeting is taking place in a hybrid format pursuant to the House order of June 23, 2022; therefore, members are attending in person in the room and remotely using the Zoom application.

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Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, January 30, 2023, the committee is continuing its study of U.S. countervailing and anti-dumping duties on Canadian exports of certain softwood lumber products.

We have with us today the Alberta Forest Products Association's Jason Krips, president and chief executive officer, by video conference. We have Trevor Kennedy, vice-president of trade and international policy with the Business Council of Canada. We have Gorman Bros. Lumber and Nick Arkle, chief executive officer, by video conference. We have Jerome Pelletier, chairperson, New Brunswick Lumber Producers, by video conference. We have Jeff Bromley, chair of the United Steelworkers Union's Wood Council, by video conference.

Welcome to you all.

We will start with opening remarks and then proceed with rounds of questions.

Mr. Bromley, I understand that you have to leave shortly, so I will give you your opportunity now to ensure that your comments get on the record.

[Jeff Bromley, Chair, Wood Council, United Steelworkers Union]

Thank you, Madam Chair. I appreciate the opportunity to jump the queue, as it were, as my flight is in about 45 minutes, and I have to run.

Through you, thank you to the clerk and all members of the committee for the opportunity to join you here today.

My name is Jeff Bromley. I'd like to begin by acknowledging that my office is on the unceded territory of the Ktunaxa Nation, located in southeastern British Columbia.

I've spent 29 years in the forestry industry in the Kootenays, in southeastern B.C. I now serve as chair of the United Steelworkers Wood Council. The council is made up of 11 local unions across Canada, representing 14,000 forestry and manufacturing workers, with approximately 1,500 members in Quebec.

The United Steelworkers Union is the largest private sector union in North America, with 225,000 workers in nearly every economic sector in Canada, including 15,000 workers in the forestry industry.

To begin, I think we can all agree that when we're talking about protecting the forestry industry, we're talking about the Canadian economy, but we're also talking about the workers, their families and the communities they support, a very large majority of which are in rural Canada.

There's more, though, along with steel, aluminum and cement, wood products produced in Canada have some of the lowest carbon emissions in the world, and Canada's forest products are a net carbon sink.

As we look for ways to lower Canadian and global emissions, Canadian wood products need to be part of the equation. The Americans are already on it. The Biden administration is tying together infrastructure spending with fighting climate change and creating good union jobs. Canada should be a natural partner, but instead of becoming a bigger and bigger supplier of forestry products to the U.S., we're shipping them less and less. Competing nations out of Europe are earning larger and larger amounts of the U.S. softwood lumber market, because they aren't being hit with the huge tariffs that the U.S. puts on us.

Even though they have to ship their products across the ocean, other countries can get their products into the U.S. market for less, and they are.

For example, 10 years ago Russia exported less than 1,000 cubic metres of lumber to the U.S. By 2021, before Putin's latest invasion of Ukraine, that number jumped to over a million cubic metres a year.

Meanwhile, last year Canada had exported close to six million fewer cubic metres of lumber than we did just six years ago.

Let me put that into perspective. For every 850,000 cubic metres per year that we export or use, that equals roughly one sawmill operation. Approximately 160 workers make between $80,000 and $100,000 a year. Let me assure you that our members are not socking that money away into offshore-based bank accounts. Their money gets spent to support and grow their families, and it gets spent in their local communities.

Now, I'm not usually a defender of the employer. In fact, I'm heading into bargaining with the number one and number two largest forestry companies in the country this week. However, when markets for the softwood commodity are low, unfair duties have added an increasing percentage of cost of anywhere from 4% to 17% over the seven years of this latest U.S.-Canadian softwood lumber dispute.

The duties and the anti-dumping amounts have been set at various amounts since the expiry of the last deal in 2017, and the difference can mean the employer is staying above water or not, which means the difference between our members working or not.

I will say that when things are going well, what they are able to make gets put back into developing the Canadian industry, and the future of our industry is getting higher value from our softwood products in the form of CLT, or cross-laminated timbers, for example. It will take capital to add to the ability of these mills to produce high-value, carbon-neutral products for the future.

As for the U.S. tariff money, it goes to the American economy; it goes to the American industry, and it goes to paying American lawyers to keep defending the tariffs and jacking them up.

The U.S. softwood lumber lobby in Washington continues to say that our publicly owned Canadian forests are subsidized to our industry, but they aren't. Our industry builds the roads, decommissions the roads, plants three seedlings for every one tree harvested and, on average, pays 1.5 times the average wage and benefits of the U.S. industry.

