NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 26, 1997

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): I'm pleased to call to order this March 26 meeting of the Standing Committee on Natural Resources and Government Operations. For the record, this is just to remind members and witnesses that we're continuing our study of the knowledge- and technology-based industries that have evolved out of the natural resources sector over decades of history.

There are a lot of good-news stories, and I hope we can get some examples from our witnesses. There are jobs in the knowledge-based, high-technology industries connected to natural resources. It's the job of our committee to better understand what government policies have done to help or hurt the further development of knowledge and technology. I'm sure our witnesses will help us today to move closer to that better understanding.

We've already heard from the mineral and energy sectors. Today we're doing forestry, and we're pleased to have with us the Canadian Wood Council, Forintek, the Canadian Pulp and Paper Association, the Pulp and Paper Research Institute of Canada, and the Forest Engineering Research Institute of Canada. They will introduce individual persons as we go along.

As has been the practice over the last few meetings when we have had a panel like this, we will try to hear as much as possible from within a sector. I would ask each of our five witnesses to give brief opening remarks so that members will have lots of time to ask questions.

Again, to the extent that you can provide us with real-life stories about the development of high tech and answer questions about how the manufacturing of equipment in forestry has evolved or otherwise regressed in this country, I'd be glad to hear about that.

So with that, we will start with the president of the Canadian Wood Council. Kelly, would you like to start?

Mr. Kelly McCloskey (President, Canadian Wood Council): Actually, we'd like to ask Dave Barron to start. He was going to do a few introductory comments, if that's okay.

The Chairman: Okay, Mr. Barron, you lead us off.

Again, I ask our witnesses to keep their opening remarks to five or ten minutes, so we have lots of time for questions and answers.

Please proceed, Mr. Barron.

Mr. David Barron (Vice-President, Canadian Pulp and Paper Association): Thank you. I'd like to introduce my colleagues in the order of their presentation. We thought we would begin with the forest industry, move through the solid wood industry, and then to pulp and paper in the end. So we'll proceed in that order.

We have with us Mr. Daniel Guimier, vice-president, eastern division, FERIC; Mr. Ian de la Roche, president of Forintek; Kelly McCloskey, president of the Canadian Wood Council; and Ron Crotogino, director of research at PAPRICAN.

Each of these organizations will introduce themselves as we move through this.

For our part, the CPPA represents the pulp and paper industries, about 50 companies across Canada in all sorts of product lines: pulp, printing papers, sanitary papers, and packaging products.

The association's many functions include public policy, economic and statistical analyses, and services in that area, as well as technology sharing, both in forestry and in pulp and paper manufacturing.

I want to offer just a few general comments and then show a few overheads just to give people a sense of the size of the whole forest sector, not just pulp and paper.

First, let me just make a bit of a statement about science and technology in a general sort of way. The forest industry has been an important part of this Canadian economy for most of the country's history. The industry has changed over time and is now an industry with very high levels of advanced technology and continually evolving knowledge and expertise.

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We might look at the development of technology and knowledge in probably two ways: they should influence how we move forward and they should encourage Canadian leadership.

It seems to me that much of the direction that the analysis and policy are taking is to directly promote the creation of new technology and then move that forward. Maybe that's valuable. I presume it is in some areas.

This creates a supply of new ideas for development in Canada and for export. This is the “if you build it, they will come” approach to the problem. This should be thought of as a kind of supply-type approach that creates the technology and then moves forward.

I believe there is another approach we really ought to think about while we're doing this analysis. This other, less direct, demand approach builds on our national strength, and it should be considered. This is the encouragement of technology and expertise through the identified needs and opportunities of the major engines of our domestic economy.

The expertise in these fields will have global application and will be continually improved from the solid base of the expanding domestic sectors of economic strength, like the forest industry. Unlocking and building on that innovative potential can lead to global leadership.

I understand, for example, that in Finland, where the forest sector is at least as important to the economy as it is in Canada, Nokia, the cellular phone giant, began by selling new technology to the forest industry, among others. It then built itself from that base into a world leader. That's the kind of thing we want to think about as part of the strategy in Canada.

Domestic sectoral demand for technology gives a solid base to build on, creates competitive Canadian advantage in its leading industry, and leads to global knowledge leadership.

So government programs to fund research should be strongly influenced by those demand considerations. That means focusing on sectors like the forest sector.

I'd like to give you a bit of background on the sector, just so that we have a fairly rich understanding of its importance to the Canadian economy. I have information for you from our sector and aggregate statistics from the sector in total, for both pulp and paper and solid wood.

In 1996 the forest industry's contribution to the Canadian balance of trade was some $31 billion. The total balance of trade for Canada was $34 billion, so this is an essential industry to the economy of Canada.

We're a significant creator of jobs. There are some 250,000 jobs in the sector, leading to at least another 750,000 jobs, and this totals a million jobs directly and indirectly.

With respect to forest sector earnings, as well as contributions to government, we've been having a difficult time, of course, through the past extended business cycle. Only 1995 showed a very high level of return, which affects capital.

One important bit of information is that over the period 1995 to 1998 the share of Canadian manufacturing capital expenditures by the industry totalled some 26% of total expenditures on capital in Canada.

So I think this is really an area for you to focus on. It's extremely important for the Canadian economy and to the knowledge-based industry.

Capital expenditures in the sector rose to $14 billion in 1990 and up around the $10 billion area recently.

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Just as an example, statistics from FAO project paper consumption to the year 2005. Continual growth is expected, and Canada can take advantage of that.

The industry is changing. Recently we've moved into recycled content, and this demands a change in technology as well. So the industry is again evolving with the times.

Pollution-abatement expenditures are still quite high. Part of it is driven by the recent effluent regulations at the federal level, but there's a continuing turnover of capital in this area at a significant level, some $5 billion over the period shown on the graph before you.

Other evidence of technical change goes back to 1970. You can see the level of water that was used in the paper industry. The paper industry is basically energy, water, and fibre. That has dropped significantly, and will continue to drop further. Mr. Crotogino will talk to that as well.

The industry's energy use is very highly focused on biomass, which is global climate change friendly. There's reason to believe that substantial changes will be continuing in that area, so we're going to be a great contributor to the solution of the global climate change problem.

There are technical opportunities there. Our use of fossil fuel is shown on the next slide, and as you can see, as a measure of fossil fuel to tonne of paper, it continues to drop.

In the area of forest management, our expenditures have been expanding over some period of time. The industry's portion continues to take a bigger piece of the action.

Those are some statistics. Other statistics in the material I'm leaving behind will show you other information on the impact of the industry on Canada.

The Chairman: Thank you, Mr. Barron.

At this point, we'll turn to Mr. Guimier.

Witnesses, you may speak in either of the official languages.

Mr. Daniel Guimier (Vice-President, Eastern Region, Forest Engineering Research Institute of Canada): Thank you, Mr. Chairman. It's a pleasure to be here.

I'll use the next five or ten minutes to talk about the forest operations side of the forestry business. I want to describe a bit of what's included in that. Then I want to say a few words about FERIC, the research organization I'm with.

