Natural Resources Committee on Feb. 26th, 2021

[The Chair, Liberal, James Maloney]

Thanks, Mr. Patzer.

Mr. Lefebvre, you're next.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you, everyone, for being here. This has been very informative, and it's great to have the expertise you're bringing to the table as we conclude the study.

Mr. Owen, you said that you've been involved with this file since 2001. That's the year I graduated from law school, and I'm now 47 years old. It has been a long haul for you to work on that file. It's pretty much like a job for life. I'm sure you're trying it not to be, but that's the reality. What I'm getting at is that the context you provided us was very important, which is that the system they've made in the U.S., the laws they've passed and the structure they have, has made it so that the industry can sue any time it wants and stop the process.

It's extremely difficult for us as Canada, no matter what political party, to really put a structure in place so that we don't need to deal with this and you can move on to another file. For the purposes of this study, where do you think it ends, and does it? If it doesn't, how do you see this unfolding in the next five to ten years?

[Colin Barker]

Maybe I'll jump in—sorry, Mike—given that it's a bit more of a negotiations question, and in the interests of time.

[Michael Owen]

Yes, sure.

[Colin Barker]

As Mike alluded to, Canada is very keen to find a permanent solution if one can be found. The U.S. has even indicated at times what sorts of things could be done to help arrive at that, such as reforms within our system to include auctions, which both British Columbia and Quebec have adopted.

Unfortunately, when we make those changes, the U.S. is not always quick to follow through on their commitments. They indicated previously what reforms might be worthwhile and, as my colleague pointed out, the industry ultimately holds the whip hand, in that under U.S. law they have the right to bring claims unless they give up that right unilaterally—

[Paul Lefebvre, Liberal, Sudbury, ON]

They will never do so. That's the reality.

We've heard questions from both parties. What I'm trying to get at is the partisanship. I think all members of Parliament here are supportive of the work you're doing. Again, I should say that certainly from my standpoint, on the hard work and the position you're in to negotiate with either side, no matter who is in power in Canada, we are all supportive of having a softwood lumber deal with the U.S.

You've expressed to us the importance of the efforts and the non-reciprocity. Certainly, the other side is not as keen as we are because of the factions on the U.S. side that are making sure that they benefit from this uncertainty. I just want to make sure we get that on the record. I really appreciate that because it's key for this study, as we are all concerned about the lumber dispute. The reality is that it's extremely challenging regardless of the political parties involved.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Lefebvre, for stopping on time.

Mr. Simard, you have three minutes, sir. Then we have Mr. Cannings for three minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

My question could be for either Mr. Barker or Mr. Owen.

In 2006, $1 billion was left on the table. We spoke to several forestry sector entrepreneurs and major players in the sector. They told us that this was called the “run out of steam strategy.” In short, the United States was hoping that the forestry sector would run out of steam and agree to a deal.

Do any WTO provisions protect us from this type of cheap agreement, or is this done only through the negotiation process?

[Arun Alexander]

Thank you very much, honourable member. Maybe I'll begin.

It was in a previous round—you're correct—that the U.S. returned four billion dollars' worth of duties. One billion dollars was retained under the previous agreement.

In the current round, the U.S. is once again collecting duties. It would be our aim in a negotiated agreement to get all the duties back for Canadian companies. It would, of course, be part of the negotiations.

With respect to WTO aspects, maybe I'll turn it over to Mike Owen, our litigator.

[Michael Owen]

I'm sorry. I had a bit of an interruption in the feed. I know you asked about WTO aspects, but could you repeat that question so I'm clear on it?

Sorry.

[Mario Simard, Bloc, Jonquière, QC]

Do any WTO mechanisms require the United States to reimburse us for all the unfairly levied countervailing duties? Under the 2006 agreement, the United States retained $1 billion.

Is this simply a matter of negotiating or is there a legal way to collect this amount?

[Michael Owen]

Thank you for the question. I understand now.

In terms of answering that question, I think the key thing to note is yes, that relief is available. That's one of the reasons the government made sure we could get that relief under the NAFTA system and preserve that dispute settlement system under the Canada-U.S.-Mexico agreement. That refund of duties, if we were to win everything, is available under that system, and it's binding under U.S. law, because those panels stand in the place of U.S. courts. WTO relief is prospective, so while we could ultimately prevail at the WTO if the appellate body mechanism issue was resolved, that relief would be going forward as of the date of that victory.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Owen and Mr. Simard.

Mr. Cannings, you are last up today.

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

Thank you.

When I talk to forest companies in my riding and around the region—I'm sure Mr. Zimmer hears this as well—one of their main concerns in British Columbia are stumpage rates, and how stumpage rates are too high or they're out of sync with the prices being offered at the present time. Of course, when I talk to the provincial government, they say they're wary about changing that system because of the softwood lumber issue with the United States.

I'm wondering if someone here can answer this. If provinces started changing the way that they charge stumpage rates, how sensitive would that be in terms of raising the spectre of new tariffs, new actions on the part of the United States? What is that risk?

[Arun Alexander]

Thank you for that question, honourable member.

I'll ask Colin Barker to respond to that.

[Colin Barker]

I was going to pass it to Mike, but I'll try it quickly.

As I alluded to earlier, British Columbia adopted an auction system, which was partially adopted in an effort to make reforms that were hoped would reduce the potency of U.S. arguments that the B.C. system is providing a subsidy.

Mike and his team did an excellent job at the WTO to show that the B.C. system offers fair prices when compared to a reasonably comparable benchmark. That is why we were ultimately largely successful, both at the WTO and using those same arguments as part of the annual review process to have the duties cut by more than half in that first annual review.

Certainly, it's very important that the provinces are cognizant of this issue when formulating their forestry practices. Obviously, they still have broad leeway in how they do that, and we work with them to make sure we understand it fully so that we can bring the best arguments forward in our dispute settlement.

As I said, I think Mike and his team had some great success, both at the WTO and with respect to the current duty.

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

Thank you.

That's all I have, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Cannings.

Thank you, everybody.

To our witnesses, thank you very much. It's a complicated and critical topic, and thank you for your insight. It provided us with a greater understanding. Speaking for myself it certainly did, and I am sure I speak for everybody when I say that. We're grateful for your time, on a Friday afternoon especially.

Thanks to the members.

Enjoy the non-sitting week—I know everybody will be busy—and we'll see you when we get back.

Thank you.

The meeting is adjourned.