It goes without saying that these tariffs are unfair and damaging. We know they contravene fair trade in almost all WTO decisions, but the U.S. government has missed key opportunities to scrap them. I hope that with the work of this committee, we do better next time.

With that, I thank you for your time. I look forward to your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Bromley.

Mr. Krips, you have up to five minutes, please.

[Jason Krips, President and Chief Executive Officer, Alberta Forest Products Association]

Thank you, Madam Chair. Good morning, everybody.

My name is Jason Krips, and I'm president and CEO of the Alberta Forest Products Association.

First and foremost, I'd like to recognize that I am currently in Edmonton, on Treaty 6 territory. Our members operate in Treaty 6, 7 and 8 territories. I would like to acknowledge those who came before us, as well as the Métis nations of Alberta.

The Alberta Forest Products Association is a non-profit organization that has represented the sustainable forestry industry in Alberta since 1942. We represent companies that manufacture lumber, panel board, pulp, paper and secondary manufactured wood products in Alberta. Our members range from small, local businesses to large, publicly traded corporations. Alberta's forestry industry supports over 30,000 jobs throughout the province. These are well-paying jobs in a sustainable sector, creating products that are in demand around the world.

The AFPA member companies produce over three billion board feet of softwood lumber in Alberta each year, approximately 13% of Canadian production. Well over half of our members' annual production is exported to the United States. Those exports are subject to unfair anti-dumping and countervailing duties that the United States, in this latest iteration of the decades-long softwood lumber dispute, known as Lumber V, has been imposing since 2017.

When the United States Department of Commerce made its final dumping and subsidization determinations against Canadian softwood lumber in November 2017, the affected Canadian industry, along with the federal and provincial governments, requested binational panel reviews of those determinations, as was our right under chapter 19 of NAFTA.

Decisions by these binational panels are critical to Canada's interest in the softwood lumber dispute, because they have direct force of law in the United States. They can be Canada's most effective tool for challenging the unjustified duty orders against Canadian softwood lumber, and for recouping the billions of dollars in duty deposits, currently well over $7 billion, that our members and other Canadian exporters have been forced to pay under those orders.

Given the importance of these binational panels, one of the biggest sources of frustration in Lumber V has been the conduct by the United States that has prevented the panel process from working as it should. That conduct takes three forms.

First, the United States has been exceptionally slow in nominating its panellists.

Second, when the U.S. has nominated individuals to serve on panels, those nominees have been anything but independent and impartial. Many of them have been involved in the softwood lumber dispute while serving at the Department of Commerce, or have represented the U.S. industry. The United States has repeatedly renominated candidates who have been previously opposed by Canada because of material conflicts.

Third, the United States has refused to nominate, or appoint panellists concurrently, to hear appeals from the Department of Commerce decisions in what since the 2017 final determinations are now three subsequent administrative reviews. They are AR1 for the 2017-18 period, AR2 for 2019, and AR3 for 2020. Instead, the U.S. has insisted that each panel must be appointed successively.

Largely as a result of the United States conduct, the panel hearings in the anti-dumping appeal from the 2017 final determination took place only last week, more than five and a half years since the appeal was launched. Panels still have not been composed to hear the AR1 appeals that the Canadian parties launched in December 2020, nor the AR2 or AR3 panels launched in 2021 and 2022. That backlog will likely take longer when the Department of Commerce issues its AR4 final determination later this summer.

To put these delays into perspective, the rules of procedure for binational panels, under NAFTA and its successor, the CUSMA, contemplate that the entire process, from the request of the panel review through to the panel's decision, should take approximately 10 months. When the panel process has been conducted as intended, in prior softwood lumber disputes and even in other disputes under the CUSMA, these timelines, for the most part, have been respected.

Preserving that binational panel process was a key objective for Canada in the CUSMA negotiations, and one that Canada bargained hard to achieve. When it achieved that objective, the government rightly claimed it as an important success. Unfortunately, that success has been illusory. Due to the United States' conduct, the panel process is not operating as intended, and Canada is not receiving the benefits it bargained for. As a result, our members, like sawmills across the country, have no effective recourse for the billions of dollars in unfair duties that the United States has charged them, an amount that continues to grow daily.

We recognize that officials at Global Affairs Canada have made repeated efforts over the past several years to persuade their United States counterparts to approach the composition of binational panels in the Lumber V dispute in good faith. We are extremely grateful for those efforts, but sadly they have not succeeded.

It is clear that resolving this issue will require political engagement at the highest levels. It is our strong hope that the Prime Minister will undertake that engagement with President Biden to ensure that the binational panel process functions as the parties committed to, and that, going forward, our appeals from the U.S. panel lumber duty determinations can be heard expeditiously, by fair and impartial panellists.

