Natural Resources Committee on June 22nd, 2006

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Welcome. Thank you for your presentation.

As you are aware, Mr. Martel, I represent a Quebec riding that has a lot of mills situated close to the border. These mills are smaller than those of companies like Tembec or others.

During the softwood lumber dispute, which lasted too long, these people slipped back compared with the Europeans, the Chileans and the Americans. Please correct me if I am mistaken.

I would like to know the Forest Products Association of Canada's view on this. How do you see the situation? In Canada, we always prided ourselves in being the leader in the forestry sector. Does this position still belong to us or did the dispute affect us in this regard? I am talking here of the smaller mills.

I will ask you a second question later. For now, I would like an answer to that one.

[Jean-Pierre Martel]

I am not the trade specialist. My colleague might be better able to answer your question than me.

We are still the leader as far as world exports are concerned. Canada is by far the largest exporter of forestry products. We export mainly to the United States, but also to Europe and Asia.

When we are talking about softwood lumber in the United States, Canada's market share has dropped off somewhat because of the ever-growing value of the Canada dollar and because of restrictions. The other countries, that are smaller exporters, for example Chile, other South American countries and even Europe, entered the market because there were no restrictions targetting them. This nevertheless accounts for a market share that is small compared with Canada's exports. For those smaller producers who have niche markets, the impact is perhaps greater still.

My colleague is the trade specialist.

[Marta Morgan]

I do not have much to add, except that global competition in this sector, as in many others, is more intense. When producers enter our North American markets, that exerts pressure on the prices. Often, this pressure falls upon those producers whose costs of production are higher. That is perhaps what is happening in your riding.

[Jean-Pierre Martel]

As a matter of fact, we have a graph showing the growth of exports from other countries, for example Chile. We could show it to you.

[Marta Morgan]

One of the consequences of the problems that we encountered with the Americans in the area of softwood lumber is that the portion of the American market that is in the hands of our competitors has doubled over the last four or five year. We believe that that share is going to continue to increase if there are barriers and restrictions between our two countries. We must work together as a North American industry facing the rest of the world.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Thank you.

I understand that considerable efforts have been made over the course of the last few years. You talked of 5 billion dollars per year in research and development and 4 billion dollars for equipment upgrades.

Once again, my intervention will have a local flavour. The reality is that there are a lot of border-zone mills in the ridings of Beauce, Mégantic-L'Érable and in the Sherbrooke region. The people there tell me that there is a serious technological transfer problem. I understand that your statistics cover the entire industry.

What might the industry do in this particular case? What is it expecting from the government? Clearly, if what is being asked for are major investments... These people have told me that they do not want subsidies, but rather support. What could that be translated into in order for us to be on the same wave-length here?

[Jean-Pierre Martel]

I will answer your fellow citizens' questions at the same time I answer yours.

First of all, we devote 500 million dollars per year to research and development. We would very much like it to be 5 billion dollars, but...

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I too found that to be a little on the high side.

[Jean-Pierre Martel]

We therefore devote 500 million dollars to research and development, which is considerable. There is research and technological transfer at the provincial and federal government levels.

As for mills and wood products, Mr. Farrell alluded earlier to Forintec, a former federal institute that was privatized and that has created a real partnership with the industry, the provinces and the federal government. Forintec has a very advanced research program. As a matter of fact, its research centre is in Quebec City. It also has a very developed technological transfer program. As well, it helps mills evaluate their productivity and identify improvements to be made.

At present, therefore, the mills have access to some expertise to help them improve their productivity and identify the products they should be making. However, they must be members of Forintec. I believe there is some cost associated with that.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I now have a more general question for you. I found what Ms. Morgan mentioned most interesting. I would like to have more details.

You talk about a policy framework, in other words friendlier rules in order to attract investment. First of all, do I have the right understanding of your statement? Secondly, what are you looking for, concretely?

[Marta Morgan]

We are really looking for a sectoral strategy for the industry. This would involve several components, including improvements to the incentives...

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

The incentives.

[Marta Morgan]

... for investment. We have proposed a tax credit for investment that could help to reduce marginal taxes on investment and align them with those of our colleagues in other natural resource-based sectors.

Furthermore, we are proposing that the competition policy be applied in recognition of the fact that our companies must compete on world markets and not on Canadian or local markets.

