International Trade Committee on June 12th, 2023

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

There are countervailing duties, but there's also another category, namely anti-dumping duties, which have been applied punitively by the Americans. We're somewhat familiar with the usual routine, that is, the United States ends up losing in court, but in the years when the duties are applied, it really hurts us and forces us into near-bankruptcy. That's why the report recommended that these amounts be returned to the industry without delay, so as to give it some breathing room to absorb the hit.

Is what you're telling us based on discussions you've had with the government?

[Jerome Pelletier]

We have not had discussions with the government on the return of countervailing duties to Canadian companies at this time. We believe that this should be done in the context of the ongoing legal proceedings under NAFTA and CUSMA. The proceedings are behind schedule, as all the witnesses have said this morning, and are not following the timetable that was originally negotiated. There are no negotiations between the two countries.

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

During last fall's study of the Canada-U.S. relationship, which I alluded to, the Quebec Forest Industry Council encouraged the government to consult more with the provinces, but also with forestry stakeholders and other concerned partners, in order to obtain the best possible action plan to put an end to this dispute. As part of this study, Resolute Forest Products, a major company that manages a third of Quebec's forests, also asked the government to work with wood producers in Canada to ensure a good exchange of information.

Since last fall, do you feel there's been increased dialogue on this specific point? You say you haven't had any discussions about duties, but is there really a willingness to end this dispute and consult with the industry?

Since you brought it up, Mr. Pelletier, I'll let you answer first, but I'd like each witness to answer the question afterwards.

[Jerome Pelletier]

I believe there have been two roundtables with Minister Ng since last fall. There have been direct consultations with different producers, but also with different associations. We're very grateful for the time and energy the Minister is putting into the file.

Our position is that we must continue in this direction. We must even accelerate talks between the provinces and between producers within Canada to develop a negotiating strategy.

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

Madam Chair, I'll leave it to you to decide who answers in which order.

[The Chair, Liberal, Judy Sgro]

You have 11 seconds remaining in your time.

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

So we are now moving on to the next round.

[The Chair, Liberal, Judy Sgro]

Okay, exactly, thank you.

I'm sorry, Mr. Seeback was trying to get my attention.

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

I wanted to say that I just got an email that there might be bells at 12:30, so I would suggest that maybe we stop at 12:30 and do our in camera until 12:45, and then people can get to the vote as they need.

[The Chair, Liberal, Judy Sgro]

Is everybody okay with that?

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

We'll do that in camera....

[The Chair, Liberal, Judy Sgro]

Yes, but we'll stop at 12:30—

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

—go in camera, do our committee business....

[The Chair, Liberal, Judy Sgro]

Then everybody will get to the House for the vote, if that's what they want.

Okay, thank you.

Mr. Cannings for six minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

Thanks to all the witnesses for being here today.

Thanks especially to Nick Arkle for giving me a shout-out. For full disclosure, in my previous life—maybe 25 years ago—I did a couple of contracts with Gorman Bros. and met Nick then. It's been a long and happy relationship there.

I wanted to pick up on this concern about the high-value producers and how they've been disproportionately impacted.

Nick, you mentioned that in the 2006 deal, they were treated differently because of that impact. I'm just wondering if you wanted to expand on what happened then and what you would like to see with a new solution to this dispute.

[Nick Arkle]

Thank you very much.

Obviously, I'd like high-value products to be excluded and recognized as something different. What they did back then—and I believe it was something that was put into the negotiated agreement at the very end—was put in a cap on the value. They said that after a certain amount, which I believe back then was $500, there wouldn't be any extra duty paid. That was the tax back then. It was on a sliding scale, but once you hit that amount, it was....

I assume what they tried to do there was take high-value product and make it somewhat similar to construction dimension lumber as far as the way it would get treated, so that there was an equitability across the board, whereas right now—as I pointed out and as you just picked up on—today, we pay the duty on the total value of that product going across the border. We're sending something across at $1,500 for 1,000 board feet, with a lot of costs associated with that. We're paying the duty based on $1,500, whereas someone else today is paying it based on $350.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

If I understand correctly, products like glulam beams and CLT panels are excluded already. You could argue that they are higher-value products, similar to yours but maybe taken one step further in the manufacturing process.

They are excluded. Why not exclude your products, which are very different from simple two-by-fours and two-by-sixes?

[Nick Arkle]

That is correct.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I was going to ask Jeff Bromley some questions about the British Columbia situation, but it looks like he had to catch a plane.

I'll continue with you, Mr. Arkle.

Various mills in British Columbia have been closed or curtailed. I'm just wondering if you could perhaps comment on your experience.

