Mr. Speaker, I am pleased to have this opportunity to set the record straight on the softwood lumber file. As the hon. member for Battlefords—Lloydminster rightly notes, softwood lumber is the main source of the livelihood of hundreds of thousands of Canadians in communities across the country. That is why concluding a new softwood lumber agreement is so critical to the continued prosperity of Canada's softwood lumber industry. However, the Government of Canada is looking for a good deal, not an agreement at any cost.
There can be no denying that softwood lumber has been the subject of long-standing disputes between Canada and the United States, disputes that have been grounded in differences in forest management practices. Over the past 35 years, Canadian producers have faced four rounds of U.S. Department of Commerce investigations and related trade remedy action. These have been followed on three occasions by the conclusion of managed trade agreements. In other words, since the early 1980s, Canada has experienced very few months when either litigation or managed trade have not been applied to its softwood lumber exports to the United States. With this in mind, we are working intensively to avoid a fifth dispute cycle, and have been doing so since our election.
The long history of trade in softwood lumber products between Canada and the United States reveals just how highly integrated and intertwined our industries truly are. It also highlights the enormous costs to economies and communities on both sides of the border if we do not get a deal right.
The forestry sector is an important driver of economic growth in Canada. It contributed over $20 billion to Canada's GDP in 2015, the majority from softwood lumber production. However, despite considerable success in developing new markets for Canadian softwood lumber, the reality is that our industry remains highly dependent on trade with the United States. Canadian softwood lumber exports to the United States totalled $6 billion in 2015, representing 69% of total softwood exports. Securing stable access to this market is therefore essential for the more than 200,000 Canadians in some 171, mostly rural, municipalities that depend on this industry for their well-being.
As I just noted, successive governments have sought to ensure access to the United States markets for our softwood lumber products through managed trade agreements.
Such agreements enable us to go beyond simple disputes over forest management practices, softwood lumber pricing systems, and the forestry programs currently in dispute. The repercussions of forest development without a trade agreement in place became perfectly clear during the last round of disputes between 2001 and 2006, when the American industry took trade remedy action to stop Canadian softwood lumber imports. At that time, that is, between 2001 and 2006, it was the largest trade dispute in the world.
My hon. colleague certainly knows that when that conflict was over, the Canadian industry had to pay over $5.5 billion in duties. The average tariff rates on softwood lumber exports to the United States in 2006 reached over 25%. This situation had an obvious, immediate, and devastating impact on the industry. Fifty-six Canadian sawmills shut down during that time, which cost us over 7,000 jobs.
Some say that it would be better for Canada to resolve this dispute through litigation. We understand those who believe that Canada is not at fault in this matter and that it should stand up and fight. Canada has certainly won some legal battles in international courts. However, we should be clear that a lawsuit costs money. It is a lengthy and arduous undertaking. In fact, the legal costs of the last dispute imposed yet another financial burden on Canadian businesses, which had already been hit hard by punitive countervailing duties.
We have to admit that the 2006 softwood lumber agreement was far from ideal.
However, that agreement did manage to reasonably balance the interests of producers on both sides of the border. The agreement allowed Canadian softwood lumber exporters to have access to U.S. markets that was predictable and stable for many years.
While Canada has been saying for a long time that it is prepared to extend the 2006 softwood lumber agreement, the U.S. has clearly indicated that it wants to negotiate a new agreement. It believes that the market has changed significantly since 2006, and that this must be reflected in any future deal.
It is true that the market has changed in the past decade. The mountain pine beetle infestation has ravaged western Canada's forests. The 2008 global economic crisis devastated the U.S. housing market and upset the balance between global supply and demand. Canadian producers have opened new markets in Asia, while cross-border investment in the forestry sector is at a record high. The new softwood lumber agreement must reflect these new realities.
The things I have been saying since the beginning of my speech may give the impression that the softwood lumber issue is doomed to failure. However, I assure my colleagues that I do not believe that that is the case. When she took office, our minister inherited a softwood lumber agreement that was already expired. Nevertheless, I would like to assure the hon. member for Battlefords—Lloydminster that the government has been working on resolving this problem since it took office.
