International Trade Committee on June 12th, 2023

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

This would appear, to me, to be something that has to be resolved on a government-to-government basis.

Would you agree with me on that?

[Jason Krips]

We would like to see, at the highest levels, the administration on both sides lean in to ensure we have functioning panel processes. We fought long and hard through the NAFTA negotiations, and now through CUSMA, to get these panel processes. We would like to see those processes held in a way that is impartial, functioning and running in good faith.

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

This isn't just, “We're not going to negotiate.” We hear this all the time. Am I right? We tried. We raised it, but they're not interested in negotiating. This is actually, it seems to me, a myriad of tactics to prevent a decision from being made entirely, or to delay that as long as possible.

Would you agree with my assessment of that?

[Jason Krips]

I would argue that we believe—I believe—that the processes have not been adhered to in good faith. These processes were negotiated by both sides, both the United States and Canada, to ensure we had functioning panels so that when disputes came up under CUSMA or softwood lumber, we'd have fair and impartial panels. I would argue that—

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

The Americans appear to be ragging the puck, to use a hockey analogy.

[Jason Krips]

That's a great analogy to use, yes. I say that as an Edmonton Oilers fan.

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

The only way to stop them from doing that would be for the Canadian government to find a way to stop them from doing that. Would that also be correct?

[Jason Krips]

We believe that we need pressure at the highest levels of government to ensure we have properly operating panel processes.

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

The failure of any movement on these panels, on the issue with panels or on an actual agreement itself, would be a failure of the government to get the U.S. to move on these issues, would it not? There's no one else who can do it.

[Jason Krips]

We believe that Global Affairs Canada...we believe that Minister Ng has really pushed this hard. She has pushed it, as I understand it, in every meeting she's had with her counterpart. We believe that this has been raised by Prime Minister Trudeau to President Biden. We'd just say that we need to have increased engagement, so that we have highly functioning panels.

[The Chair, Liberal, Judy Sgro]

I'm sorry, Mr. Seeback. You have 15 seconds.

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

Quickly, Mr. Kennedy, what should we do differently?

[Jason Krips]

Well, in terms of being done differently, we just need to continue to push hard to ensure the U.S. is following in good faith these panel processes, getting proper appointments in place and getting the hearings happening concurrently.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Virani, you have six minutes, please.

[Arif Virani, Liberal, Parkdale—High Park, ON]

I'll pick it up there, because this is something.... You're probably all aware that we just had a trade trip to Washington, and we were pretty unified in a team Canada approach in terms of addressing various irritants. The lack of robust mechanisms under CUSMA or the WTO is a pet issue of mine that I've raised repeatedly.

Mr. Kennedy, what Mr. Seeback was trying to ask you is what we should be doing differently to make sure this is on the utmost priority level for the U.S. administration, because it has been and is raised repeatedly by Mary Ng with Katherine Tai, and it was raised with President Biden when he was here in March. It's not for lack of effort, but in terms of creative suggestions, it's over to you, Mr. Kennedy, in terms of what should be done differently.

[Trevor Kennedy]

There's no doubt that this is a serious challenge. We understand that a range of stakeholders and political leaders have attempted to move this conversation forward over the past several years.

In terms of new ideas, it is important to also work with some of the folks who can put pressure on the administration internally. When there are members of Congress, leading senators, who express support for a softwood lumber negotiation, those could be key allies for Canada to help push this forward. Of course, they still have a difficult time in making the case with the administration, but we see those folks as possible allies.

There are industry groups as well. Many people in politics and policy are focused on affordability, and one can frame this in the context of improving affordability. The senators who weighed in last year made that case around home affordability.

I think we all acknowledge that there has been a lot of effort put into this over the past several years to help get us to a point where we can negotiate a softwood lumber agreement, but we would appreciate a renewed effort. Anywhere we can be helpful and other associations can be helpful, I think we'd be happy to support the government's initiative.

[Arif Virani, Liberal, Parkdale—High Park, ON]

I'll stay with you, Mr. Kennedy, because you mentioned something about the WTO appellate body. Others raised it as well, but can you tell me, strategically, if you think that since there seems to be some appetite.... Indeed, the U.S. has made a commitment to have that appellate body functioning by 2024. Would one approach be to do it seriatim, to try to address the WTO mechanism, to get it up and running in a way that the Americans can agree to, to say, “Look, here's an example of things that can actually work,” and then to turn to the CUSMA panel? Should it be approached incrementally to get them on the same page we're on?

