That, in the opinion of this House, the principles and provisions of the Canada-U.S. Free Trade Agreement (FTA) and the North American Free Trade Agreement (NAFTA), including their dispute resolution mechanisms, should be fully applied to trade in softwood lumber, and it urges the government not to accept any negotiated settlement of the current softwood lumber dispute outside of the FTA and the NAFTA unless it guarantees free and unfettered access to the U.S. market, and includes dispute resolution mechanisms capable of overriding domestic trade measures to resolve future disputes.
Mr. Speaker, I had a question this morning relating to the last part of the motion which reads “and includes dispute resolution mechanisms capable of overriding domestic trade measures to resolve future disputes”. The intent of that was to include a dispute resolution mechanism that would override U.S. domestic trade legislation which has always been the stumbling block. The U.S. has always retained the trump card in past softwood lumber agreements.
I am pleased to be able to bring the issue to the House today as the subject of business. We all know how important the softwood lumber dispute is in terms of the economy of Canada. It is now getting the public prominence it has deserved for a long time.
The dispute is almost 12 months old. It began when the old softwood lumber agreement expired in March 2001. Forest dependent communities, workers and companies have been dealing with uncertainty about market access to the United States since that time. Everyone is focused on March 21, a week from today, because that is when the U.S. department of commerce will announce its so-called final determination on countervail tariff and anti-dumping tariff rates.
I remind Canadians that the deadline is only one of many. Nothing about March 21 is earth shattering. Earlier deadlines have included last May, last August, last December and, more recently, February 19. Is it any wonder the public and many people in the industry remain fuzzy and confused about what is going on? It is hard even for those of us who follow the issue to keep the process in its chronological order.
One thing is for sure: We are a year into it now. This is not the time to get into brinksmanship. That is where the history of the dispute goes and it is a long history. It is good to look at history to ensure we learn the lessons of the past. It is vitally important to get our forest industry back to health without compromising the long term viability of our industry through short term band aids that do long term damage.
There was more bad news today as some companies reported their financial earnings in British Columbia, our major softwood lumber producing area. B.C. contributes about half our lumber exports to the U.S. on an annual basis. Quebec is our second largest producer. Pricewaterhouse Coopers reported yesterday that total profitability of B.C.'s publicly traded forest products companies was down last year from $1.5 billion to $200 million. That is an 87% drop in profits. We did not go the whole year with punishing duties. We only went a portion of the year, as members are well aware.
This is a very significant measurement. We had some individual results from companies that were actually much worse than that. Companies have been putting aside huge cash reserves to cover potential duties. Last year was the worst year in five years. Prices for pulp and for lumber were not very good although prices for lumber this year are up considerably. We can forecast that a big part of that is due to the impact of this dispute.
We have spent five of the last six years under a softwood lumber agreement with the U.S. that was based on a quota system. We were never on a quota system before. That was negotiated by the Liberal government and imposed in 1996. The quota system carried us through to 2001, terribly distorting and very destructive particularly to independents and to people without quota and new entrants.
I watched the government defend that quota system right up until it was virtually expiring in March 2001. In the meantime we had many people trying to move the government to plan for the future. Was the government going to adopt free trade? Was it going to extend the old quota arrangement which was becoming more problematic?
There were groups on both sides of the border, the American consumer groups and the Canadian producers, all wanting the government to take a position. The government did not take a position until March 2001. That is my great frustration and my party's great frustration that we wasted all of that time.
Meanwhile the Canadian Alliance, the official opposition, was firmly fixed on promoting unfettered free trade market access to the U.S. market for softwood lumber. We had built a lot of bridges with the American consumer movement and with Canadian industry. I want to put that on the record. Although the Liberal government is currently talking the talk of free trade, it is not a great free trader in principle.
We must look at this from another perspective. We have a commitment and a responsibility and actually a vested interest as a country in supporting international organizations with effective dispute resolution mechanisms or at least dispute resolution mechanisms that work in the international arena, maybe with shortened timeframes. There are organizations like the World Trade Organization that we cannot undercut. If we go and do things that undercut the WTO we are being hypocritical.
I want us to keep that in the background here. We do have opportunities that we are pursuing as a nation through the WTO on this softwood dispute. We cannot write that off without being very considerate of whether we are damaging that organization or its ability to function in the international arena.