Gorman has several mills. Which of these mills has been closed, and why? Why have they been impacted to the point that they have closed? Are they big companies that are just trimming around the edges, or are they small mills?

What are the factors that are really hurting mills in British Columbia in particular?

[Nick Arkle]

The changes to the number of mills in the province is really based on the available fibre supply.

As most of the committee members are probably aware, we had a mountain pine beetle infestation go through the province back in the 1980s, 1990s and into the 2000s. It attacked a lot of the interior lodgepole pine—which is really the staple for a large part of the interior industry. We've had forest fires associated with that as well.

There was a decision back then to harvest timber before it deteriorated to the point at which it had no value, which I believe was the right decision to make. At some point we all knew there was going to be a day of reckoning.

By law, we have to be at a sustainable level, so you're cutting only what you have in growing stock and what's in standing timber. We knew that if we were overcutting to remove the damaged timber, someday there was going to be a reduction in that supply, and that someday is today.

What you're seeing is a rebalancing of mill capacity with the available fibre supply. A lot of mills are having to make the decision to shut down completely. Some have just curtailed production.

We quite often get asked the question, “Why haven't you shut down a mill?” and I say, “We have.” Those people then look at me with great surprise and say, “No, you have all of your mills running.” I say, “No, we've gone from three shifts to two shifts in three of our primary operations. That means we have shut down one mill.” It's the equivalency.

What you're seeing in the province is a lot of equivalency as well—total mill closures and equivalency.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I have one further question on that.

For a while last year, lumber prices were very high. Mills seemed to be handling the tariff situation because prices were so high. Now, prices are lower. I assume that's impacting mills as well, and will impact them in the future. The anti-dumping tariffs will increase because of those low prices. Can you comment on that?

[Nick Arkle]

Yes, we've come off a sugar high. There's no doubt about it. Those were two of the best years the industry had experienced probably ever—certainly in recent memory. One year we hit $1,600 CAD—$1,000 USD—for dimensional lumber. Then we came down to the lofty low of $1,400 the following year. We all started to think that maybe this was the new norm. Well, we should have known better. We're back to 20-year averaging again.

That's a bit of a shock to the system, but I think it was sort of expected. It means that we're still trying to balance our delivered log costs and operating costs with what the market is prepared to pay at the other end. That's the struggle today.

Having said that, we needed those two years, because we had just come off about five years of not much better than breaking even or heavy losses. It was—

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir. I'm sorry to interrupt.

Mr. Carrie, you have five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I, too, wanted to ask questions of Mr. Bromley in regard to jobs, jobs at risk and job losses, but I think I'll shift over to Mr. Kennedy.

You mentioned six million jobs in Canada, small businesses, and that we require certainty in the industry. Without certainty, we really can't make plans; we can't make investments, and the future isn't as clear.

I remember, when we were first in government in 2006, that we were faced with making an agreement with the Harper government, and I remember Mr. Emerson. We were successful. It wasn't a perfect agreement, but it did give certainty.

Fast forward to 2015, and one of the first things we had on our plate was the original TPP, and Canada walked away from that. It was Mr. Obama's deal, and my understanding is that there was a lot of upset in the United States when we walked away from that.

To give him credit, Mr. Obama appointed Michael Froman, I believe his name was, and we had Madam Freeland. In March 2016, he instructed them to come back within 100 days, so that this would be resolved. I think you're aware that it failed.

We had another administration, the Trump administration, with CUSMA, and we had a great opportunity to get something solidified there. Nothing happened. Now, with Mr. Biden just here a short period ago, we had an opportunity to get it resolved.

It has to be a priority. It has to be a negotiated settlement. Mr. Seeback talked to the panel here today about this idea of a special envoy, and I really didn't get a clear response.

I was just curious. Are you and your members in favour of a special envoy? Mr. MacNaughton's name was brought up because it seems what's going on isn't really working. We're not getting that certainty that you say is so important.

Could you comment on that a little more clearly?

[Trevor Kennedy]

Absolutely, we would be supportive of having an individual or individuals leading the effort to fundamentally get U.S. policy-makers on board with a negotiation. It is important, and that seems to be where we're struggling at the moment. Having somebody who's familiar with policy-making in the United States stakeholder community, who can really drive this for Canada, would be beneficial, whether that's Mr. MacNaughton, another senior former official or somebody with experience in the industry.

We need to find a way to move this discussion forward. Unfortunately, the administration has not considered this to be a priority at this time, so we should consider many options, including working with other members. I know there are suggestions to work with the provinces and other stakeholders in Canada, but anything we can do through our networks to help drive this forward as well....