Thank you very much, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Krips.

Mr. Kennedy, you have up to five minutes, please.

[Trevor Kennedy, Vice-President, Trade and International Policy, Business Council of Canada]

Madam Chair and committee members, thank you for this invitation to take part in your meeting on Canada-U.S. trade issues.

The Business Council of Canada is composed of 175 chief executives and entrepreneurs from Canada’s leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses. Since our establishment more than four decades ago, the Canada-U.S. partnership has been a priority for our members. We played a critical role in supporting the development of the first free trade agreement and its expansion into NAFTA and into our new framework, the CUSMA.

Today Canada and the United States enjoy a strong, mutually beneficial trade and investment relationship. In 2022 we had a record year of exports. In the big picture, the future of bilateral trade looks bright, in large part due to the greater certainty provided by the CUSMA. Unfortunately, this certainty has not extended to the softwood lumber industry, nor to the various industries that rely on lumber inputs, such as home builders.

We believe the only workable long-term solution to provide certainty and stability for the industry would be a new softwood lumber agreement. We are disappointed that eight years after the expiration of the last softwood lumber agreement, there is no new agreement in place, nor are there active negotiations toward one. A new agreement would clearly be in Canada’s interest, but it would also be in the interest of American consumers.

We understand that there has been resistance by certain industry groups in the United States to negotiate a new deal, and as a result, this has not been a priority for the administration. However, we know that there are many supporters in the United States as well. Just last year, members of Congress called on the United States to return to the negotiating table. We were especially encouraged to see United States senators Menendez and Thune, a Democrat and a Republican respectively, call on the administration to negotiate a new deal to benefit industry and consumers, particularly to reduce home building costs and housing costs.

Following up on this initiative, the Business Council of Canada sent a letter to the government, calling on the government to work with congressional leaders as well as other supporters in the United States to build some renewed pressure toward a new deal. This is still possible. We encourage Canadian officials to intensify efforts with like-minded partners in the United States to make progress toward negotiations this year.

Securing a deal becomes more important as we approach the review and what we hope will be a smooth extension of the CUSMA in 2026. While there is still considerable support for the agreement across a range of stakeholders, we should not take this support for granted. To create the conditions for expansion, it should be a priority for Canada to reduce the number of irritants and disputes facing the trilateral trade relationship. Reaching a long-term solution for softwood lumber would certainly improve this discussion.

Another challenge in resolving this dispute has been the current state of the WTO appellate body. This concern extends well beyond softwood lumber, but this dispute demonstrates just how important this institution is for Canada. We were encouraged that at the 12th ministerial conference, the United States and other WTO members agreed to restore full functionality of the dispute settlement system by 2024. We urge Canada and its partners in the Ottawa Group to work closely with the United States this year to overcome long-standing concerns and restore this important system.

The recent expansion of buy America rules to include a broad range of construction materials further threatens to harm Canada-U.S. lumber trade. We reiterate the importance of Canada's securing a carve-in to proposed restrictions placed on government procurement.

In conclusion, we urge Canada to prioritize securing a softwood lumber agreement. The Business Council of Canada and its members stand ready to support efforts to build a more stable and prosperous Canada-U.S. relationship and a competitive North America.

Thank you for this opportunity.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Arkle, you have up to five minutes, please.

[Nick Arkle, Chief Executive Officer, Gorman Bros. Lumber]

Thank you very much, Madam Chair.

I'd like to recognize that we operate on and alongside the Okanagan Syilx and Secwépemc nations.

I'd also like to give a special welcome to Richard Cannings, who I know resides most of the year just 40 minutes south of us. It's nice to see him on the panel.

[The Chair, Liberal, Judy Sgro]

Mr. Arkle, could you turn your camera on, please? We were missing a handsome face.

There he is.

[Nick Arkle]

Good morning, and thank you for the opportunity to present to the committee.

I am Nick Arkle. I'm the chief executive officer of Gorman Bros. Lumber, based out of the Okanagan, here in British Columbia.

We are a B.C.-based, independent, family-owned and -operated company that is currently in its third generation. We have five divisions that range from what I would call very small through to mid-size, totalling just under 1,000 employees. That's before you count contractors and all others associated with the businesses.

We've operated continuously without interruption since 1951. While we have many employees, we'd still be considered small to mid-sized based on the throughput of logs that go through our mills.

We're an economic driver in each of the communities we reside in. When you add all the associated multiplier benefits, it just makes the importance even greater.

