Mr. Chair, I am happy to discuss this matter, which is really about the integrity of the NAFTA process. What we are seeing here is a shaking of the confidence of the parties, certainly the parties in Canada, as to how we resolve disputes.
We need to remind ourselves that this NAFTA panel considered an extraordinary challenge to the decision of a previous NAFTA panel. It is the right of the United States to do that, but this extraordinary panel also concluded that there was no injury to the U.S. lumber industry. That was after a panel had concluded previously that the amount of subsidy was well below the amount that had been determined by the commerce department.
Irrespective of all that, even if we do not accept the premise that the panel has concluded, and rightly, that there are no subsidies, the other panel concluded that there is no injury. Even if there are subsidies, which I do not accept, nor does this panel, if there is no injury, how can there be a cause for countervailing duties?
We know that the issue is about market share. We know that whenever the market share of the Canadian lumber producing industry gets beyond 30% or so, the U.S. launches another countervailing duty process.
Under NAFTA, we have concluded arrangements with respect to energy. How do we know that the United States, Canada and Mexico might not have disputes around the energy provisions of NAFTA?
If we do not have any confidence in the way that these disputes are resolved, then surely that puts a whole range of products and trade into question.
That is why I think it is important that we seek alternatives for our energy, for our oil and gas. We do not want to get caught in a dispute with the United States over energy and get into the same tangled mess that we have here with softwood lumber. The reality is that we do have options.
I myself think it would be preferable if we could work with the Americans on energy, but frankly I think they have shown they do not respect the way that disputes are resolved under the NAFTA and we do have to look at different alternatives.
The members opposite have talked about this letter from 21 U.S. senators about the fact that Canadian softwood lumber is subsidized. I guess they have not read the panel decisions from many years past, including the current one, that have decided just the opposite, that there are no countervailable duties eligible with respect to alleged subsidies.
I am wondering if they would also understand that if we wanted to put up a mill in the United States we would be offered incredible subsidies at the state and local government levels to put in a pulp mill, a sawmill or a panel board mill. I know that from personal experience. What about those subsidies? I suppose they do not count.
What about the subsidies that are offered to U.S. agricultural interests? Are they not subsidies? I think they probably are.
What about the subsidies provided to auto manufacturers in the United States? In fact, I saw a list. For the last 25 or so U.S. auto plant expansions, the subsidies at the state level were in the vicinity of 30% to 40% to 50% of the capital costs. This is at the state and municipal or local government levels. I do not suppose they call those subsidies.
The U.S. forgets about those subsidies and then it says there are subsidies in the softwood lumber industry in Canada although independent panels have concluded just the opposite after very thorough reviews.
A study done recently by an independent group of management consultants showed that the forest products industry in Canada is about 40% more productive than the U.S. forest industry. That is on what we call the basis of total factor productivity. It is 40% more productive.
I know from my experience in visiting the U.S. markets for softwood lumber that the builders, carpenters and contractors much prefer the lumber that comes from Canada compared to the southern yellow pine. It is a better product. It grows more slowly. It nails better. It does not warp and wane so much.
We have a good product. We have a very productive industry. We have a good source of raw materials. We have a highly productive labour force. We have a good infrastructure. I am wondering if it is not conceivable that in softwood lumber Canada has a comparative advantage over the United States. Is that too much to accept?
I would be the first to admit that in certain sectors the United States might have a comparative advantage over us, perhaps in IT or telecommunications. I do not know. I have not studied all the different sectors. Why is it so difficult for the U.S. to accept the fact that maybe we have a comparative advantage in softwood lumber?
As for all these countervailing duty initiatives that emanated out of the United States, of course we know the reason. It is that there is a very strong U.S. producer lobby that seems to be able to get its way time and again in Washington, D.C. Even though lobbies are formed on behalf of builders and buyers of homes, they do not even come close to the lobby of the U.S. lumber producers.
Every time one of these countervailing duty initiatives is launched, we have some winners and some losers. The losers are the homebuyers in the United States, and of course the sawmilling communities in Canada suffer as a result of layoffs and mill closures and the uncertainty that surrounds a lot of this.
We know who some of the winners are. Lawyers in Washington, D.C., and here in Canada make a lot of money out of this, along with the U.S. forest products companies. We know that in the United States there is more private forestry land. Every time a countervailing duty action is launched, the value of private forestry lands increases, so share prices go up for companies that own a lot of private forest lands.
We also know with these countervailing duty actions that lumber producers in the Czech Republic, Latvia, Russia and South America are very happy to increase their market share in the U.S. as a result of these disputes. Their market share has increased. It is nothing compared to Canada's, but I am wondering if anyone has ever looked at whether lumber is subsidized at all in Russia or the Czech Republic. I do not know. It is a question that someone might want to look at.
The thing is that this whole matter really comes down to the process of the NAFTA and it is really causing great harm to the way that disputes are resolved. As I have said before, if we look at other sectors in the United States we see that there are many subsidies provided by the United States government.
Unfortunately, the way the countervailing duty process goes, the only thing that Canada can do is respond to the questions posed by the United States. The United States does not have to defend any incentives or subsidies that it provides to its forest products industry. The whole process is skewed in favour of the United States.
I think it was in 1996 that the United States producers had the audacity to argue that restricting log exports in Canada was a de facto or effective subsidy. That is because the domestic policy here in Canada says that we want to encourage value added, so we do not like to see raw logs exported. The Americans said that this kept the domestic log market deflated and they alleged that it was an effective subsidy. Again, that was struck down by a panel, but this is the kind of nonsense that we see out of these processes.
While I agree that we need to find a durable solution, I am not sure what that durable solution is if we cannot rely on the U.S. to honour its trade agreements that are currently in place. The reality is that what the U.S. must do is honour NAFTA.
This issue has been through the NAFTA processes so many times, and it has been concluded so often that there are no countervailable subsidies. In fact, this panel has even concluded that there is no injury, so if there is no injury to the U.S. producers and there is no subsidy, how can the United States possibly be collecting tariffs?
The tariffs have to come back. The U.S. has to honour its commitments under the NAFTA. Perhaps we then need to look at a durable solution, but to do that I think we must have some very concrete undertakings from the U.S. government that any dispute mechanism that is put in place will be respected and honoured by the U.S. government.