Natural Resources Committee on March 11th, 2008

[Francis Albert]

That is a two-pronged question. Currently, neither the industry nor small woodlot owners have access to any type of funding for forestry certification. People must take that upon themselves, and they are responsible for all of the costs. There should at least be some type of tax credit for the industry and woodlot owners who would like the certification, not necessarily in order to add to the value of the product that they sell, but rather in order to be recognized at provincial, national and international levels. Many countries are looking for certified lumber or healthy practices.

The only reason that I mentioned private woodlot is because the province needs to take care of its public forest. The federal government was involved in a program to help develop private woodlots and improve the quality of their products.

The private woodlots in Quebec and New Brunswick are very productive, but the owners do not have the financial means to develop them. For example, someone who invests $1,000 in his property today will reap the benefits in 15, 20 or 30 years. It would be unthinkable to invest 100% of those amounts to increase the production of ligneous materials and improve the quality of the wood. Private woodlots used to have access to a Forest Development Program for eastern Quebec, in which the federal government participated. Unfortunately...

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

How long ago was the program cancelled?

[Francis Albert]

In 1996. I believe it represented some $30 million for eastern Quebec. I seem to remember something similar being available for the Maritime provinces as well.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Was that enough?

[Francis Albert]

It may not have been enough, but it did help to improve both the quality and the quantity of wood.

[The Chair, Conservative, Leon Benoit]

Merci.

Mr. Allen is next for up to five minutes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

I'd like to ask three quick questions. The first is to Mr. Asselin, the second is to Mr. Candline, and the third is to Mr. Scarrow.

Mr. Asselin, you say in your brief that the middle-sized companies are best able to stay afloat in times of crisis. I have an example in my riding of a company that invested and kept going. It's kind of a medium-sized company in New Brunswick.

How do you react to Mr. Lazar, the president of the Forest Products Association, when he says, do no harm, let restructuring happen, let mergers happen, and let the industry sort itself out? I think there's a balance between those two.... From a recommendation standpoint, what are your thoughts on that?

[Hugo Asselin]

You're right that there's a balance, but now it's unbalanced toward fusions and consolidations.

I always start in English.

We have to find that balance which, in my opinion, continues to elude us. I am referring to medium-sized companies. Of course, the situation isn't necessarily any better for the very small companies, since they do not have the means to cope with a long-term crisis. However, medium-sized companies can manage to stay afloat despite market fluctuations. It is easier for a medium-sized company than it would be for a large plant to turn itself around and produce another type of commodity when there is a drop in demand for a given product.

Moreover, medium-sized companies are usually closer to the community and that makes it more difficult to lay people off, since there is a chance that one will run into them at the grocery store; that does not happen with large companies whose head office is somewhere else. It can happen within the same province. I am not pointing the finger at other countries or other provinces or at anyone in particular, but with this management style, one is more removed from the employees. There are plants throughout the world, and they are opened or shut down according to market forces, without necessarily giving too much thought to the needs of the people who are affected by these fluctuations.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Candline, we've talked a lot about the Canadian dollar rising very quickly, especially in the last six or eight months. What is your comment on the period between 1998 and 2004 when the dollar was between 68¢ and 75¢? Was that an opportunity missed, or would there have been an opportunity for industry to make an investment at that time when some of them were making profits?

[William Candline]

Thanks for the question.

Certainly there was a lot of money to be made in the industry during those years when the Canadian dollar was fairly low, but I would argue that there was a fair amount of investment made during that period of time. Certainly the impact of the higher Canadian dollar today has an extreme impact on our facility. We pay for most of the raw materials that go into making our product in Canadian dollars, other than the resin that comes out of the States. But 90% of our products are sold into the States, so it certainly hurts us that way.

But I would argue that there was a fair amount of investment in the industry during that period of time.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

But basically there wasn't enough, because the Scandinavian countries clearly outpaced us during that time.

[William Candline]

Right.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

My third question is to Mr. Scarrow.

You talked about optimizing. This topic is of much interest to me because our select committee on wood supply in New Brunswick made some recommendations a few years ago on optimizing the value of every log out of the forest. Right now we're doing things like chipping some pretty high-quality things for fuel and other types of things.

Can you comment briefly on some of the best practices we could be looking at to optimize the value of each log? Is that where some of the R and D should be spent?

