Thank you, Madam Chair and members of the committee, for the invitation today and the opportunity to discuss the status of and a future look at the Canadian forest sector's trade with Japan.
I appreciate the opportunity to share the time with my colleagues and give a shout-out to our colleagues at the chamber. We're a proud chamber member and appreciate the work that they do to facilitate a number of these trade missions.
I'd also like to recognize the work of the Canada Wood Group. They are a partner group of FPAC that leads our export market diversification work.
As the son and the grandson of Ottawa Valley pulp and paper workers and as the son-in-law of a former stationary engineer at the pulp mill in Smooth Rock Falls, Ontario, I'm really proud to work with our team to bring the voice of our sector and its employees and communities across its large value chain from producers of lumber to panels, engineered wood, pulp and paper and bioenergy. It's an industry in Canada that creates nearly $90 billion a year in economic activity with $37 billion in annual exports, putting it in the top four of Canada's exporting industries. Our current shipments to Japan are in the $1-billion range.
In the face of combined softwood lumber duties and section 232 tariffs currently in the 45% range, our sector's priority continues to be the elimination of section 232 tariffs and future risks thereof and getting to a durable deal on softwood. At the same time, we're leaning into the domestic market opportunity for more wood use here at home and export market diversification. There are opportunities, but they are incremental relative to the nearly $8 billion in annual softwood lumber shipments to the United States.
We've been trading in Japan for 100 years in Canadian forestry. The Canada Wood Group has been in place for 50 years. It's taken us that much time to get to $1 billion in business. It's a heavy lift, and I'm happy to talk about some of the details in a bit.
These are our priorities in Japan.
We want to defend and grow lumber share. Let's remember that Japan is not a natural build-with-wood culture, and Canada has played a leading role in introducing and accelerating the wood-building culture into Japan. Our dimension lumber now holds 65% of Japan's two-by-four market, and continued technical engagement on Japanese market standards and the platform frame system is needed to hold and grow that share.
On mass timber and advanced wood building systems, what Canada can bring aligns with Japan's housing renewal, decarbonization and seismic resilience priorities. It builds on Canada's federal-provincial reconstruction support after the 2011 Tohoku earthquake.
In the forest bioeconomy, we see an opportunity in biocarbon, biofuels and biomass, which are also emerging Japanese priorities in that decarbonization space.
There are a few barriers to note.
There is a shrinking Japanese market with growing Japanese supply. Housing starts are declining with the aging Japanese demographics, and Japanese-graded lumber is gaining share in the two-by-four segment.
European and other competitors are scaling up. We're seeing aggressive market entry across lumber, pulp and pellets from the EU into Japan.
We're seeing a tightening of standards and sustainability requirements. New Japanese sustainability and traceability rules require sustained technical engagement.
It's not just about selling more wood to Japan; we have to get in there, we have to work on the codes and the systems, we have to develop the market and then we have to demonstrate. It's really a three-step process.
There is supply-side pressure here at home in terms of declining allowable cut, federal-provincial regulatory duplication, rail and port reliability and the cost of the rail system in Canada.
Our asks and offers to meet the moment include dedicated, multi-year funding for the Canada Wood Group to build on its successes in export development; and doubling the funding of NRCan's global forest leadership program; collaborating on investment in market-entry support, spec alignment tools, testing labs and distributor networks in Japan. There are also those opportunities in Korea.
On the continued trade missions to Japan, we just had one with the B.C. and Alberta governments back in November specific to forestry.
That was a bit of a profile about us and our opportunities.
I thank you for your time and look forward to your questions.