Natural Resources Committee on March 11th, 2020

[Bryan May, Liberal, Cambridge, ON]

Thank you, Mr. Chair.

I'll be very brief. I do have a couple of questions, but just a point of clarification before I get into that, only because it was brought up by my colleague Monsieur Simard making a connection between auto and forestry, using words such as “ransom” and “currency”.

I would argue, respectfully, sir, that the auto industry in Canada and the United States and the success we've seen there with regard to trade deals is directly tied to the fact that they're identical. Manufacturing, supply chain, and even sales are identical. I think we know around this table that it isn't identical in forestry; it's a vastly different system.

Can you confirm that it is a big factor at play in some of these trade disputes?

[Arun Alexander]

Maybe I'll start, and then, Mike, you could answer.

It's a very good question. The fundamental difference is the way we manage our forests. That is the key. The United States uses a private ownership system, with an auction system, while in Canada, much of the land is owned by the federal and provincial government and we give licences for timber. That is a fundamental difference in the way we manage our system, but that does not mean that we subsidize our softwood lumber industry.

[Bryan May, Liberal, Cambridge, ON]

Exactly. Thank you for that clarification.

What measures, then, can Canada take to mitigate any future protectionism in trade policy that might threaten the forest industry?

[Colin Barker]

I'll take a stab at that.

It's an important question and one that the industry has worked on for many years now, trying to find ways to lower the temperature on this dispute. Some of the meritorious initiatives that were funded out of the last settlement were aimed at trying to find some of those areas where the industry across the continent could collaborate to build the softwood lumber sector, to build demand domestically and internationally, the idea being that if they can build demand and create new products, there will be enough business for everyone and we won't have to constantly have these fights between us.

That should be a goal going forward.

[Bryan May, Liberal, Cambridge, ON]

I don't know if I have any time left. I'm not even going to look at the chair because he's going to tell me I don't.

[The Chair, Liberal, James Maloney]

It's a good idea that you don't look.

[Bryan May, Liberal, Cambridge, ON]

Very quickly, you talked about the cases that are in front of us. I know we've seen resolution for a number of cases, one with China, and two with the United States. What has been the impact of those resolutions on the Canadian forest industry?

[Arun Alexander]

Sorry, I'm not certain which cases you're referring to.

[Bryan May, Liberal, Cambridge, ON]

I tried to cut it down because I know he's going to bug me for time, but the successful result of the trade—

[The Chair, Liberal, James Maloney]

You're really out of time.

[Bryan May, Liberal, Cambridge, ON]

I'm referring specifically to the China deal on dissolving pulp, and the two with the United States, the one on supercalendered paper and the other on uncoated groundwood paper.

[Michael Owen]

Quickly, then, on uncoated groundwood paper, through the WTO submissions we made in conjunction with our provincial partners, we were able to get a “no injury” determination. That was not appealed by the U.S. industry, and as a result, there are no duties there.

On supercalendered paper, we had a successful outcome at both the WTO and the NAFTA. As a result, that provided impetus for the remaining U.S. petitioner to go into negotiations and that case was settled between the Canadian industry and the U.S. industry.

Dissolving pulp is not my file, and I don't want to give any misleading information. I'd be guessing.

[Bryan May, Liberal, Cambridge, ON]

Thank you, sir.

[The Chair, Liberal, James Maloney]

Before we stop, I just want to clarify something that Mr. Owen and Mr. Barker said.

My interpretation of some things you said is that softwood lumber agreements are unique in the trade world because the industry effectively has a veto power, whereas, if you're dealing with other trade agreements, you're dealing government to government. In this situation, if the Canadian government and the U.S. government agreed to a deal, the U.S. industry would still have to agree to it. Given that they're continuing to collect these tariffs during this period and not all of them come back, from a negotiating standpoint I don't see why they would give in. That's why we have to go through this legal process.

Is that the gist of what you were telling us?

[Michael Owen]

Yes.

[The Chair, Liberal, James Maloney]

I thought so. Okay.

All right. Thank you, gentlemen.

Thank you all very much. That was incredibly helpful.

[Eric Melillo, Conservative, Kenora, ON]

May I ask another question?

[The Chair, Liberal, James Maloney]

No, we're out of time.

We're going to have to suspend now to do some committee business for a few minutes and then start with the next panel.

We will suspend for 30 seconds and go into committee business.

[The Chair, Liberal, James Maloney]

Welcome back, everybody. Thank you.

We have our next panel of witnesses. Joining us by video conference is Mr. Maillet, vice-president, Nova Scotia, for the Atlantic Canada Opportunities Agency. With also have with us Mr. Salembier and Mr. Mitchell from the Department of Western Economic Diversification, and Ms. Brassard, deputy minister and president of Economic Development Agency of Canada for the Regions of Quebec.