I will then take a look at some of the driving forces that are affecting forest operations in the nineties and in the year 2000. We will then look at some of the promising technologies that are starting to be used, and will be needed in the future, for the success of this industry.

We will then look very quickly at the equipment suppliers, the equipment side of the business on the Canadian scene, and then I will offer a few concluding remarks.

First, what I mean by forest operations is all the activities that take place in the forest, whether it's reforestation, forest tending, harvesting obviously, and road construction and transportation, all the way to the mill gate. So it is anything that takes place in the forest until the fibre is delivered to the industry, and also all the silvicultural activities.

We should look at the importance of forest operations in terms of their contribution to the total cost of a forest product, whether it's a 2x4 or a roll of paper. Included in the cost of the final product are all those activities related to forest operations. Harvesting, transportation, and the stumpage fees can represent close to 50% of the cost of the final product.

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So that's why the industry is putting quite a bit of effort into trying to improve the forest operations side of its business.

I will very quickly provide a few words on FERIC. FERIC is the Forest Engineering Research Institute of Canada. We were created 23 years ago. We're a Canada-wide institute with divisions in Vancouver and in Pointe-Claire near Montreal.

We're really the child of the industry and the federal government getting together and pooling their resources to develop a research program on the forest operations side of the business. So initially, when we were created in 1975, industry contributed 50% of our resources and the federal government contributed the other 50%.

Things have evolved with time. You see our budget for 1998 as roughly $7.8 million, with industrial members contributing a bit more than half and the Government of Canada, through Natural Resources Canada, contributing 22%. Provinces are contributing to FERIC, and we get another 18% from other, various sources.

Government-industrial members are most of the companies in Canada, and we represent 70% of the industrial sector in Canada. Of the industry in Canada, 70% are members and contribute to FERIC.

We are very customer-oriented and customer-focused. That means that everything we do is driven by our clients, the industry and government. So all the research program is decided and ranked through committees of the industry and the government.

We also put a lot of emphasis on technology transfer, making sure the research or the innovation of a technology that's being developed is actually applied at this level and doesn't stay in a nice report on a shelf collecting dust.

The mission of the institute is to provide our members with knowledge and technology. So these are the two key words you're associating with your committee here. This is really to stress three aspects of forest operations: cost competitiveness, trying to reduce the cost of fibre; quality operations; and obviously respect of the forest environment. So environment issues are a very large ingredient of our program.

There is another characteristic that I feel is important. Should you come and visit our labs or our offices, you probably would not see a classical research organization. All the work we do is out there in the forest with our members, on their operations. So it's very field-oriented.

I'll skip now to the third part of my presentation and say a few words about the document that was distributed to you beforehand. It is called “The Technology Road Map”.

Essentially this is an exercise that FERIC carried out on behalf of Industry Canada. It looked at the driving forces in the forest operations sector and at the technological opportunities we might be able to exploit for the industry.

Now, I'm not going to go into every single detail of the report. I will just highlight maybe three or four of the key driving forces that the industry felt were controlling the changes in this industry now and in the next five or ten years.

The number one driving force by far was the cost of this fibre that's delivered at the mill. With competition coming from some low-cost producers in Brazil, the industry has to strive to try to minimize and keep that cost of fibre at the lowest possible level. So that was the number one driving force.

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Second, and not very far behind, are environmental issues. I don't think I need to say very much about environmental issues. We're all aware that over the last 10 or 20 years the industry has changed a lot. The type of operations they're conducting now in the forest are quite different from the way business used to be done in the old days. Things continue to evolve and change for the better on those aspects.

The third one is the availability of fibre. There are already some regions where the fibre that the mills are using is in scarce quantity. That means the research or the technology has to be geared up to make better use of the existing fibre and maximize the utilization of what we have, using every species and every piece of wood that can be recovered.

The last one in terms of driving force is the people and jobs. I think this is important, and it is important in Canada. In evolution terms the job in the forest now is way more sophisticated than it was 20 years ago. So that's a major consideration if we're thinking about training, or even the availability of labour, in the years to come.

The report also looked at the opportunities in terms of technology. There is a series of examples, and I've just chosen to talk about four here.

If you go to the woods and look at the forestry machine, the public in general would probably find it way more sophisticated than they imagine. You would probably see more computers in the forest than you could imagine.

It's already like that, but we feel that to meet the challenges I've outlined earlier, a lot more needs to be done in the area of operator's aid, robotics, etc. This is an avenue of technological development we could utilize.

Another avenue is in the area of materials, especially lightweight components. The aeronautics industry is making great use of aluminum and composite material, especially when we're talking about environmental issues and being softer on the environment. There is a great potential to apply some of those technologies to the forestry sector. We're seeing some of that already, but we can do much more with lightweight components.

Something that was just a suggestion a few years back and is now starting to be a reality relates to my comments about training on the operators side. This is the development of training simulators. We're not talking about the training simulators that plane pilots go through to get their certification, but maybe something a bit more simple that operators could use to learn how to optimize their use of forestry equipment before they actually go in the field.

Those machines can be awfully complex, so training, especially through simulators, has good potential. We have an example of two prototypes that were demonstrated this week in Montreal at the seminar that was held there.

The whole area of vision and artificial vision has a multitude of applications. Certainly my colleagues from the mills know that quite well; there are a lot of vision systems in sawmills, etc.

Also at the woodland side, there's a series of places, whether for log measurements or just for positioning tools and trees, etc., where vision could be applied. It's largely underused at this stage.

Let me draw a very quick portrait of what the equipment supplier side of the business looks like in Canada. I've broken it down into two categories. There are basically two types of equipment: there are the tractors and the track machines, and then there are all the tools, like the felling heads and the delimbing equipment, etc.

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So it's broken down into what I call carriers, and here we are only self-sufficient for 40% of the equipment that's being used. That means 60% is coming from either the U.S.A. or from Scandinavia or Japan. It doesn't look bad, except that this share of the Canadian market is being lost, and more and more we are dependant on foreign imports.

It's really the same thing for attachments. In 1997, 79% of the attachments were made in Canada. It looks reasonable, but the problem is that we are really losing, and losing fast. We are losing especially to Finland, and to Sweden to some extent. So in a way we've lost the initiative in producing our own tools to harvest and tend the forest.

In summary, there are a number of key messages I wanted to leave with you. First, the forest operations side of the business is an important part of the business, close to 50% of the cost of the final product.

We the Canadian forestry manufacturing sector, the suppliers of tools, are losing ground. We are more and more dependent on foreign imports in terms of equipment.

The industry itself faces a number of challenges, and I've referred to them, but these are mainly on the competitiveness side. We still have a number of challenges in the areas of competing on the world markets and on environmental issues.

The good news is that probably part of the solution can come from technological innovation and development. If we're smart in the use of these technologies, I think we have a bright future.

The Chairman: Thank you very much, Mr. Guimier.

I believe we're going to go to Dr. de la Roche. Again, I want to make sure we have lots of time for questions, so....

Dr. Ian de la Roche (President and Chief Executive Officer, Forintek): I will be brief. I think I was allowed ten minutes, and I'll stick to that. I want to cover three issues, and I hope you all have a copy of this in English and en français. I'll take you through that quickly with the high points.

