Thanks to all of you for inviting us. I know that after a long hard session, and with Christmas being, what, 20 to 30 minutes away...? Holding an extra special meeting at the end of the day is an act of generosity on your part, so we really appreciate it.
Canada's forest industry, especially all the workers across the country and the communities that depend upon the industry, appreciates it when parliamentarians show their concern for the industry. Certainly when I travel around the country and meet with the various communities, that's one of the questions I'm almost always asked: does anyone in Ottawa care about us?
Wherever I go, I can very happily say yes, there are many MPs, on both sides of the House, who really care about the industry. The opposition is asking questions and the government is trying to present initiatives to help us, so the industry is on the mind of parliamentarians, and that means a lot to the industry.
As many of you will know, we are now 2% of Canada's GDP. We account for 240,000 direct jobs. You can at least double that, maybe more, if you count the indirect jobs. It's employment for an awful lot of people. We sustain the economic backbone of 200 communities across the country. This is good news, but it's also difficult, because when the industry takes a downturn, those 200 communities suffer very deeply.
Many of you who represent forest industry communities will know that when a mill closes, it's not just a loss of a few jobs. It's the loss of the economic foundation, the economic backbone, of a whole community. The taxi driver has no business. The lunch counter has no business. The cleaning service has no business. The grocery store finds that no one's coming in. You can't go and work for your cousin because he doesn't have a job.
These one-industry towns suffer very, very deeply when a mill closes, and over the last several years the industry has had a difficult time. We've lost many jobs. Many mills have closed. During this time we were tempted to think that we were suffering through a perfect storm: a high Canadian dollar, the collapse of the U.S. housing market, a low demand for paper, and high competition from elsewhere. But as we began to go through these very difficult waters, it became obvious that maybe this is not a storm; maybe this is a changed climate. If you're sailing through a terrible storm, the right thing to do is to batten the hatches, hold on tight, have great fortitude and patience, and clear sailing is going to come. But if it's a changed climate, if it's a structural rather than a cyclical change, then holding on tight just isn't enough; holding on tight just means you're going to sink.
So what you have to do is gird your loins, look through the storm, and ask, “How has the world changed and how do we have to change what we're doing to be able to survive?”
Now, it's true that some things will get better. The demand for wood will return and the Americans will eventually start building houses again. I'd like to say that I know when the global economy will find its feet again, but apparently none of us knows that.
But it's also true that some things are going to stay difficult for us. We are going to have competitors growing trees in South America, where the conditions are better. The global demand for paper may go up, but the North American demand is going to continue to fall. As well, the Canadian dollar is likely to stay high.
Also, as in many industries, the conditions for success are hugely demanding. Pretending that we're suffering from a cycle or a bad time, as opposed to understanding that we have to respond to a changed circumstance that will be permanent.... That is absolutely necessary. When I was sitting in on these meetings trying to discuss what to do, it was very hard for many of the CEOs leading the companies to get beyond the tough times and the survival strategies, but the industry pulled itself together, both at the company level and all the way across.
We set ourselves four objectives for restructuring, transforming, and setting new sales levels so that the industry would be able to survive past these times.
The first challenge that we set for ourselves was to increase productivity. Of course, this is nothing new. In a commodity business you have to become more productive. For us, it was do or die. Those companies that could not quickly improve productivity simply shut down. We now have labour productivity that is 20% higher than the Canadian average. Our wood sector is one of the only sectors that is outperforming its U.S. counterparts.
The second thing we said we had to do was to become more diversified in our markets. We knocked on China's door and we knocked on India's door—we even went to our competitors—and we started selling newsprint into Brazil, lumber into China, and pulp into India. We've become Canada's most successful exporter. No one exports more to India or China than Canada's forest industry does. Since 2000, our exports to China have gone up 46 times. I was almost about to say 46%, but it's 4,600%. This was not a casual thing. This was a huge effort.
