Natural Resources Committee on Feb. 26th, 2021

[Mario Simard, Bloc, Jonquière, QC]

I was told that most applications were rejected by Global Affairs Canada. We can verify your response.

What seems contentious is that, even if the company is engaged in secondary and tertiary wood processing, as long as it also engages in primary wood processing, Global Affairs Canada refuses to allow CED to support this type of company.

Is this statement correct?

[Arun Alexander]

I don't know the specifics of the example you're giving. What I can say is that as long as our funding mechanisms are consistent with our international trade obligations, Canada is able to, and will, provide funding to the softwood lumber sector.

It's difficult for me to address specific examples without knowing the background.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Simard.

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

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

My main question that I want answered is this business of, as Katherine Tai, who is going to be the new trade representative in the United States, said, these issues seem to go back to the beginning of time.

Are there any examples out there in international trade agreements, with Canada or not, that offer a way for us to stop this treadmill of constant softwood lumber disagreements? I wonder if there's a way to put in language something that says what Canada does, the stumpage system we use and the public land ownership we have, is okay, some language that says the United States cannot bring these actions forward if that system remains the same. We need something to stop this whole cycle of dispute.

I don't know who might want to try to answer that.

[Arun Alexander]

Thank you, honourable member. Perhaps I will begin, and then I might turn to my colleagues to add to my response.

I understand your point that it seems as though there has been an interminable cycle of lumber disputes with the United States. I think softwood lumber one goes back to the early 1980s and we're now in the fifth iteration. I've been involved, and I know Michael Owen has been involved, at least since the early days of softwood lumber six. It is a difficult issue.

What I can say is that, in negotiations, Canada is always open and willing to enter into discussions and negotiations with the United States for any agreement that is fair to our industry and which will bring benefits to our industry, our workers and our communities.

In negotiating such an agreement, we would put everything on the table, including the possibility of recognizing Canada's stumpage system, which as you say is based on public lands, as a key priority. We would like to end these interminable softwood lumber disputes as well, so anything we can do to resolve this issue on a longer term basis is a key priority for the government.

Maybe I'll ask my colleague, Mike Owen, the lead litigator, to add to this.

[Michael Owen, Acting General Counsel and Executive Director, Softwood Lumber Litigation Division, Department of Foreign Affairs, Trade and Development]

Sure. Thank you, Arun.

It's a great question. It's something that the department has thought about over numerous cycles of softwood lumber, since I've been involved in the file, since 2001.

I can tell you that it's very difficult, what we're doing here, with our U.S. domestic proceedings, the countervailing duty investigations, the anti-dumping investigations that any U.S. industry has a right under U.S. law to bring.

I think one of the impediments we face in coming to a final conclusion is that the U.S. coalition, the U.S. lumber industry, has a right to sue under U.S. law. In order to even reach a softwood lumber agreement like the one we had the last time, they have to suspend that right or at least come to the table and indicate perhaps that there's going to be no injury or that they're not going to move forward with duties.

That has always been one particular difficulty in trying to reach a final solution where we wouldn't have to go back to softwood lumber six or softwood lumber seven. I don't even like thinking of that.

To answer your question, it's one of the key problems—

[The Chair, Liberal, James Maloney]

Thank you. I'm going to have to stop you there.

Mr. McLean, I believe you're next, for five minutes.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

Mr. Alexander, you raised the point here that the Japanese, you say, gave us a lot of credit for the fact that we had green types of lumber. Let me say that I don't think they're paying one cent more per million board feet because we're green. If you have different information that we're being paid more, or that we're doing more business because we're green, could you please send that me? To date, I haven't seen that.

I've also noticed that since 2008, the industry has been stagnant; that is, there is no more money being earned in the industry. Therefore, all the extra money we seem to be spending in trade agreements and everything else associated with the industry we're getting less and less return for.

Perhaps you could comment on that, please.