The three issues I want to cover are technology, jobs, and small communities. That will be the emphasis in my presentation.

The Chairman: Those are all very important.

Dr. Ian de la Roche: First, I would like to just comment very briefly on who we are. We are a not-for-profit research organization. We were privatized in 1979. We used to be government laboratories. We were the first privatization of a research group, and I'm proud to say it's worked very well.

Our membership includes 150 companies across Canada. The federal government is a partner, and so are five provinces. We're located in Vancouver with a head office. We have a brand-new lab at Sainte-Foy in Quebec City, a group in Ottawa, and a small team in Edmonton.

The next slide will provide the profile of the wood products industry. I'm not going to dwell on this. My colleague has hit all the high points. But I just want to alert you to the fact that the sector I'm reporting about, the solid wood products sector, accounted for about 43% of the total exports from Canada, and that's worth about $16 billion.

The other point I want to emphasize is that the wood products sector is a major employer in over 500 towns across Canada. It is mostly located in remote regions, and obviously in areas where the members of this committee have a vested interest.

I turn to the next area, which are the forces that have been driving change in the industry. As you know, in recent years the wood products industry has been undergoing some fundamental changes. They've been driven by the factors I've listed here: customer demands and the competing materials.

You've seen the ads on TV for using steel or concrete to build houses, instead of wood. It is a threat that's there.

Equally important factors are the environmental issues, the timber supply, etc.

About two years ago we pulled together our key members and we addressed the problem of building a technology model—a knowledge model, I should say, because it is broader than technology. It is a knowledge model to address the future competitiveness of the industry. Around that is built the Forintek research program. It's built around complete shelter systems. It's built around our members' customers, our customers' customers as a research organization and supplier, and it's built around addressing their needs in the marketplace.

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If we're going to keep and grow market share in shelter systems around the world, we're going to have to provide shelters that meet key things—affordability, safety, durability, and environmental sustainability.

The key is really to understand the attributes that define performance and to relate that back from the market, right back to the resource. We should then be able, as you can see from this graph, to add value at each step of the process, right from the resource, through the manufacturing, on to the marketplace.

I talked about the forces driving the industry. On the next slide, you'll see that we've obviously seen an evolution from commodity products—the 2x4's, the 2x6's—to engineered wood products like parallam, like timber strand, finger jointing, MSR lumber, and of course laminated veneer lumber. These are all knowledge-intensive or value-added products.

An example of a post and beam support system is parallam. If you look, you'll see a picture of our laboratory on the left side. You'll see an engineered wood product that showcases the structural and aesthetic attributes of that system.

In the next slide, you'll see another example—engineered floored system, the Silent Floor, sold by Trus Joist MacMillan Bloedel. The key on this is that we've been able to see in this case a stronger product that uses less fibre and uses underutilized species like aspen.

I want to turn now to a success story. This is an example of how we've been working to meet the customers' needs as they apply to fire and earthquake safety. This is some work that was supported by all our members. A lead player on this was the federal government. This allowed us to get involved with the safety and fire issues in Japan back in 1991.

In 1991 Forintek and the Building Research Institute of Japan conducted seismic and fire tests on three-storey, wood-frame apartment buildings. Up to that stage, you could only build structures in Japan to two storeys.

We designed, with the Japanese, a house. The test had a combined effect of shaking it and also burning it. We call it the shake and bake test, actually. Very successful. The combined effects—

The Chairman: Was that successful burning or survival?

Dr. Ian de la Roche: Well, survival, Mr. Chairman. It showed that if you design a product the right way, it can withstand the combined effects of earthquake and fire.

The bottom line was that the codes were revised in Japan in 1992, and by 1997 there were 563 three-storey wood-frame apartments, using Canadian wood, built in low-density suburban areas. So that's a success story of working with officials over there on the codes and standards, but also the scientist-to-scientist interaction to solve problems, where we want to see more wood used, and hopefully more Canadian wood used.

In 1992, we shifted our interest to the high-density areas. Things moved along quite nicely, but then Kobe struck in 1995. You can see the devastation wasn't from the earthquake; it was from the fires afterwards and the loss of life and what had you. That was a major setback.

We sent our fire expert over to work with the Japanese to review and assess the situation of Kobe. We concluded that if the structures had been built to withstand the seismic shock of the earthquake, they would have contained the fire, and the fire wouldn't have been a problem.

In March 1996, the Japanese, with again a Forintek scientist collaborating, set to do some tests of three-storey buildings again, in dense urban areas, and replicated the Kobe fires. That is, they started a fire from an adjoining building, as you can see here, and then looked to see if the three-storey wood structure would act as a barrier or as a conduit to that fire. What happened was that the test did indeed demonstrate that there was a barrier.

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I might add that the Japanese take this very seriously. That one test cost $10 million to build the structures and to do one experiment. So it's not a trivial thing.

In 1997 the regulations were changed. We now are allowed to build three-story buildings, of wood, in the high-density areas, because they will act as a fire wall. The first one is under construction in Yokohama.

I want to turn now to another success story. You've been given a copy of this. This is called Athena. In this context, what I'm talking about here is that consumers more and more are looking to have environmentally sustainable housing, and my colleague, Kelly McCloskey, will address that later as to the impact it's having on our market today.

I want to mention that with federal support, back about three years ago, we pulled together a team of experts from universities, from the steel industry, from the concrete industry, and us as wood specialists to do a life cycle analysis comparing building systems using wood, steel, and concrete. What we came up with as a product was a computer-based decision tool that allows architects, as you will see in this diagram, to sit down with a buyer of a home and design a structure using wood, steel, or concrete and be able to calculate the environmental impact, or footprint, each design will have.

The key here is we are giving the power to the consumer to be able to make their own decisions, based on sound information, on what is best for them. We're not telling them what to use; we're just giving them the information so they can make the choice.

We recently spun off the institute and it's now a not-for-profit institute located here in Ottawa. The important thing is the membership has gone beyond Canada. We have members in the U.K.—the British Steel institute has joined it—and we have members in the U.S. So it is growing. And it's a body. It's an objective body that involves steel, concrete, and wood users, and the focus is on getting facts out and not myths.

Needless to say, you'll hear wood has done very well in this. We didn't fix the data. It was there. These are just two examples of promotional material, and that's a very important point. We're in the research business; we're not in the promotional side of it. To keep our objectivity, we will provide and interpret the information, but the public has to decide how to use it.

Fortunately we have the Canadian Wood Council, as you'll see from the brochure in that slide, and organizations such as COFI, which are very effective in promoting and demonstrating the environmental merits of wood buildings in specific applications.

The next area I want to talk to you about is a very exciting one for us at Forintek. It's a very new program and one that gets to the very heart of the job issue in small communities.

There's a myth out there that technology leads to fewer jobs. If you restrict it in a very narrow sense, that might be true, but knowledge in a broader sense leads to more jobs. It's a very important differentiation. I'm very pleased that your committee is looking not only at technology but also at knowledge.

Knowledge includes the research and the development of the technology, but it also includes things such as technical service in the mills and also training of people. My colleague from FERIC mentioned that point. We have to look at it as a broad base, and not only as a piece of technology that's going to replace a job.