[Jim Scarrow]

Certainly I would agree. Our particular industry in Saskatchewan is smaller. It's conveniently located geographically near Prince Albert. We're looking at a sorting operation that would sort all of the logs coming in, take those of highest value, and assign them to that production area.

I want to quickly add that the world has clearly changed dramatically. While it was convenient for us to do north-south trade with the United States, we need to look at China and India. My story about China and tissue is that 5% of the population of China has access to tissue, and the access to tissue grows proportionately with the standard of living. Ninety-five percent of the people in China don't have access to tissue, but as their standard of living goes up they will acquire tissue for functions that we take very much for granted. They also don't have Eaton's catalogues in China.

I would add that with a population of 1.3 billion in China and 1.1 billion in India, we need to understand what they need in terms of fibre or wood products, and then redefine--from 2x4s to whatever fits in those countries.

But clearly nothing happens until somebody goes out and sells something. It's about marketing and finding new partners. It's pretty clear to me that we could start with those two nations at least.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Allen.

We'll go to the third round now and Mr. Alghabra for five minutes.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Good afternoon, everybody. Thank you very much for coming here to help us navigate through this study.

My question is for Professor Asselin. I very much enjoyed everybody's presentations, including yours. The paths to consider, or options, are very comprehensive and cover a wide range, true to your recommendation about a holistic approach.

Some of these things are more industry specific, so can you elaborate on where you think the federal government can play a significant role and help implement some of these recommendations? In general I really agree with your recommendations, but the challenge for us is how the federal government can help sustain middle-sized companies, for example, etc.

Please help us in that regard.

[Hugo Asselin]

Under some of these recommendations, the government could be the main actor, particularly in the areas of research and development funding and protected zones. This must be done in collaboration with the provinces and Parks Canada. Given the climate change knows no borders, clearly the government has to do something in that area. There has perhaps been a slowing down over the past few years, but it is not necessarily impossible to catch up. Nevertheless, there is a realization after the mountain pine beetle epidemic that climate change can affect us in unexpected ways.

The other recommendations appear to involve the industry. I think that the government's role is to assess how it can support industry through credits that will not be challenged under international agreements. I think that the area of research and development is very promising because no country can prevent us from investing in research and development. We have a right to do that.

There are many solutions, but sometimes researchers are lacking in small subsidies. I would intercede on behalf of the university. However the federal government, through the Canadian Forest Service, does excellent work. So is the industry. Furthermore, as we stated earlier, if the industry does not make a profit then it cannot invest in research. I therefore think that research subsidies would not be discouraged within international agreement frameworks.

I think that this would be the role of government. I cannot say more than that, because you are the government. Therefore you'll be the ones to see.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

You're right, but one of the reasons we are holding these hearings is that we need fresh pairs of eyes to perhaps think outside the box. That's why I find a lot of the presentations here today and on previous days shed some light on some original ideas that perhaps have not been considered, like biomass and certain marketing strategies abroad, and diversifying markets. That's a challenge for us.

You also say it is not necessarily one solution that is the right solution. I like the idea of sustaining middle-sized companies; it's just that I am struggling personally with what the federal government can do to help with that. I agree with investing in research and development, training programs for workers, and perhaps capital investment and partnership.

Go ahead, please.

[Hugo Asselin]

We could perhaps help the medium-sized companies and, to a lesser extent, the smaller companies as well. We should encourage networking and the creation of industry clusters in certain regions, so that several complementary plants would locate next to one another.

However, If an unforeseen market fluctuation were to affect one of the plants, it would not necessarily threaten all of the community' s industries. The other factories could hire some of the workers who have been laid off temporarily, which would be a great help.

For any given number of workers, a network would be much stronger than a single entity. That would be one possible solution.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you. Merci.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Alghabra.

Now to the government side, to Mr. Comuzzi, for up to five minutes.

[Joe Comuzzi, Conservative, Thunder Bay—Superior North, ON]

Thank you. I'll keep within the five minutes.

[The Chair, Conservative, Leon Benoit]

Don't make any promises you can't keep.

[Joe Comuzzi, Conservative, Thunder Bay—Superior North, ON]

That's a politician's life.

[Some hon. members]

Oh, oh!