Madam Speaker, I rise today to bring to the attention of the House a trade irritant that has cost the Canadian softwood lumber industry $700 million per year. This amount does not include the numerous other industries related to softwood lumber as well as the Canadian Christmas tree market. I am referring to the non-tariff trade barrier imposed by the European Union on Canadian softwood lumber.
This trade barrier is disguised as a plant protection measure. I am speaking of the kiln drying that the European Union imposes on all softwood lumber being imported from Canada.
First let me give a summary of the pinewood nematode. The presence of the pinewood nematode in North American prompted the European Plant Protection Organization to assess the risk of transmission from North America to Europe via the lumber and the wood chip pathway of pinewood nematode.
Assessments by the European Plant Protection Organization identified the pinewood nematode as a quarantine test and recommended kiln drying as the only accepted quarantine measure. This was based on the belief that lumber, with only pinewood nematode and no insect vector, posed a risk of transmission by other carriers. The United Kingdom did not support this conclusion and continued to allow imports of green material under a visual grub hole program which eliminated the insect carrier.
Other member states continued to accept lumber with only freedom of bark and still allowed the presence of grub holes. With trade harmonization of the European community, all member states began to focus on the plant health risks of the pinewood nematode.
The first regulation enforcing kiln drying as the only acceptable plant health measure was imposed in 1989. Canada did not support the kiln drying as a plant health measure since kiln drying is a commercial mark and is based solely upon moisture content. Canada maintained that moisture content was not the element which eradicated the parasite but that heat was the important element. A Canada-European Union joint research program was started in 1990. Canada invested $800,000 to determine that 56° centigrade for 30 minutes was the temperature that pinewood nematode dies.
In 1993 the European Union required all coniferous lumber except cedar to be heat treated to 56° centigrade for 30 minutes. Cedar was exempted based on survey information of non-incidence of pinewood nematode in cedar trees. This information was supplied to the European Union by the Plant Health Committee of Canada.
In April 1993 the European Union extended the regulation for visual inspection to eliminate grub holes by four months. However this was revoked in June when live larvae were found in the United Kingdom in green Canadian imports certified to be free of grub holes.
The loss of the program for visual inspection of grub holes resulted in a $400 million loss in trade since all green coniferous lumber destined for the European Union, except for cedar, had to be heat treated. To this day Canada continues to maintain that heat treatment is unduly trade restrictive based on the actual risk. Canada and the U.S. have disagreed with the European Union on a number of scientific arguments related to the risks of pinewood nematode in the forest of Europe.
In September 1993 the governments of the European Union, Canada and the U.S.A. convened an international panel of experts from China, Japan, Europe and North America. The discrepancies between the conclusions of these experts and the earlier 1998 meeting were the result of extensive scientific research conducted between 1988 and 1993.
The first discrepancy was that the European Plant Protection Organization assumed the moderate risk of pine wilt disease north of the 20°C mean summer isotherm and concluded that pine wilt could possibly occur in northern Europe if certain conditions prevailed. The ultimate conclusion was that northern Europe was not at risk from pine wilt disease and the economic impact of pinewood nematode was restricted to southern Europe.
The second discrepancy was that the European Plant Protection Organization's 1988 assessment indicated that there had been interceptions of pinewood nematode into the European Union. In fact pine wood nematode was intercepted on one shipment out of 630 surveyed.
The survey was designed to survey the worse case scenario. Therefore the survey results had no statistical validity. In order to determine a statistically valid incidence level Canada surveyed its export lumber between July and December 1993. In those six months no pinewood nematode was found in 1,157 random samples. This translate into a 99.7% reliability level. Canadian lumber is free of pinewood nematode. The conclusion was that pinewood nematode is rarely, if ever, found in Canadian lumber exports.
The third discrepancy was that the European Plant Protection Organization's 1988 assessments concluded that nematodes were capable of active, independent movement and could leave the wood which they inhabit to move to adjoining or nearby wood.
The European Union, Canada, U.S.A. and international experts met and concluded that the research demonstrating this was inconclusive. In the experts' view there was no supportive evidence of natural transmission without the carrier except through root grafting.
The European Union technical team therefore concluded that the risk of transmission of the nematode without the carrier was negligible, meaning not worth considering. The conclusion was that the pinewood nematode could not move independently and that the insect carrier must be present for transmission to occur. Therefore eliminating the carrier will eliminate the risk of transmission.
Since 1989 Canada has lost billions of dollars in exports and has invested millions of dollars in research to demonstrate that the presence of pinewood nematode poses a negligible risk to the European Union and any associated risk can be managed effectively through appropriate mitigating measures.
Heat treating meant that Canada lost 71% of its market share for solid wood products in the first year and the market was closed permanently to other products such as Christmas trees.
From 1993 to 1997 Canada lost 92% of its historic market share to Europe for solid wood products alone. This amounts to an excess of $700 million in trade. Millions of additional dollars of lost trade are incurred through eliminating the potential exports of other valued forest products.
This brings us to 1997. In September 1997 the Canadian forest products industry, working in co-operation with provincial governments interested in resolving this trade barrier which is disguised as a plant protection measure, agreed that the Department of International Trade should exercise its World Trade Organization options and explore a solution to dispute settlement.
This is one instance where industry and provincial governments are in full agreement that enough is enough. There have been enough studies, enough time, and enough market shares have been lost to warrant action by the federal government. To date the Minister of International Trade has not indicated his acceptance of these recommendations. Canada has not yet requested formal consultations with the European Union on this important trade irritant.
I urge the Canadian government not to give up on this critical issue. The demand for Canadian lumber is being replaced by exports from northern Europe, the Soviet Union and former satellite countries of the Soviet Union.
There are some who would argue that the American dollar has had a great effect on this situation. It has certainly allowed the American market to replace our traditional European market. This has been further assisted by the results of the American embargo on softwood lumber, which did not apply to Atlantic Canadian lumber exports.
Let us not allow ourselves to be co-opted into thinking the Canadian dollar will stay at 69 cents. No one in business and certainly no country can afford to lose market share.
There is still a demand for softwood lumber in Europe. Heat treating rather than kiln drying should be the least that we accept from the European Plant Protection Organization. Plus it has never been proven that Christmas trees are carriers for pinewood nematode transfer and should not be part of the embargo.
If our lumber, wood chips, round wood, pulp and Christmas trees could possibly introduce pinewood nematode to Europe, obviously after 500 years of trade to Europe it is there now. If this is the case it would be a cross-border pest and not applicable to a European plant protection embargo.
It is time that the Government of Canada stood up for the loss of a $700 million industry and called the European Union to task. At best, this should be a minor trade irritant. Instead it is a blatant example of protectionism in a non-tariff trade barrier.
In conclusion, I urge the Parliament of Canada to study this very important issue which has a significant impact on the Canadian economy.