[Trevor Kennedy]

That's an excellent question.

Because we have a number of cases through different venues with NAFTA, CUSMA and the WTO, maybe it's more broadly on the issue of the WTO appellate body that we were very much encouraged to see the United States, through other WTO parties, agree to restore functionality. I think we still have some way to go to get to that point in time, but we see that as an opening to restore the body.

There are U.S. stakeholders that have also been very supportive of getting to that point in time. Canada is a leader through the Ottawa Group in engaging countries toward reforming and restoring functionality to the WTO, so Canada is in an excellent position with its partners to intensify its efforts with the United States, to get us to a point such that we can restore that body. It could become a vehicle whereby we can at least address this dispute or, for the future, have a functioning dispute settlement system globally.

In terms of what an actual softwood lumber agreement would include, including if we were to drop certain cases, I don't know how that process would play out or what would be preferable to certain industry groups, but we see the restoration of the dispute settlement system at the WTO as a positive step in addressing this dispute and others.

[Arif Virani, Liberal, Parkdale—High Park, ON]

Thank you.

I'd like to turn to Nick Arkle of Gorman Bros. Lumber.

You mentioned Minister Ng's visit out to your location and understanding on the ground the challenges that high-value producers are facing.

Can you flesh that out a bit in terms of the differentiation in the work and the product that you are providing to customers as opposed to the building materials and softwood lumber that are going primarily into the construction of houses?

[Nick Arkle]

High-value products, as you point out, don't get behind drywall. This tends to be a product that is graded on visuals and feel, because it's what people are using in home finishings and renovations, products like ceilings and walls, feature walls and flooring. It would probably be used in baseboards, casings around windows, siding to houses and decking, particularly when you're looking at a product like cedar.

The way I describe high-value products is that they are margin through value, and the commodity world is a price taker. The world says how much it's going to pay for a product, and they have to produce that product at the lowest cost possible, and that's the comparative advantage to the neighbours. We see the world differently, and this is the niche that we're in. We don't mind spending another five dollars on producing a product through a very refined process if we're getting $10 or $6 more for value. It really is a margin through value.

What are the differences? An example would be our drying process, where a dimension mill doesn't need to be as exacting. They can put their lumber into a dry kiln for maybe a day or a day and a half, something like that. We'll put lumber into a dry kiln to get it dried down to the right moisture code content that isn't going to twist and warp when it ends up in a house. It could be in for five to 10 days. Then we put our products through specialized equipment to get a very fine finish. Instead of through a regular planer, as we would call them, we'll put them through moulders.

Everything is more refined than it would be for the construction dimension business.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Savard-Tremblay, you have six minutes, please.

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

Thank you, Madam Chair.

I would like to thank all of the witnesses for their presentations.

I'll put my question to the industry representatives, Mr. Krips, Mr. Arkle and Mr. Pelletier.

In 2022, we conducted a study on the relationship between Canada and the United States which included a section on softwood lumber and was the subject of a chapter in the report we wrote. The report, which was quite voluminous, recommended that the government make “returning the amounts of anti-dumping and countervailing duties collected by the United States to the producers who paid them” a priority. Have these amounts been returned to producers, or are they in the process of being returned?

[Jerome Pelletier]

Mr. Savard-Tremblay, I can answer your question. I believe you're referring to the duties that are paid on lumber shipments to the United States. Can you confirm that this is indeed the case?

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

Yes, I'm talking about the anti-dumping and countervailing duties imposed by the United States.

[Jerome Pelletier]

The countervailing duties have not been redistributed to Canadian producers and cannot be until the committees established under the North American Free Trade Agreement, NAFTA, and the Canada-U.S.-Mexico Agreement, CUSMA, have completed their work. We referred to these issues earlier in our presentation. A number of appeals have been lodged under both agreements to clarify the countervailing duty issue. Once the appeals processes are completed and their findings confirmed, the countervailing duties can be redistributed to Canadian companies.

In the past, some or all of the countervailing duties reverted back to Canadian producers during negotiations and when there was agreement between the two countries. That's the approach we're advocating. We believe that legal proceedings are part of the process, and we must ensure that they take their course. However, we believe that this issue will be resolved during the final negotiations between Canada and the United States. We will then be able to ensure that a portion of the countervailing duties is returned to Canadian producers.