Our two largest divisions are focused on producing a variety of high-value products directed at the interior and exterior home finishing and renovation markets, with a large portion of that going to the U.S., although our products actually go to over 30 countries worldwide.

We are a member of both the BC Lumber Trade Council and the BC Council of Forest Industries, both of which I know are also making their own written submissions. I would like to point out that we fully support the positions and comments that will be identified in those briefings. We strongly believe in a pan-Canadian position regarding this dispute.

We also understand and appreciate the statutory rights of U.S. producers under U.S. trade laws, but we believe that working constructively to find and negotiate a solution to this trade dispute is really the approach we should be taking.

We're not afraid of litigation. We strongly believe, though, that our industry on both sides of the border has so much more in common than we have differences. I experience this all the time when I'm on trade trips.

We can and we should work together collectively to promote this incredible product that we all produce. There's an insatiable appetite for lumber products, and the benefit of using this product, as we all know, goes so much further than just the consumption of it.

The role of sustainable forestry and lumber use should be a major part of the climate change solution. It's not the problem. A greater use of wood across North America and within the global context should be aggressively explored—not barriers to its use. A combined North American position working together would be a far more efficient use of our combined resources than battling through ongoing trade disputes.

We'll continue to work closely with Minister Ng and her staff, with a focus on ensuring that high-value products are specifically recognized in any process or developments going forward. We appreciate the time that has been spent to date by both the minister and her staff to better understand the high-value portion of the industry and the specific impacts we face. The time the minister gave to a personal visit to our operations last year to better understand the challenges of the high-value producers was particularly appreciated.

This submission is to identify that high-value producers are disproportionately impacted due to the duty being based on the total value of the product as it crosses the border. What must not be forgotten is that high-value products require refined processes, special and targeted marketing, and customers building programs together with the producer. It comes with a very high cost. Many of the companies producing these high-value products are small to mid-sized companies that do not always have the same financial and borrowing depth of the larger producers.

Should this dispute go on for several more years, many small to mid-sized mills, especially those producing high-value products for the U.S., will be stretched beyond acceptable stress levels. Any and all delays in arriving at a settlement, whether due to delays in the administrative review processes due to the absence of appointed panellists or any other factors, could cause irreparable damage to the high-value lumber industry.

We believe high-value products need to be considered carefully going forward and receive the same level of attention as in 2006, when they were dealt with in a special fashion. This is important, especially in a dispute that is focused mainly on construction lumber.

Thank you again for this opportunity.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

Mr. Pelletier, go ahead for up to five minutes.

[Jerome Pelletier, Chairperson, New Brunswick Lumber Producers]

Thank you, Madam Chair.

My name is Jerome Pelletier. I'm the vice-president of the Sawmills Division at J.D. Irving, Limited, and also chairperson of the New Brunswick Lumber Producers, the NBLP.

I'm pleased to appear before the committee today to speak about the softwood lumber agreement and its importance to the lumber producers in the province of New Brunswick.

The New Brunswick Lumber Producers are made up of nine lumber producers in the province. We represent 95% of the softwood lumber production here in New Brunswick.

The NBLP is a key part of the New Brunswick forestry products value chain. We're the largest wood buyers for the local private woodlot owners, supporting thousands of mill employees, professional loggers, truckers and silviculture workers in all regions of the province.

We, the NBLP, are the largest supplier of wood chips, biomass and sawdust, which are all key ingredients in the manufacturing of New Brunswick's pulp, paper and wood pellets products. We also supply products to wood fencing manufacturing facilities, as well as pellet manufacturing operations all located here in New Brunswick.

There are currently 40,000 registered private and industrial woodlot owners in New Brunswick. Historically, the Government of New Brunswick's timber utilization survey reports that approximately 50% of the wood supply comes from private land. This makes New Brunswick the only Canadian province other than Nova Scotia in which such a large volume of logs come from private sources.

The New Brunswick forests are sustainability managed. In fact, New Brunswick Crown forests have a growing inventory of timber and among the lowest losses to pests and fire in Canada. The majority of the finished products produced with logs originating from the New Brunswick forests are third party certified through chain-of-custody standards like those of the Sustainable Forestry Initiative, or SFI.

New Brunswick forests fall mainly into the Acadian forest type, a natural diverse forest not only from a species perspective but also in terms of age diversity.

I think it is important for committee members to understand the significance of the forestry products sector to the New Brunswick economy. The following information comes from Statistics Canada.

New Brunswick's forestry products sector generates more economic activity than does any other industrial sector in the province of New Brunswick.