A good example is the secondary manufacturing initiative that we have targeted to over 500 towns across Canada. We were out of the chute very early. I had copies in front, and I'd like you to get these after.

The first one is a program we've set up with the province of Quebec.

[Translation]

It deals with value added.

[English]

It gives you a description of what this is about. We're quite excited about it.

We have also launched one with the Government of British Columbia, and we are dealing now at very advanced stages with Alberta and New Brunswick doing the same thing.

Really it's an outreach program. What we want to do is put technology specialists out in the field, out in the regions. In your riding, Mr. Chairman, for instance, we're looking at having an individual, perhaps out of Lakehead, being able to be out there in the mills, in the small remanufacturing operations, to deliver technology and help.

The Chairman: Like field workers?

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Dr. Ian de la Roche: Actually, yes, but these would be technical people, and the idea is a network. As my colleague mentioned, you just can't have them sitting in labs; they have to be out there. The point is that, by having this kind of outreach, you can be much more effective in transferring technology and helping with the training these people need out in the mills.

On the next slide, you will see where we are coming from as Forintek. We have a reputation and expertise in the primary wood products industry, but you can see there's a lot of overlap, according to that slide, into remanufacturing and secondary wood manufacturing.

We decided to take the common elements of the areas we're good at. They're listed on the right of the slide. These are the areas we're going to focus on because we believe these are the areas that are going to have the biggest impact.

The Chairman: Is it this line with the green box below?

Dr. Ian de la Roche: Yes.

I'm finishing here very quickly. The last point I want to make is an example of where we're looking at the machining properties or attributes of 15 B.C. wood species. These include underutilized species like white birch, red alder, as well as trembling aspen.

My point here is that we're trying to match the characteristics of the resources we have across this country to the end product that the customer is willing to pay for. That's a very key thing. So it's adding knowledge at each step of the way, and hence, higher-paying jobs.

In conclusion, I want to say three things. The forest products sector is technology-based. It has been the basis of our success in the past, and it will be even more important in the future.

A key point though is that the level of investment that we have on technology or knowledge is very low. In fact, in my particular sector, the solid wood product sector, R and D represents only 0.16% of sales. It's a very low number. Compare that to rates of 2% in Sweden and 1.5% in the United States.

The other point is that the government is a partner in this, and we can't forget this. A lot of people will say that it's a problem, and industry has to do this. This is not the case. In 1996, we did a benchmarking of all our comparable colleagues who run similar labs around the world. On that last page, beyond the conclusions, you'll see the results of that. These are 1996 figures.

If you look at the bottom, you'll see Forintek Canada. This year, we grew to 180. Our budget is $20 million, but still holding.

The important thing is that industry involvement has gone up from 37% to almost 50%. Compare that to that of the other labs around the world.

Key one, the United States Forest Products Laboratory, is virtually 100% paid by government.

We're doing very well. We're doing well with PAPRICAN, FERIC, and Forintek.

We're competitive out there. Industry is investing, but there is a role for government, and I don't think we should forget that. It's a partnership and this is important.

On that note, Mr. Chairman, I will end my comments.

The Chairman: Thank you, Dr. de la Roche. It's very interesting.

We're going to continue with Kelly McCloskey.

Mr. Kelly McCloskey: Thank you very much, Mr. Chairman. It's great to have the opportunity to present to you again. You may recall that I was here just before Christmas when you were talking about greenhouse gases.

Because you have some familiarity, I'll just say this very briefly to remind you. The Canadian Wood Council is the national association of saw wood products. We represent approximately 95% of all the saw wood products that are produced in Canada, be it lumber, plywood, treated wood, whatever.

Our mission effectively is to maintain and expand market access for those products in North America. So the comments I'll make here will be brief and will really focus on the knowledge and technology side of the market.

Mr. de la Roche talked a lot about what he does and how that interrelates with us. The best way we can describe it, or one of the ways we describe it anyway, is that Forintek, as a research organization, produces a lot of bullets, while the Canadian Wood Council is out there in the marketplace shooting them into the marketplace and trying to get them to stick. We work very closely together. You'll hear that if you haven't heard it already.

What I would like to do in the few minutes that I have is really give you four very specific examples—this is what I think you were looking for, Mr. Chairman—of things you could point to as you go forward. Here are some things you can support or question and maybe have an impact on.

The first thing is something we did in conjunction with Forintek. The industry recently put in an application for a network of centres of excellence in wood building and design. That went to the federal government through the NCE process, which you are hopefully aware. This would have grown and nurtured this knowledge and technology base.

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I looked at what your mandate was and what you were trying to do here. Look at the package you've got in front of you with the black metal clip on the top. Behind that is the actual proposal that we submitted to the federal government. A lot of what you'll find in there with respect to developing the knowledge and technology base was in that proposal.

Unfortunately, our industry doesn't often get the same kind of tension that some of the more sexier industries get when it comes to those subjects, which is why you're looking at it, I know.

We were unsuccessful. There was a lot of competition from the medical side of the economy. Most of the groups that got the nod to go forward were from that sector. We were very disappointed about that because we felt this was a real opportunity, particularly given the size of our industry, to take advantage of some of the knowledge and technology advances and to move forward, particularly in the value-added products sector, where we know there are a lot of good, high-paying jobs per cubic meter, if you will.

So I would encourage you to take a look at that as you go forward to see whether there are some other ways that the government can help our industry. Our industry is quite fragmented, and there is a role for government there to help us move something like that forward. So there's one example.

The second example I have really refers to the point that Mr. de la Roche was mentioning with respect to this life cycle tool that they have created and that we have been promoting in the marketplace. You may recall that, before Christmas, I mentioned that to you. I talked about the whole greenhouse gas challenge.

There's also the fact that we have a lot of concern that some of the approaches that the bureaucracy is making are very specific and almost myopic with respect to how they're addressing a challenge. The beauty of the model that has been created at Forintek is that it looks at it from a life cycle perspective.

So we continue to want to promote the notion that when government is looking at how it's going to deal with the greenhouse gas challenge—I know that's a topic of interest to you—the message should get in there. You don't want to just look at little pieces without understanding the whole picture. It would be very easy to create a benefit here and lose twice as much over here if you don't take into account that full picture.

So to the extent that you're active in that area and can encourage the bureaucracy to keep that broad perspective, that would also be a very good thing from our perspective. It's knowledge and technology.

The third thing is maybe the most significant one from our perspective. One of the Canadian Wood Council's major goals for this year and through to 2000 is to increase wood product usage in Canada through increased knowledge and technology. This is really a fallout of the softwood lumber agreement in part, and in part because of the fact that markets in general worldwide, the Asian situation, etc., are not good for our products right now. The industry is looking for other ways to continue to grow and put their production into....

So we are launching right now the creation of a consortium that will have—it already has it—the support of Natural Resources Canada and Industry Canada. The objective will be to look very closely at the commercial market in Canada and then also the engineered wood product market, which Ian talked about, and component prefabricated houses, etc. I know that others have presented to you on that.