In addition to becoming more productive and learning how to export more aggressively outside the U.S., we also realized that we had to extract more value from every tree. If the Brazilians could go into their backyard and harvest a tree that they had just grown in seven years, and we had to lumber halfway across the wilderness—to harvest a tree and take it across Canada's muskeg and then process it—we needed to extract more value from every tree. We started to experiment with the extraction of bioenergy, bioplastics, and biofuels so there would be zero waste. Every single bit of the tree would be used, whether it's the chips, lumber, sawdust, or bark. We have, through R and D work and through experiments and new innovations, begun to become not just the pulp, paper, and lumber industry, but the pulp, paper, lumber, energy, bioplastics, and biopharmaceuticals industry. In other words, we have joined the bioeconomy.
With increased productivity, diversified exports, and more value extracted from every tree, the last thing we had to do was secure the western front. For us, the western front meant the constant attacks by the environmentalists. We had a bad brand in terms of environmental practices. We've been doing our work. We have more certified forests than any other place in the world does. We've improved our forest practices and reduced our greenhouse gases by more than seven times the Kyoto target—though I guess that target doesn't matter anymore.
We've gone to almost 60% renewable energy in our mills. But we were not getting the credit we deserved. What we did was something totally radical. It has never been done before in Canada or anywhere in the world on this scale. We said to the environmental groups, “Do you guys want to do business?” There are 21 companies—big, multinational companies—and nine radical environmental groups, including Greenpeace and ForestEthics, and the Canadian Parks and Wilderness Society. We all signed the boreal agreement, forming a partnership for preserving the jobs in the forest, and at the same time preserving ecosystem values.
These four paths—making productivity jumps, diversifying our market, extracting more value, and changing the game in terms of environmental reputation—made up our survival strategy. We're not just talking about it; we're well on the way to doing it. We need to continue to do many of these things.
That's about us. What about you? What about government? Faced with the same circumstances, governments have three choices. You have constituents, and you have communities suffering mightily. You'll hear some of my members, some of the unions, and a lot of the mayors saying, “Jump in and save us. We need you, government. You saved the car manufacturers. You have to save us, too.” And the temptation would be to try to subsidize, to support the status quo, to stop the bleeding, to stop the mills from closing. That's a lot of what you will have heard.
A second possible response would be to say this is a free market; the best thing we can do for these businesses, the best thing we can do for these towns, is let the marketplace prevail. The trouble with that response is that other governments aren't doing it. The United States, the South American governments—especially Brazil—Europe, and even China are investing heavily in their industry. So to say this is a free market would be to pretend that other governments are working within a free market. This would doom Canada's forest industry, because we could not compete with foreign governments.
So choice one was to subsidize the status quo; choice two, laissez-faire. The third choice was to develop a creative approach to supporting the industry, an approach grounded in transformation as opposed to the status quo, an approach whose objective is to accelerate the industry's adaptation and change process rather than to support the industry while it holds on tight. If this were a cyclical change, if this were a storm instead of a changed climate, I would have been here lobbying for support to get us through the storm. But because we knew it was a structural shift, that the climate wasn't going to come back nice and friendly but was going to stay fiercely competitive, what we came in and lobbied for was help to change the ship, to change our approach, to transform the industry under the four headings I've just shared with you.
To be fair to the government, that's exactly how they responded—with investments in R and D that helped us extract more value from every tree, investments in exports that helped us export to China and India, investments in bringing new technology to market readiness, and investments in helping us with our environmental reputation.
To be fair to the reality in which we work, the number of investments, while significant, are not as much as many of our competitors have gotten in other countries. So our basic message is that government is doing the right thing, but this is no time to slow it down, especially now when the economy is, let's say, on delicate feet. The question that all parliamentarians have to be wrestling with is whether this is a time to simply control the deficit or whether this is a time for massive stimulus. Where is the balance between these two?
Our advice, our recommendation, is modest stimulus. But make it very smart stimulus. Don't just throw money at problems. Invest it strategically. Our view is that the most strategic investment lies in focusing on those things that transform the industry, things that support the change, such as export development, R and D, environmental reputation, and green transformation.
That's what we're hoping to see from the next budget. More important, this is what we're hoping to see over many years. We're hoping the government will join us in understanding the long-term dynamics of transformation and play its part in supporting the industry's change of process.
I could go on for a very long time, but I won't.