There are 900 companies operating in this forestry sector of the province, and we operate in 70% of New Brunswick's communities. In 2021, New Brunswick's forestry products sector generated the highest provincial GDP per capita in Canada, which was 56% more than the amount in the next-highest province.

The New Brunswick forestry products sector exported 2.9 billion dollars' worth of products in 2019.

In 2021, the sector directly employed 11,800 employees. When you add in indirect and induced employment, it employs over 23,000 people in the province. That is one in every 18 people in the New Brunswick workforce.

The New Brunswick forestry products sector contributed to 1.5 billion dollars' worth of employment income in 2019.

As you can see, a strong forestry sector is vital to the economy of New Brunswick. This fact leads in to the next part of my remarks, which relate directly to the importance of the softwood lumber agreement to the New Brunswick Lumber Producers.

Since the antidumping and countervailing duties were unfairly imposed by the U.S. Department of Commerce in 2017, the NBLP have paid on average a combined duty rate of almost 14%. Current cash deposits paid by the NBLP are now over $500 million Canadian.

The total amount of cash deposits paid by all Canadian producers is now at over $8 billion, making the current trade case one of the longest and most expensive in Canadian history.

The duty imposed on the NBLP significantly reduces our capacity to compete with other lumber producers located in the northeastern United States, Scandinavia and the rest of Europe.

As part of the trade dispute resolution process under the North American Free Trade Agreement and the Canada-United States-Mexico Agreement, NAFTA and CUSMA, several appeals have been filed by the New Brunswick Lumber Producers and other Canadian lumber producers. Although NAFTA and CUSMA direct that a final panel decision be made in less than one year, after more than five years no decision has been made.

We expect that the outcome of the decisions from the NAFTA and CUSMA appeals will be favourable for Canada and the NBLP. We also expect that a significant portion of the cash deposits will be refunded to the Canadian lumber producers, as well as to the NBLP.

The current trade case between Canada and the U.S. is the fifth in the last 40 years. In the last four trade cases, the softwood lumber dispute was resolved when the Canadian and U.S. governments made it a priority. For that reason, the NBLP respectfully asks the Government of Canada to, one, insist the U.S. comply with the NAFTA and CUSMA appeal procedures, with a goal of meeting all ruling deadlines, as specified in the trade agreements; two, work jointly with all parties of each province, and the lumber associations and producers, to develop a negotiation strategy; and three, encourage the United States trade representative, Katherine Tai, to enter into serious negotiations to resolve this long-standing issue.

Dear members of the international trade committee, this concludes my presentation.

Thank you very much.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

It's on to the members.

Mr. Seeback, you have six minutes.

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

Thank you very much, Madam Chair.

One thing we've heard is that industry requested that the government appoint a lead negotiator-slash-envoy to resolve the dispute. If my memory serves me correctly, the trade minister asked for a name, and Mr. MacNaughton's name was put forward. To my understanding, nothing has happened with that. I asked the minister at the committee—I think it was five times—whether she had raised appointing special envoys or negotiators to try to resolve the dispute with our U.S. counterparts, and she refused to answer the question.

I'm wondering whether any of the industry representatives have any thoughts on why she refused to answer that question.

[The Chair, Liberal, Judy Sgro]

Who are you directing that question to?

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

That was for anyone. It could be Mr. Krips, Mr. Pelletier, Mr. Kennedy or Mr. Arkle—anyone.

Does anyone have any thoughts on that?

[The Chair, Liberal, Judy Sgro]

It doesn't look as if anyone is particularly anxious to answer here.

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

I see. Okay.

I want to talk to Mr. Krips.

Mr. Krips, you're suggesting there's a failure to have these panels run properly. I think you said the Americans are not appointing non-partisan people. They're slow to nominate. Then you gave a third thing, which I didn't get all of.

Who makes these appointments? Is it the U.S. administration making these appointments?

[Jason Krips]

I will reiterate the three concerns we have with respect to the panel process.

One, as you mentioned, is that it's exceedingly slow.

Two, those who have been nominated, by and large, have been anything but independent and impartial. We've had a number of appointments in which there has been a conflict of interest. The Canadian government raised concerns around it, yet the United States continues to renominate the candidates.

The third is the fact that they're being done successively. We have a number of panel requests in, and instead of having them—

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

They're running consecutively.

[Jason Krips]

You have it. That's our third concern.

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

Who's making those decisions? This would be the President's administration. Is that correct?

[Jason Krips]

The U.S. administration is making those, in conjunction with the Department of Commerce, as I understand it.

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

This isn't being driven by some rogue senators or representatives, or by the industry itself. This is a decision being made directly by the Biden administration.

Is that correct?

[Jason Krips]

That's my understanding.