There are some real opportunities in Canada to use more of our wood products in very high-end ways and then have those products exported. Also, that technology and knowledge can be exported.

So this consortium will be going forward in a very focused, specific way; it will not be a shotgun approach. We'll be going into certain select communities across Canada to try to make it work, such as in Chicoutimi, Prince George, and a suburb of a big city. Then we'll take all that knowledge and technology that we create locally and distribute it throughout Canada and then North America.

It's a new project. It's not officially launched yet. It's just in the process.

I certainly know you're aware of the challenge that our industry is having right now in finding new markets. To the extent that you can encourage Industry Canada and Forestry Canada to continue to be a major partner in that consortium, that will also be very helpful.

My final very specific example is one actually that came out of one of your colleagues, Ben Serré. It was his initiative to have a stamp come out next year supporting the contribution that this industry has given, economically, socially, and culturally, to our economy.

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Our industry is currently gathering up letters of support to put into the system. To the extent you would support that initiative, we think that would also be helpful to address, Mr. Chairman, your comment earlier about the fact that we need to have the public more aware of the nature of this industry and the contribution it makes and will be able to make into the future.

Those are four examples.

The Chairman: Thank you, Mr. McCloskey.

We'll conclude this opening round with Dr. Ron Crotogino from the Pulp and Paper Research Institute of Canada.

Dr. Ron Crotogino (Director of Research, Engineering, Pulp and Paper Research Institute of Canada): Thank you, Mr. Chairman, for allowing me to be here and present on behalf of PAPRICAN and the pulp and paper industry. I want to go over quickly who we are and what our vision is in terms of our mandate.

In brief, we are a research consortium. We were founded back in 1925 and have been in existence for quite a while as a university, government, and industry partnership. We were never privatized, because we were private from the beginning.

The majority of Canadian companies finance our institute. About 85% of the Canadian capacity supports PAPRICAN and about 85% of our budget comes directly from industry. So is industry doing something? Yes, indeed they are.

We have 390 employees spread in six different locations across Canada, and those include three university laboratories. Our budget is roughly $37 million.

I have an annual report for your reference, to find out more about us. This is the institute. We're spread among various locations. The head office is in Pointe-Claire, outside Montreal. We also have a pulp and paper centre at McGill University, where we actually started in 1925, and more recently École Polytechnique has also started a pulp and paper research activity with us.

We have two similar activities in Vancouver, a research staff laboratory and a university centre on the campus of UBC. We also have a field station up in Prince George. So we tried to use this industry funding and also the leverage through the university to address both our research and our educational mandates.

As a brief historical perspective, in the 1950s, about 25 years after the lab was founded, we were actually then incorporated. The character of the institute was very much of a university laboratory, and we still have some of those in the universities. It was led by world-class researchers. They had authority and autonomy, and they interacted with member companies.

The thing that happened back in the 1950s is that all of our member companies also had a lot of research, not in large centres, but actually in the mills. They had very active world-class research centres in the mills.

The reality today is somewhat different. We now still have very strong, fundamental, related research programs with lots of depth and breadth and integration of skills on demand. That is, we don't just send individual experts out; we send teams of people out. We now have, as we've always had, very strong member company involvement in our work, but more in the planning of what we do rather than in their participating in the mills. This is a sad part of the story. But the research, again, is world-class, team-based, and with a very strong focus on the impact it has on our industry, rather than the luxury we had back in the 1950s of dealing with the fundamental science. Now we're looking at how we can make that fundamental science work for our industry.

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Our mandate is in both research and education, as I've said. During that same period of history, from 1950 to 1990, our industry was built on the basis of plentiful, high-quality, cheap fibre; abundant, cheap energy; and abundant water. Now we have to change. We have to maximize the benefits that we derive from these valuable resources, and that's the major shift that must take place and is taking place in our industry, but it's not an easy one to make.

The successful survival of the industry into the 21st century will depend on an aggressive exploitation of technology to do three things. One is to produce quality products, that is, products that are of value to our customers at a competitive cost, and there we have a bit of a problem. I put a note at the bottom that says “with sensitivity to sustainable development”. In the past we usually put the environmental issues up front, because if we want to survive we have to think about producing the right kinds of products for our customers and focus on that rather than....

The PAPRICAN mission is to support and enhance the technical competitiveness of our member companies, support and supplement the research and technical efforts they have made, and increase the technical content of products. This is a key issue. It is not just to get the wood out as fast as possible, but to actually put some technology and knowledge into the product. This will require a major research and development effort and technology transfer, which is one of the critical problems. This involves education and training and major technical services to our industry.

What are some of the challenges we face? We face a lot of challenges from abroad, and some of these have been alluded to. Finland and Sweden have bigger, faster, newer machines. Brazil has low-cost, abundant fibres. There are new investments with patient capital—this is beyond the usual three-month horizon—in places like Indonesia, and we're facing increasingly high fibre costs as one of the major issues we need to deal with.

Scenarios—again, this goes back to quality products made from excellent fibres. The advantage in Canada is that we do have an excellent fibre base, both in terms of the quality of the fibre and the variety of species we have access to. We have environmental expertise that I think is second to none in this industry worldwide, and we have highly skilled, educated people. Our main problem is to get all of that mobilized to effect those changes.

Here is an interesting benchmarking slide that was put into the operating budgets of the three leading research institutes. The one in Finland operates with a 12% direct government grant. STFI, which is the Swedish institute, works with in excess of 30% direct government funding. PAPRICAN currently operates with 8.2% repayable government loans. It's a somewhat interesting picture.

I want to end by mentioning a current success story in partnership with the federal government. This is the TPC program that we're involved in on system closure, where we are actually trying to...not close mills. Sometimes it is referred to as mill closure, but that's not a good term to use.

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We're trying to reduce the amount of water that flows through our mills, but in such a way that it's of benefit to our industry. We do not want to just turn the tap off, but to be very sensitive to the local conditions and to use this kind of program to.... Rather than looking at it purely as an environmental project, we look at it as a cost-saving project by conserving resources that usually flow out with the waste water.

That's the one strong partnership we currently have with the federal government. The objective is to progressively close up the air, water, and solids emissions. It is not just water. There are two other phases. We're dealing with solids and gases as well. We want to make sure that much of the material that flows into a mill actually comes out as a product. This is a very important program to us that we're in partnership with the government on.

There are other areas where we think we've had some major success stories. Dave Barron has mentioned the environmental work that has gone on in Canada, driven by the Research Institute. When we suddenly discovered that we were emitting dioxins, within one year we cut the emissions in half, and within about three years, by about 95%.

At the same time, we have dramatically reduced the emissions of organic chlorines, but we haven't thrown out the baby with the bath water. We did not tell our industry to get out of chlorine come hell or high water. We managed to move our industry from chlorine to chlorine dioxide, a development that was strongly supported by Canadian research a number of years ago. That has basically saved the bacon for our industry, because we did not have to make massive investments to rebuild existing facilities.

One of the other success stories I want to mention is the consulting industry. In Canada we have a very strong consulting industry in the pulp and paper sector, and these have grown out of mill towns.

