Natural Resources Committee on Dec. 12th, 2011

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

It was interesting when you were talking earlier about how the Canadian industry had responded under pressure by becoming more interested in the whole bioenergy aspect of forestry by going to China. What occurred to me when you were talking about that was if our companies—the Canadian industry—are taking steps to be more competitive, quite naturally other countries and our competitors are going to be dynamic as well.

So with that in mind, what do you see that we as a government can do to assist you in keeping these edges? Our competitors are going to look and see what you've done, going into China, and think that if the Canadians can move that much into China, why can't they? If the Canadians can do stuff with bioenergy, why can't they?

So how do we keep being at the leading edge of those areas that industry has identified? Is there anything we can do, or just cheer you along?

[Avrim Lazar]

First of all, the majority of the responsibility has to rest with the industry to do it. Yes, you can extend the programs in which you're speeding up transformation, replenish the IFIT program, which is just about empty now, with another $300 million, extend the funding for R and D, extend the funding for environmental reputation, extend the funding for market development.... Just don't take your foot off the accelerator for transformation.

The government cannot buy this transformation and it cannot make us transform, but you can accelerate it with these programs, and again, we understand that you may have to cut stuff. We're saying if you're going to have to cut stuff, cut stuff that supports the status quo. Don't touch the programs that support transformation.

In fact, we go one step further to say expand the programs for transformation at the expense of programs that support the status quo.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Again, the fascination with your expansion into the Chinese market made me also wonder if there are other markets out there that Canadian lumber has not necessarily looked at before.

Let me ask this. Is the industry identifying or thinking of other places to go? If the answer to that is yes, are they merely technological and cultural issues that are preventing going forward? Or are there trade issues that the government could be involved in? For that matter, are there technical, cultural issues that the government could help the industry overcome as far as expanding to more markets?

[Avrim Lazar]

Good question. Just one correction. We all talk, and I do it, about exporting lumber. Our biggest export is always pulp. We export tons of pulp. We export more pulp to China than we do lumber, more pulp and paper to India than we do lumber. So let's not forget—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

So whenever I said lumber, include lumber and pulp.

[Avrim Lazar]

Yes, and me too, because I've been saying lumber as well. But it's good to remember that those markets are hugely important for the pulp and paper industry as well.

The next big one is India. We're already the largest exporter from Canada to India, but we haven't even begun to tap its potential. It's a paper-using country. There's such a big population that we can sell a lot more wood as well: construction wood, wood for bookshelves, wood for interiors. There's huge wood potential, but there is enormous pulp and paper potential. So India is the next one.

We've been working hard at Korea. And anywhere in the emerging economies where there's an emerging middle class, we think we have a big market opportunity.

Now, on the trade side...signing free trade agreements, working on the Asia-Pacific thing the Prime Minister announced, working on a trade deal with India.... Even on Europe, there are trade barriers into Europe, which, if we get the Canada-Europe free trade deal, will help.

So those démarches—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

You're saying all of our major trade initiatives—India, the EU, Korea, etc.—would help your industry if we were able to successfully engage.

[Avrim Lazar]

Yes, and sometimes it's a very small barrier, but there's one mill that would stay operating. There was one mill making cement bags that couldn't get into Egypt because of a trade barrier. By removing that trade barrier, that mill keeps going. So even though it's a small percentage of the economy, it's a whole town.

[Catherine Cobden]

And I think it's obvious, but I'll just add as well that we're just at the tip of the iceberg of the opportunity in China. So it's quite critical that the work that has been going on there continue. Of course, working with the Chinese, one of our main lessons has been the criticality of the government-to-government relationship and how that is a really important interface for us and a role that you do play.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost.

Mr. Gravelle, you have up to five minutes.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Chair, and thank you to the witnesses for being here today.

I'm glad you mentioned that the mayors, the union, and the communities need our help, so we would really like to hear from these people.

Just a couple of months ago I had a mill operator come into my office in Sturgeon Falls. He was telling me a story about having to lay off his employees. This is a mill that was run first by his father and now by him. It's been running for decades and they've never laid off anybody. But now they've had to lay off their workers because of the black liquor subsidies that the American companies are getting. He had a whole slew of clients in Quebec, but because of the black liquor subsidies, they are now buying their lumber in Maine.

There are a lot of Goulard Lumbers in northern Ontario and in Canada. I'd like to know if your association represents them.

[Avrim Lazar]

For the most part we represent the integrated companies. We have a few single sawmills, but not many. The reason for that is that they find it easier to be represented by their provincial associations. In all our representations to Parliament, we consult with the provincial associations, and we have their full support.

[Claude Gravelle, NDP, Nickel Belt, ON]

Okay. In other words, you represent the bigger companies.

[Avrim Lazar]

That's correct.

[Claude Gravelle, NDP, Nickel Belt, ON]

So you wouldn't be representing the Goulard Lumber mills?

[Avrim Lazar]

We represent some of them directly; we certainly represent their interests.

[Claude Gravelle, NDP, Nickel Belt, ON]

Okay. Of everything that has been said here today, what can specifically help a company like Goulard Lumber or many little companies in northern Ontario?

[Avrim Lazar]

Goulard Lumber and all the little companies depend upon access to the U.S. market, even if they don't sell directly to the U.S. If we don't have access to the U.S. market, then all the big companies are going to flood the Canadian market. They are dependent on keeping the softwood lumber agreement, even if they think their market is in Canada. If the other lumber companies can't get into the U.S., it's going to depress prices in Canada. They depend on selling their chips to the pulp industry. The money that is spent on transforming the pulp industry and its ability to not be dependent on fossil fuels and become more self-sufficient, both economically and environmentally, creates a client for the chips from the lumber industry.

I can go on, but the truth is that while you may be independently owned, you don't get to live independently because the industry is actually integrated.

[Claude Gravelle, NDP, Nickel Belt, ON]

In northern Ontario, since 2006, we've lost 34,500 jobs. That's over 40% of the workers.

Global Sticks, near North Bay, is shut down. Resolute Forest Products in Thunder Bay had a five-week layoff on November 24. There are some imminent layoffs in Terrace Bay. The list could go on.

When this happens in small communities that are dependent on one industry, it's devastating to the local economy. It's not like there are other jobs to go to. The U.S. government provided over $6 billion in IRS refunds without conditions to its forest companies in black liquor subsidies. These companies use the subsidies to lower prices, undercutting Canadian barrels by as much as $10. Through its pulp and paper green transformation program Canada has provided $1 billion, with investment conditions, for its own companies.

Wouldn't you agree that this is an insufficient response to very damaging U.S. measures?

[Avrim Lazar]

I certainly would much prefer to get $6 billion, and if not $6 billion, then $4 billion, or $3 billion, or $2 billion.

As I've said many times, we're not going to be anything but respectful of $1 billion well spent, but we're also not going to pretend that it's sufficient compared to what our competitors are getting.

[Claude Gravelle, NDP, Nickel Belt, ON]

So you're satisfied with the $1 billion?

[Avrim Lazar]

That's not what I said.

[Claude Gravelle, NDP, Nickel Belt, ON]

That's what I heard.

[Avrim Lazar]

Well, let me say it again.

We'd much prefer to get far more, and it is not sufficient to allow us to compete with what our American competitors are getting. You didn't even mention what the Europeans are getting, which is also very generous.

So yes, we would like more.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gravelle.

Ms. Ambler.