Have all of you appeared before committees before?

I don't need to explain the process then. Okay, that's good.

We can jump right into the presentations. Each group will be given up to 10 minutes to deliver their remarks to be followed by questions from around the table. I'll ask for volunteers for who wants to go first.

Ms. Brassard, thank you.

[Manon Brassard, Deputy Minister and President , Economic Development Agency of Canada for the Regions of Quebec]

Thank you, Mr. Chair.

I'd also like to thank all the committee members.

The forest sector is a key economic driver in Quebec's regions. In 2018, the forest sector generated $6.6 billion in output, accounting for 1.8% of Quebec's GDP, and it employed 58,000 workers, accounting for almost 1.4% of all employment. More than 160 communities in Quebec rely on this industry.

In past years, the forest sector has been hit hard. The commercial softwood lumber disputes, the collapse of the American housing market and the significant worldwide drop on demand in newsprint have had negative impacts.

At every step of the way, Canada Economic Development for Quebec Regions, or CED, was there with temporary and targeted initiatives to support economic activity in the affected areas. Here are some examples.

Between 2009 and 2011, as part of the community adjustment fund, we entered into seven agreements with the Government of Quebec to provide short-term relief for the impacts of the economic downturn through silviculture projects and the restoration of bridges and culverts on multi-use roads.

We invested $119 million in projects that helped and maintained 8,000 jobs, all while responding to the transition and adjustment challenges faced by communities. From 2010 to 2013, the temporary initiative for the strengthening of Quebec's forest economies, of the TISQFE, allowed us to support 210 diversification and growth projects with a total of $80.5 million in contributions.

Between 2014 and 2018, the strategic initiative to combat the spruce budworm outbreak in Quebec made it possible to implement intervention measures to control the spread of this parasite to maintain forest potential and protect jobs.

CED's mandate is to support the long-term economic development of businesses and regions. As such the value-added role that we play with the forest industry is tied to support for secondary and tertiary wood processing projects. This is at the heart of our interventions.

Our strategy is based on the approach set by key industry players in the province. It is centred on leveraging innovation, modernization and diversification for long-term sector development.

At CED, one of our focus areas is projects that promote innovation and green technologies, particularly those in the bioeconomy sector. We believe that this is a growth area because of the potential value of biomass—which is abundant in our forests—makes it possible to develop and offer, once processed, a wider range of products. This has significant economic potential on the global market. Let me give you a few examples.

We have supported college centres for technology transfer, or CCTT, that process biomass for commercial purposes and are very successful with their projects. These are great success stories for us. For example, CED has supported Agrinova, a CCTT in Mashteuiatsh in Lac St-Jean that is working to revalorize forest residues through the production of biochar.

We also supported the Damabois Group, a company specializing in the manufacturing of handling pallets that wanted and needed to diversify its activities. The Damabois Group now markets energy logs made from aspen bark, one of the wood by-products that the company generates during its operations. Our contribution helped the company acquire the technology needed to put the new product into production.

In conclusion, bioproduct transformation projects, such as those related to wood pellets, are still relatively few. However, CED is well positioned to support them in their initial marketing efforts on foreign markets. As a regional economic development agency, CED's role is to support the development and diversification of enterprises and regions. To do so, CED is committed to promoting innovation to create economic prosperity. That is what we want for the future of the forestry industry.

Thank you for allowing me to speak about the important work CED does to support the communities that depend on it.

[The Chair, Liberal, James Maloney]

Thank you very much, Ms. Brassard.

Mr. Salembier, you're next.

[Gerry Salembier, Assistant Deputy Minister, British Columbia Region , Department of Western Economic Diversification]

Thank you very much, Mr. Chair, for the opportunity to speak to you here today.

My name is Gerry Salembier, and I am the assistant deputy minister for Western Economic Diversification in the province of British Columbia.

In French, it's called Diversification de l'économie de l'Ouest Canada, or DEO.

It is WD, for short, in English.

I'm going to be talking to you about the impacts that the current situation in the forest sector has, principally, on communities, what WD is doing to support those communities, and what else we think could be done.

I know you've heard from my colleagues at Natural Resources Canada about the challenges the industry and its workers are facing and that the situation is particularly acute in British Columbia. I'm not going to repeat the reasons for that; you've heard them several times. Suffice it to say that we do not see this situation as part of a normal industrial cycle.

You have heard about the impacts of all this on industry and on workers.

I will focus my remarks on the broader challenges the situation is imposing on the communities that rely on the forestry sector, which is where we see a role for WD.