A large company called NLK has grown up in the last 20 years. I know this grew out of a mill town because the the “N” was a schoolmate of mine from Powell River. So with a lot of the things that are happening, that technology is going out.

The sad story is that the R and D spending that we used to have in our industry in those mills has been squeezed by cost-cutting. We've had enormous expenditures with fibre costs going up, and we've had major expenditures in the environmental area. As a consequence, we've also let our machinery supplier industry die, and to a large extent we're now dependent on foreign equipment. If we want to commercialize any technology that we develop that we think is beneficial to the Canadian industry, we have to go abroad to get that done.

There are some areas where we need to make some progress.

The Chairman: Thank you, Dr. Crotogino. I appreciate the opening remarks. They were a little longer than I thought, but that's fine. I think we learned a lot.

We're going to take a short break. If you want to grab a sandwich and a cup of coffee, we'll start with Darrel's question.

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The Chairman: We're going to have what could be called a power lunch. We're going to eat and talk at the same time as best we can.

We're going to start, if it's okay with our witnesses. They'll be sensitive to those who are still in the middle of a bite.

Mr. Stinson, please start us off.

Mr. Darrel Stinson (Okanagan—Shuswap, Ref.): I'll throw it out there to anybody, Mr. Chair.

First I'd like to make a little complaint, Mr. Chair.

In meetings like this, we have a number of witnesses coming before us. It would be quite helpful if we could get their briefs beforehand and have a chance to go over them so we can ask better questions.

The Chairman: That's fair enough. We'll do our best.

• 1220

Mr. Darrel Stinson: Today we've heard of the great impact the forest industries and the spin-offs have upon the Canadian economy, and that's great. I fully realize this.

I have a couple of quick questions, which are open to anybody.

One of my main concerns is this. We heard today that although we are masters of technology, we've been losing our share of the equipment manufacturing here in Canada. I would like to know a little bit more why. Is government directly or indirectly responsible for some of this? Are our costs too high in the competitive world? Do we overtax here in Canada? There has to be a reason why we're losing this share of the industry.

Also, is the government or industry doing enough to offset the negative impacts of the Sierra Clubs and Greenpeace, which are going around in different countries spreading, a lot of times, misinformation about our forest practices here in Canada and our use of value-added wood products?

The Chairman: Who wants to start?

Mr. Guimier, please.

Mr. Daniel Guimier: I would like to make a comment on the first part of the question about the equipment manufacturing sector and forest operations.

It's an excellent question. I'm not sure we know all the answers, but if we compare ourselves with Finland, for instance, it seems that as a country whose industry produces equipment, Finland somehow has a way of organizing itself, really focusing, and making a decision that, yes, Finland is going to be a producer of forestry equipment and dedicating a lot of energy and resources to doing it.

It's more of a directive from the top there, with everybody following suit. It took them a few years, but they ended up with a very strong forest equipment sector.

If we look at the situation in Canada, it's quite different. The equipment suppliers are quite fragmented on the forest operation side. For a long time they competed against each other instead of realizing the competition was actually abroad.

With the government it was a bit of the same thing, a lack of direction and focus. There are fewer and fewer now, but in the 1980s there were a number of programs to subsidize or help promote innovation. Again it seemed to be piecemeal, a little bit here and a little bit there, without a decision being made that we're going to promote robotics or this aspect or that aspect.

We seem to have ended up in the situation we're in because of a lack of organization, focus, and all the partners pulling together in the same direction.

Mr. Darrel Stinson: Federal and provincial jurisdictions overlap in certain areas. Could this have an impact on what you're talking about? We have different environmental standards, for example, under the provincial government of B.C. than we have under Ontario, Quebec, or Nova Scotia.

Could that be having an impact at all?

Mr. Daniel Guimier: Do you mean it's affecting the types of equipment we're using—

Mr. Darrel Stinson: Yes.

Mr. Daniel Guimier: —or the programs helping to develop them?

It does, especially when it comes to transportation. There's no standard truck or trailer. You change the standards from one province to another, so it's very difficult to pool your resources and develop the ideal trucks. You almost need ten of them.

You're quite right there are provincial differences, which don't foster the development of the ideal piece of equipment.

I think it's less so for the forestry equipment, the forestry machinery. The differences there between provinces are more dictated by the nature of the forest—the size of the tree, the steepness of the ground, etc.

Mr. Darrel Stinson: The terrain, yes.

Dr. Ian de la Roche: I'd like to build on that a bit, because I think there's a very critical issue.

We were talking about how the Scandinavians have been able to generate and create this industry. I think one of the key points there was that it was a partnership between government and the sector, but also a partnership between the supplier and the purchaser of that equipment. As was mentioned, that harmony hasn't necessarily been there.

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Costs also have been a big factor. We've seen situations in which B.C. had a strong leadership role in certain areas, for instance, and a lot of those companies have looked at southern opportunities and moved out. So there's a cost structure of doing business, which has to be taken into consideration.

I think, though, rather than look at how to get it back, we should just crystal ball ahead and look at where we could be five years from now and what kinds of technologies could be put together to create these industries. We know for sure that we've got some real strengths in Canada in electronics—by electronics, I'm thinking of computers, simulators, and stuff like that.

You take an outfit such as Newnes in Salmon Arm; 300 people are working out of there.

Mr. Darrel Stinson: That's my constituency.

Dr. Ian de la Roche: Exactly. I think the key is that when you talk to those guys, they have a vision. They said capital at one time replaced labour and now knowledge is replacing capital, and it's human knowledge. I think that's a very important point.

Another example is in the Beauce, Denis Comact. That outfit is selling product in South America. They're now expanding into western Canada. They have technologies and ideas. They're tremendously entrepreneurial. There are good entrepreneurs in the Beauce. They're moving ahead tremendously on that.

Also, we've taken two of our technologies, and I didn't mention these today.... Denis Comact is there. We form a partnership. Denis Comact lives in our lap and is a strong supporter of the technology—not only ours but that at CRIQ and other places.

The point is they have a vision of combining technology and they have a very supportive infrastructure in the province to allow them to be nurturing.

I think it's these factors, and maybe that's what we've got to try to pull together.

The Chairman: Are there any takers on Mr. Stinson's question?

Dr. Ron Crotogino: Maybe I can add to it.

I think a lack of vision and a lack of customers in Canada led to the demise of some of our major machinery suppliers.

That being said, we have a success story building in that area, too. Three large machinery suppliers in the world build enormous machines. I was just saying that the new paper machine in Port Hawkesbury was $750 million. It's an enormous investment. Most Canadian pulp and paper companies can't afford that sort of investment. They need rebuilds, and they need technology that is more aimed at getting the industry back on the main track.

We have a company at Trois-Rivières, GL&V, doing exactly that. They are now the strongest of that rebuild ilk, and they are going to be a very, very strong force in our effort to bridge the gap between where we should be and where we now are.

The second question is with regard to environment, and I know Dave Barron is anxious to answer it as well.

Basically, we're doing a lot to deal with these issues. I mentioned one of them—the dioxin issue. When it came up, the Canadian industry took an exemplary leadership role. They didn't stand back and stonewall the issue. They said okay, if this stuff is coming out of our smokestacks with our effluence, we'd better do something about it. They took a very proactive stance and got rid of the stuff.