[Arun Alexander]

I can tell you that when I was in Japan in discussions with Japanese lumber purchasers, one of the key issues they would raise with me was the green aspect of our Canadian forestry practices. It was something they saw as very positive. If you know Japan, you know that they are very concerned about the environment and nature. They made a point of pointing out to me that Canada's green practices were a very positive aspect of our lumber industry in the decisions they made with respect to sourcing lumber.

Did I miss part of your question? I'm sorry.

[Greg McLean, Conservative, Calgary Centre, AB]

Yes. I asked you whether we're actually making any more money or if in fact it's virtue signalling without any tangible results, where we're spending more money at it and getting no results for it.

[Arun Alexander]

Sorry, but just to be clear, are you speaking about the green practices or about free trade agreements in general?

[Greg McLean, Conservative, Calgary Centre, AB]

I'm speaking about what you raised, about Japan patting us on the head because we're more green than they are.

[Arun Alexander]

I didn't say we're more green than they are. They took into account our green forestry practices when making purchasing decisions. I don't have statistics on whether they paid more for it, but I can tell you that in discussions with major forestry companies in Japan, this was an issue they spoke very positively about.

[Greg McLean, Conservative, Calgary Centre, AB]

Yet you have the minister looking at border carbon adjustments on certain countries in the world right now, including India, China, Australia, Mexico and Japan. Somehow their virtue is paying us more, in some respects. I'm a little lost on this disconnect here.

[Arun Alexander]

I'm sorry if I'm not making myself clear. I think one of the virtues or one of the considerations that Japanese lumber purchasers take into account is Canada's green forestry practices. In making their decisions, it's a positive aspect.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay. Thank you.

I'd like to go back to something the minister raised. Maybe one of the officials can talk about it.

We are currently at a state in the industry where we are getting top dollar for the product, and yet we don't have all of the mills that were closed pre-COVID back open yet. It shouldn't be just those mills that are reopened. It should be all the mills that have closed down because of this border tariff situation we have with the United States. Why hasn't that happened? Where are the jobs flowing to at this point in time, and can you please tell us why? We are at record production and record financing in this industry.

[Colin Barker]

Arun, maybe I can jump in.

[Arun Alexander]

Yes, please. Thanks.

[Colin Barker]

I think it's fair to say that all of the mills that closed due to the initial shutdowns because of the COVID-19 pandemic back in April and May have reopened. Employment is back up to pre-pandemic levels. There were shutdowns and curtailments at different mills in British Columbia. Those were largely due to fibre supply issues. It's an adjustment the industry is making to the supply of their input in British Columbia. It's unrelated to the COVID-19 pandemic or the duties. Those curtailments and shutdowns and shifts in production have not been reversed, because those decisions were taken with regard to the very specific supply issue in British Columbia.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

I have another question with regard to the actual mill closures pre-COVID. Can you tell us how many jobs were lost in Canada and if there was a correlating number of jobs gained in the United States because of those closures?

[Colin Barker]

I don't have the statistics related to the job losses in front of me, but I understand there were job losses, primarily in British Columbia, due to those fibre supply issues. The jobs were not replaced with jobs in the United States per se, because not all of those mills would have opened operations in the U.S. to compensate. Sometimes production was increased at other mills that had better access to fibre. That internal adjustment within B.C. is very much a local B.C. market condition that is, as I said, playing out.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Barker.

Thank you, Mr. McLean.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you.

[The Chair, Liberal, James Maloney]

Mr. Weiler, you are up again for five minutes.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

I'd like to get back to a question that my honourable colleague brought up earlier. I think it's a very salient point for our discussion today. This is likely a question for both Mr. Alexander and Ms. Landry. It is with respect to having effective environmental regulations and policies.

As the U.S. and the EU have mused or are starting to pursue bringing in carbon border adjustments, does your department, both from the private sector buyer's point of view for our natural resource products such as forestry but also in terms of trade policy, see it as a risk if Canada does not have effective measures in place for climate action? Does it see that as a risk that may impede market access into those countries or perhaps lead to those countries putting a tariff on those goods entering those countries?