The forest sector accounts for a smaller portion of overall economic activity than it once did in B.C., but it continues to be a primary economic driver for many rural and indigenous communities—and 98 communities in the province are considered economically dependent on forestry.

For those communities, it's hard to overstate the impact that the current situation is having on them. I've heard directly from many of those communities by way of a task force on mill closures, a collaboration between a group of community-based economic development organizations consisting of Community Futures organizations that receive their core operating funding from Western Diversification.

Their main point is that the impacts of the current situation extend well beyond the mill operators and the employees of those mill operators. The impacts include supply chain operators, other local businesses and community service providers. It's in addressing those broader impacts that the communities see a gap in the supports available to them.

I'd also like to note that some 10% of forest sector employees in B.C. identify as indigenous. That's considerably higher than the 6% of the provincial population that identify as indigenous. Indigenous peoples and their communities are disproportionately impacted by this situation.

What are we doing at WD?

The bulk of the supports WD provides to rural and forestry-dependent communities in B.C. is delivered by a network of community futures organizations, or CFs, that I mentioned.

There are 34 CFs serving rural communities throughout B.C., including four indigenous CFs.

WD provides them with over $10 million annually to deliver a variety of services to small business owners and entrepreneurs in rural communities.

We're working with that group on a targeted community resilience initiative, modelled on a very successful initiative that we funded and that the CFs—the community futures—delivered in response to the record severe wildfire seasons that we had in the province in 2017 and 2018. This community resilience initiative would focus on local priorities and support for communities. I can get into that in further detail if the committee is interested.

We're actively developing that project with them. We're seeking other partners to help with that, since the scale of the problem here exceeds the resources that we would have available within WD to deal with it.

I'd also like to briefly highlight our B.C. indigenous clean energy initiative. It's an initiative that provides support for indigenous communities that are working to develop clean energy options for their communities, including bioenergy projects that utilize forest biomass. That's an initiative that's funded jointly by us and the Province of B.C. It has been cited by first nations leaders involved as an example of what a nation-to-nation relationship could look like.

Beyond this, WD has also supported forestry-specific projects—often in promotion of indigenous participation in the sector.

We are also coordinating with other federal and provincial departments on the Intergovernmental Committee on Support for Forest Sector Workers and Communities that my colleague Beth MacNeil mentioned recently before your committee.

The work of that interdepartmental and federal-provincial group is quite consistent with what I'm hearing from the mill closures task force in British Columbia.

What more could we do?

We're hoping to help address some of the gap that has been identified through that community resilience initiative. As I said, the scale and the scope of the challenges are somewhat beyond what our current resourcing will allow us to do.

Outside of our core programming, from time to time in the past, we have delivered federal funding for community adjustment initiatives in the forest sector. If the committee is interested, I could get into that in more detail.

In closing, I would like to thank the committee for letting me provide my perspective on the issues at hand.

I will be glad to answer any questions that you have.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Maillet, we'll go over to you.

[Chuck Maillet, Vice-President, Nova Scotia, Atlantic Canada Opportunities Agency]

Thank you.

Mr. Chairman, committee members, good afternoon. Thank you for the invitation to appear today.

The forestry sector is an important employer and contributor to Atlantic Canada's economy. In 2019, the sector employed approximately 19,200 people. Exports from the region totalled about $2.7 billion in products last year. Nearly three-quarters, or 72%, of those products went to the United States.

The region's forestry sector is in a period of transition, as global demand for wood products shifts, environmental stewardship increases and local demand decreases.

Three major issues affected the sector in Atlantic Canada. They were the closure of the Northern Pulp mill in my home province of Nova Scotia, the impact of tariffs and fluctuating prices, and an increase of spruce budworm population levels, primarily in New Brunswick.

At the Atlantic Canada Opportunities Agency, or ACOA, our programs are helping to grow the economy, create jobs and diversify the economies of communities.

We have flexible programming to support businesses across many sectors and community development measures.

We work with companies to build export capacity, pursue added-value projects, and invest in automation and product innovation. And through research and development activities, we work with industry to support the sustainability sector.

During the past 10 years, ACOA has invested nearly $60 million in approximately 200 projects related to this sector. These projects focused on sustainable forest management, research and development, innovation and diversification related to value-added products, public awareness and skills development.

In closing, ACOA will continue to work with forestry stakeholders—including small and medium enterprises, provincial governments, Natural Resources Canada and community leaders in the region—to ensure the sector can take advantage of emerging opportunities and continue to remain vibrant, in order to create jobs and help grow our economy.

Thank you for your time today, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you.

Thank you all for being very efficient with your time.

Mr. Deltell, you're going to start us off.