Mr. Darrel Stinson: That still doesn't answer the question of what are they doing to put this out to other countries. A large part of our problem here in Canada stems from groups going off our shores, putting this information out in areas of the world, and not allowing—using almost blackmail tactics—our goods to be exported to these countries. I would like to know what the industry or government is doing to help offset this, if they're doing enough, or if they're not doing anything.

The Chairman: Mr. Barron.

Mr. David Barron: A lot is being done, but not enough. I think that's the case. The federal government, with the Canadian Council of Forest Ministers, has a communications program that's operating primarily in Europe at the present time but is also moving into other areas.

• 1230

We at the Pulp and Paper Association have a full-time office on communications alone in Brussels, basically focused on Europe and totally focused on these issues, but still it's not enough.

As you well know, last summer the major environmental groups in British Columbia attempted to launch a large campaign, and labour and the native community drew a line in the sand for them, and they didn't cross it. Therefore they went, as you said, into the European marketplace to pursue that campaign, and that's what's going on full-scale right at the moment, again, on the idea that there is a partnership that has to be involved in this; it has to be industry and it has to be government. Provincially, the governments are basically on the line on this.

I think we have something of a problem here in some people's attitude that this is a commercial matter; this is about products in the marketplace; this is about forest certification and the competition between various schemes. But really what it's about—and the environmentalists basically tell us this—is who decides. It's politics. It's about who's in charge of forest policy in Canada in the provinces and at the federal level.

It would be wise for our governments to realize that that's what the basic question is. It's not a matter of commerce. Commerce is a tool in this. Boycotts, certification, and buyers' groups that we're seeing being set up by environmentalists all over Europe and now in North America are tools to leverage government policy. The sooner we come to realize that and then attack it on that basis, the better off we're going to be. But we do not have enough going on at the present time.

The Chairman: Thank you.

Mr. Kelly McCloskey: I'd like to add one point there. David covered that very well, and we're very much part of that process as well, but there isn't enough being done. The big fear I have right now is that the kinds of things David talked about, which have been primarily Europe-based, are now shifting towards our biggest market, the United States. We've just finished some benchmarking work that tells us we've lost some public opinion ground over the last three years in that game, despite the efforts we've made. So the threat is becoming larger, not smaller.

Mr. Darrel Stinson: Thank you.

The Chairman: Are you okay for now, Darrel?

Mr. Darrel Stinson: Yes. Unfortunately I have to run.

The Chairman: Okay.

Mr. Jackson and then Mr. Canuel.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): It's always great when we talk about vision. If you get some dogs in the north and you have a dog sled race, that guy up front really has good vision, but sometimes we're not too sure about the other guys.

I heard a number of things from you gentlemen, and I'm interested to know how we get the right focus in this vision. Vision is important, but of course one of the reasons people don't take these risks is if you go up the wrong fork and end up in a blind alley, you get egg on everybody's face.

So could you turn us in the right direction as to where this vision comes from? From what I hear, I suspect some of it comes from needing some kind of focus, that the government needs to get everybody working in synergism. So maybe you could tell me about some of those types of things that might help us. Directing the government in the right direction might be helpful.

Mr. Kelly McCloskey: I would just point to the very first area on the solid wood side that I mentioned when I made my four points, which was the proposal jointly put forward by Forintek and us to try to bring together what clearly is a fragmented industry, a fragmented government, and lots of different interests at the table, with a common vision to try to move forward on some of those research, technology, and knowledge-based advances.

By the way, a similar proposal came in from our industry the last time. The need is there, and from our perspective, it's just a function of when the timing is right for all the parties. The need is there and there is a vision in that document, and there could be tremendous advantages, because the key initiative involved in that was to create some synergy amongst all the different visions and interests out there.

So on the solid wood sector, that's a good start. Certainly we are aware that Industry Canada and Natural Resources Canada continue to express interest in that, but government is looking at 100 different proposals at any one time, and ours has not got to the top of the list yet.

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The Chairman: Dr. de la Roche.

Dr. Ian de la Roche: Yes—there's one point on that, Mr. Jackson, that I'd like to make. We do need champions in government. I think government has to take on a leadership role there. The fact that you participate in this committee, and the fact that a bunch of you, I believe, are going to be heading up to Prince George, is important. You'll get in to see a state-of-the-art mill, you'll see a small business, etc., operating well. Your going across the country is very important.

I think all too soon, often people get consumed with the sexiness of high technology in a very narrow sense. It's biotechnology, it's medical, it's stuff like this. The point of it is, we have a solid backbone industry in this country that uses technology. Given the right opportunity and leadership, we'll use a lot more of that technology in the future. It has to. It's very high tech.

When you go into those mills and can see those machine centres, wood sensors, simulators, etc., how they can take a log coming in, how they can scan it now—we're getting to scanning it internally—shape it, allow for the curve, etc., and be able to predict and cut and make the decisions all the way through.... It means jobs. It means competitiveness in this country and what have you, and it means exciting products.

All I'm saying is that what we need are more champions like yourself understanding this. When people come around and say forestry or natural resources are sunset industries—they're not.

We've seen it in other countries, like Sweden: visionary people, companies like AssiDomän AB that say, “We are going to add knowledge from every step, from the seed all the way to the bookshelf”. They talk about machines going in and selectively taking a tree that they understand and characterize, with the intent that it's going to go to a final end product.

That's the kind of thing we're going to see—a combination all the way back from the actual planting of the seed to the management of that forest, etc., always with the idea of optimizing along the way, and adding knowledge. I think it's very important that we focus on those aspects, because those are the things that are going to create jobs and keep us competitive in this country.

Mr. Ovid Jackson: Do you see another building boom coming, based on demographics? I know you're quite optimistic about the printed stuff. Obviously computers are generating a lot of activity, and people are still having books and things like that.... But do you see, based on demographics, some more opportunity? Perhaps that may be part of where we want to focus on—what kind of products people will be needing at a particular time.

Mr. Kelly McCloskey: Maybe I should take that one. The answer is yes, but it's not a building boom in the sense of massive growth. It's just that there is going to be a continued growth in that whole area. From our industry's perspective, when we looked at it in North America, we can conclude that we have the vast majority of the housing market—97% or 96%. We only have 10% or 12% of the commercial market. The commercial market—the schools, the churches, the gas stations, etc.—is about half the size of the residential market. So there's this huge opportunity for growth. Then of course you go to the Japans and the Koreas, who don't build a lot of their houses out of wood. The opportunities again are massive.

Those people who are in the forecasting game—and they do so with a lot of risk, of course, because it is very much a game—will point to the trends that you see right now in continued expansion into engineered wood products and the more value-added products. That trend is already very steep and will get steeper. They'll point to the trend towards other economies that haven't historically built out of 2x4-type construction, like Korea and obviously still Japan, coming on stream.

You just need to look at Japan as a typical success story of what you can do in the world with respect to demand, if you work at it. It took about 20 years to get Japan to where it is. The growth in using our type of construction was 20% to 50% a year for many years, though it started at virtually zero. Now it's our third-largest export market in the world. It takes a long time to develop those markets, but those who are in the forecasting game are very optimistic.