It is clear what the U.S. lumber lobby wants. It wants to restrict Canadian softwood lumber market access into its market. Why does it want to do that? It is very simple, the U.S. lumber lobby consists primarily of U.S. forest landowners who are also producers, but sometimes only landowners whose margin of profitability is increased if they can restrict Canadian access to their market.
Plain and simple that is the way it goes. The U.S. domestic legislation allows them to petition the government, harass the Canadian forest industry and have basically all of the rules favour their trade actions. This is nothing new. This has been going on for over 20 years and our track record as a nation is not particularly good in these softwood disputes. We buckled in 1986 and we imposed this quota system in 1996 in order to satisfy that lobby. We never took the process all the way through.
Our historical track record if we never take it all the way through encourages further harassment down the line. Softwood lumber is the largest commodity exchanged between the two countries. It is the largest commodity trade in the world and so it goes to the core of our trading relationship with the U.S. Not doing well on the lumber front would have implications for other trading relationships.
The negotiations surrounding softwood have always been cloaked in a diplomatic tug of war located in either Washington or Ottawa. The brinkmanship is incredible. Last weekend we had Canadian and U.S. positions exchanged. Ours was called a non-paper because it does not really exist although I have one here. The gulf between the two positions is quite incredible.
We have some major issues here. We have a sovereignty issue. Will we throw our provincial forest policy-making wide open to approval or not by American interests, the American lumber lobby? Are we interested in insuring that over the long term our independent mills, our small community single industry opportunities continue to exist or will we push this all into a direction where only the people with deep pockets can stay in the business?
The way our governments behave influences that very greatly. If we want a case study in all of that, members should recall what happened after the imposition of an export tax in 1986. Members should look at what happened over the ensuing four or five years and it will be very clear what will happen if we get into a punishing export tax scenario this time.
We have a clear example in British Columbia where last fall some very significant policy proposals were tabled, things that it thought would improve market conditions within the province. It was quite aggressive and it tabled those with the U.S. negotiators.
Predictably the good faith actions were responded to with a statement that it was not enough. There was a complete rejection from the U.S. lumber lobby, the U.S. lumber lobby holding the cards in terms of the U.S. domestic trade law situation which is most unfortunate.
To be an equal partner in these negotiations we must use our leverage. What is our leverage? It is the WTO and NAFTA panels. That is why we were such a promoter of an effective or neutral dispute resolution mechanism in those two organizations. That is why we are promoters internationally of those types of arrangements. That is our leverage. It is quite clear. We will drop our WTO and NAFTA actions if the U.S. petitioners drop their petitions and then we can start the cycle all over again.
I had the pleasure last weekend in Victoria at the speaker's reception for the six Vancouver Island members of parliament to meet Mike Apsey, who is the past chair of the Council of Forest Industries and who has been involved in these trade disputes for the last 20 plus years.
He said he could go back to his old files and figure out what the U.S. lumber lobby would be saying next week. He is right and that is why we need to change this agenda. The world is changing faster than the U.S. department of commerce and the U.S. lumber lobby. Market access is the issue. We must ensure that this a non-political, non-partisan and a binding trade dispute resolution on softwood.
If we cannot get that in these current negotiations then we should not go there. If these negotiations can lead to that outside of NAFTA and the WTO, with some kind of a binational panel, then we can buy it. However, if we do not get it the reversion from having an agreement is NAFTA.
On the issue of a border or export tax, our current forest practices do stand international scrutiny. We proposed some welcome changes. They are free market oriented and our friends in the U.S. have anything but clean hands on this front. Since 1984, the U.S. has had a bailout of $1.3 billion, something called the timber relief act. It was just for Washington, Oregon and northern California when their so-called public auction system completely fell apart after people had bid up timber contracts and then found they could not harvest and process these trees profitably.
This is the system the U.S. lumber lobby would like to impose on us. It cloaks it in market access but actually it would like to put sticks in our spokes. When we talk about market access let us remember that U.S. lumber production is shrinking. Canadian lumber production cannot increase a whole bunch. Our imports are necessary in the U.S. so this whole area needs a broader look.
We should not be fighting with each other. That will lead to market substitutes for wood products. We have more in common than we have that separates us.
Going back to the motion, I would like the House to support this free trade motion. That is what we need. It should be non-partisan, and the whole House should agree to it.