We have made recommendations so as to ensure greater competition in rail transportation. We have also made recommendations with regard to research and development, in order to foster the development of technologies that will truly be those of tomorrow, and not simply in view of reducing today's costs. We also hope to develop new products and new processes in order for Canada to be at the cutting-edge of technology in this area.

We have included, in our information package, a summary of the situation of the industry as well as more detailed recommendations. You will find that at the end. If you would like to have more information, we will be pleased to supply this to you.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Thank you.

Thank you, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Monsieur Paradis.

Monsieur St. Amand.

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Chair.

I have just a couple of questions of Mr. Bettle, if I may.

I will sound a little flippant here, but it would appear that trees are meeting their own one tonne challenge. I have no idea how long a tree lasts, the average tree. What is that based on?

[Mark Bettle]

A tree here in Canada takes probably 40 or 45 years to grow. We have done a study on a particular type of tree, and a tree, over the course of that lifetime, would consume probably between one tonne and one and a half tonnes of carbon dioxide, that it will suck out of the air during its lifetime.

[Lloyd St. Amand, Liberal, Brant, ON]

That's over 40 or 45 years, then. It's impressive that your company has planted, over 50 years, some 750 million trees--more or less 15 million per year. Where are the trees planted principally, from the provincial perspective--more in some provinces than others?

[Mark Bettle]

That's mostly in New Brunswick. Most of our land holdings are in New Brunswick. I couldn't tell you the particular districts and how it's separated out, but it's principally in New Brunswick.

[Lloyd St. Amand, Liberal, Brant, ON]

You mentioned that your company is a net grower--that's my phrasing, which is clumsy, maybe, but it's a net grower of trees. You conceded that you are in the tree-cutting business as well. What is the actual ratio? Is it two trees to one, or 10% more grown than cut?

[Mark Bettle]

I couldn't really tell you. I know it fluctuates over time. One floor down from me, there's a group of guys who do all that kind of stuff, and I get most of my information from one or two of them. But the way we look at it is basically just overlaying, in each district, planting plans that go out for 20 or 30 years and also harvesting plans that go out over that period of time, and we have to submit those both on our land and on crown land that we manage. If you overlay those two, the net is that we're planting more than we're cutting.

It varies. Frankly, I don't know what the ratio would be.

[Lloyd St. Amand, Liberal, Brant, ON]

If I may, to anyone, with respect to the aboriginal communities, as I understand it from the presentation, virtually every aboriginal community in Canada lives in the designated green belt. Is that correct?

[Mark Bettle]

Some are in the south as well, but many live in forested regions, for sure.

[Lloyd St. Amand, Liberal, Brant, ON]

All right. However many, then, live within the forested region, what are the particular challenges that can be overcome to engage aboriginal communities more in your industry? Is that a question that is capable of being answered?

[Jean-Pierre Martel]

I will try to answer, and Mark may add part of the answer as well.

As a forester, globally in Canada we plant something like 500 million, but by law, every hectare of forest harvested needs to be regenerated, either through plantation or through natural regeneration.

What I mean by natural regeneration is working with Mother Nature. Mother Nature is pretty good. In many cases, as you harvest, there are seedlings and saplings that are ready to grow as well. If you harvest properly, you will basically protect those species. There are also more seeds coming in, and more trees that come in naturally. So it is probably 50% plantation and 50% natural regeneration, but you need to meet some standards, say in terms of number of seedlings per hectare and also in the way they spread through that hectare.

You can have all of them in clumps in one corner. That isn't what you want. You want them to spread throughout that area as well. So we need to meet some of those standards. Obviously standards vary from one province to another, because forest management, by law, is a provincial jurisdiction.

Going back to your very interesting question about aboriginal issues, as an industry, basically we've been a partner in terms of development. We recognize as well that first nations have socio-cultural activities in their region where we do practise forestry. Once again, it varies in terms of consultation and ongoing discussion. In some cases, joint ventures have been developed.

As an industry, we do recognize that if you look at land claims issues and rights, it's very much between the federal government and the provincial governments. As an industry, we are in between, and our role is to maintain the moral high ground and really try to look at economic development and social development and develop partnerships, in some cases, and have proper consultation.

Do we have a proper recipe? I don't think so. There are a lot of things being tested out there, and various consultations. There is an excellent example of proper consultation, joint venture, and actually, in terms of employment, we believe that in the industry a significant part of the employment is with first nations as well. I think we are one of the largest employers of first nations, as an industry, as a sector.