The softwood lumber issue has attracted the attention of the highest offices of both countries. The Prime Minister and the President of the United States have been personally involved in dealing with this issue on several occasions. They met twice to discuss softwood lumber and they both reaffirmed the willingness of their respective governments to come to an agreement that offers “the stability, consistency and flexibility necessary to achieve the confidence of both industries”.
On June 29, in their joint statement, the Prime Minister and the President of the United States set out the nine key features of the new softwood lumber agreement. Most of them are things that Canadian stakeholders commonly identified as essential to the negotiation of future softwood lumber agreements. We listened to them.
Those key features include flexible structure, provisions for company exclusions, a meaningful, effective and timely regional exits process, effective enforcement tools, associated commitments regarding the use of trade remedies, and provisions to address other issues, such as making adequate arrangements available to remanufacturers and renewing the commitment to joint market development.
The Minister of International Trade also worked with her American counterpart, Michael Froman, the United States Trade Representative, to move this file forward as soon as the opportunity presented itself.
Over the past few months, the combined efforts of the minister, Ambassador MacNaughton, and federal officials have resulted in at least 65 in-person meetings and countless telephone calls with provincial and territorial representatives, industry stakeholders, union representatives, and indigenous group representatives.
In all, 16 rounds of talks took place between Canadian negotiators and their American counterparts at the Office of the United States Trade Representative. In addition, two round tables with major Canadian and U.S. industry representatives were held recently.
The government's work has clearly borne fruit.
During the April and June hearings of the Standing Committee on International Trade, industry representatives from the largest exporters of softwood lumber in the province congratulated the government on its determination. The minister and federal officials have made unparalleled efforts to create a dialogue, not only with Canada's primary exporters, but also with small producers such as lumber remanufacturers and manufacturers of specialized products made of softwood lumber.
In keeping with the efforts our government is making to establish nation-to-nation relationships with indigenous groups, steps have been taken to consult first nations representatives, especially from sawmills that belong to those nations.
Our consultations have taken place through various mechanisms including face-to-face consultations, regular updates through dedicated consultative forums for government and industry, formal and informal bilateral meetings, and exchanges of correspondence with premiers and ministers across the country.
What we have learned has informed and continues to inform our evolving strategy on softwood lumber, but our consultations have made abundantly clear just how diverse the softwood lumber industry is across Canada. As the hon. member for Battlefords—Lloydminster undoubtedly knows, the Canadian softwood lumber industry is characterized by different interests and sensitivities between and within regions and industry segments. This does not make concluding a new softwood lumber agreement impossible, but it does mean that negotiating a fair agreement in the interests of Canadian producers, stakeholders, and interlocutors requires the balancing of priorities, conditions, and viewpoints that are often, frankly, at odds.
On that note, allow me to return to what I said at the beginning. Our government wants a new deal, and we have been working hard since the beginning to make it happen. However, we will not accept a deal at any cost, and a number of members opposite have indeed talked about a fair deal, an equitable deal. That is what we are going to get. I echo the Minister of International Trade's commitment that the government will vigorously and tenaciously defend Canadian softwood lumber producers and their interests should trade action be launched by the United States. It has not happened yet, but should it happen we will defend ourselves.
With the expiry last week of the one-year standstill period, the softwood lumber file has clearly entered a new phase. U.S. industry is now in a legal position to petition the U.S. Department of Commerce for trade action against Canadian softwood lumber imports. While we are actively preparing for litigation, the Minister of International Trade has made it abundantly clear that negotiations can and will continue, and will be our priority. Both the minister and Ambassador Froman communicated as much in their recent joint statement on softwood lumber, issued on October 12. In it, they committed their respective governments to continue “negotiations in an effort to achieve a durable and equitable solution for North American softwood lumber producers, downstream industries and consumers.”
The October 12 statement reflects the importance of the broader Canada-U.S. trading relationship to the prosperity of Canadians. For almost 20 years, there had been no state visit by a Canadian prime minister to Washington and no speech by a U.S. president in our Parliament. In just under a year, our government has changed this dynamic and given the Canada–U.S. relationship the attention that it demands and deserves. That is more than I can say about the previous government. I think that helps us in moving forward on the softwood lumber file.
I therefore urge all hon. members of the House to support the government in its continued efforts to secure a new, fair, and equitable softwood lumber agreement with the United States.