Mr. Ovid Jackson: You are saying there could be some niches. I noticed, for instance, the Anne of Green Gables models—I'm not sure whether it was in Japan or some place in China they were having them. You may well look to some niches, as well, for opportunity.

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Mr. Kelly McCloskey: There are niches in low-cost housing, pre-fabricated homes, etc. There are all sorts of parts of the world that have not yet dealt with their shelter needs. Ian talked about that earlier. We as a country are ideally placed to house the world, both with the product and with the knowledge.

Mr. Ovid Jackson: Mr. Chairman, just one last question. The CMHC I think is becoming an expert in trying to house people. I don't know if you are familiar with that. Are any of you working with them in order to look towards those opportunities?

Mr. Kelly McCloskey: Yes, we are, both in Ian's shop on the research and development side, and certainly in the market side we work very closely with CMHC.

Ian, do you have any other comment on that?

Dr. Ian de la Roche: Very much so. In fact, we have several partnerships with them. We're interested in areas like the possibility of building houses that are resistant to termites, for instance, to open up markets in the Pacific rim. It's those kinds of studies. They're putting in demonstration houses in various parts of the world, and we're working with them to back up with some of the technology that's needed, to show that Canadian construction is a superior design.

One of the big things was that after Kobe, people went through. We sent over not only our fire experts but also our engineers. With their Japanese colleagues, they demonstrated very clearly that 2x4 platform frame construction, Canadian and North American construction systems, withstood better the seismic shocks than the post-and-beam that is a traditional construction over there.

Those are the kinds of things that people are starting to realize—that we do have something, and real opportunity, so we are working closely together.

The Chairman: Thank you.

Mr. Canuel, please.

[Translation]

Mr. René Canuel (Matapédia—Matane, BQ): Mr. Chairman, I'm just going to say a word on the environment.

My colleague seemed to be saying that we don't commit any sins here in Canada, but we have to have an office in Brussels to explain things. I know certain industrialists who, for 10 years, have been exploiting the forest in a disastrous manner. That is not what I want to talk about, but I wanted to start by making that comment.

I want to come back to research. You do a lot of research. Bravo! I congratulate you for that. However, unless I'm wrong, I would have expected that you would have done much more research on genetics over the last five or ten years. It's fine to make a finished product of the highest possible quality, and that has to be done, but we also have to know what a seed is.

If a tree takes 40, 80, 100 or 200 years to reach maturity, that's a long time. When we cut down a tree, we'd better think twice. I would like to have your comments on genetics.

I come from a rural environment. Where I live, there's a mill called Donohue Matane that has its ups and downs. Sometimes, it has to close down. Why is there so much variation? It is a lack of product quality? What is it?

Last year, here in the committee, we worked for the rural world, for rurality. You say that such and such a research laboratory is at such and such a place, and I notice that it's near big cities. Trois-Rivières perhaps isn't all that big, but still, it's a big town.

Would it not be possible, in the future, to decentralize research, to do research where the raw material is? Fifteen or 20 years ago, the Minister De Bané was in my riding. They said at that time that maritime research should be done in large centres, but the Maurice-Lamontagne Institute was set up at Sainte-Flavie to do marine research. Today, that Institute is recognized everywhere. But, it took an incredible amount of effort to get it there. With Internet and all the means of communication we have, couldn't researchers work in the area where the product is? I'm talking about the Gaspé in particular. Wouldn't it be possible to have a laboratory, not in Laval, in Montreal or in Quebec, but in the Gaspé? Would it be crazy to have highly qualified researchers work outside the big cities? I'll have another question later.

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The Chairman: Thank you, Mr. Canuel, Mr.Guimier.

Mr. Daniel Guimier: I'm going to answer certain parts of that question.

As far as the environmental performance of the industry goes, I don't think we want to debate that here. I'll just say that, in my opinion, the industry has made enormous progress over the last 20 years. I'm not saying that there's no progress left to be made, but things have changed a lot. The legislative climate and all the rules mean that the environment is one of the most important aspects of forest exploitation.

The second part of your question concerned genetics. I don't think we're the right people to answer your question since genetic research in Canada is done by the federal government, in federal centres. I think you met with some people from the Canadian Forest Service who came to talk to you about their program in that area.

This research is also done by provincial governments. There's a big laboratory in Quebec that does research in the field of genetics. Moreover, the federal laboratory in Quebec and the provincial laboratory share genetic research on various species. So, they're the people you should ask about genetic improvements. I had the impression that work was being done in that area, but you don't seem to think so.

Mr. René Canuel:

[Editor's note: Inaudible].

Mr. Daniel Guimier: I can leave it up to others to give you answers about the cyclical nature of the mill at Matane, but I would like to answer your question on research decentralization. You want researchers in the Gaspé and so on. I can tell you that yes, there are some researchers. Centres like Forintek, PAPRICAN and FERIC may be based in Quebec or Montreal, but the research itself in done on site.

Mr. René Canuel: They come as tourists.

Mr. Daniel Guimier: I wouldn't say that they come as tourists.

Mr. René Canuel: They're not there permanently.

Mr. Daniel Guimier: I wouldn't say they go there as tourists. They go there to work. A question was asked. A problem comes up. Can a research group such as ours, with 40 members, afford to have 40 people scattered all over the place? Research is, by definition, multidisciplinary. There has to be specialists in various fields.

Mr. René Canuel: But, there could be 40 people in the Gaspé.

Mr. Daniel Guimier: Yes, there could be 40 people in the Gaspé. It's mostly a question of logistics. It's easier to go to Newfoundland from Pointe-Claire than to go to Newfoundland from the Gaspé.

Mr. René Canuel: There are airplanes, after all.

Mr. Daniel Guimier: There are airplanes after all, that's true.

Now, there's a great wave of decentralization, especially in Quebec. So, we're starting to develop hubs. There are very important research hubs in Abitibi, for example, that are mostly centred around universities. There is a very important research hub in Lac St. Jean. Links with the regions are also made through the cégeps and educational institutions. We are in your area. We are in the Gaspé. We are there.

Mr. René Canuel: The wood is in our area. The trucks leave our area and they always go out. They never come in. There are researchers that stay out there, and the wood goes where the researchers are.

Mr. Daniel Guimier: We don't go to visit you. We go there to work.

Mr. Ian de la Roche: I just want to say that the value added program we set up is exactly that. We send specialists to all the regions. In that sense, things are progressing.

Mr. René Canuel: In our area, we had to set up the Mecker company that hardens wood. We set up a little company.

Mr. Ian de la Roche: There's another thing. With computers and Internet, distance courses can be given. That's important for training people. In my opinion, that is one of the greatest advantages we could have. It's possible. We try to link the kilns and our researchers in Quebec on line. So, the people who manage the kilns can talk directly with the researchers about their problems through Internet.

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Mr. René Canuel: I agree completely, except that they could be in the Matapedia Valley and communicate with some other lab in Montreal, in New York or anywhere else.

Mr. Ian de la Roche: Yes.

Mr. René Canuel: They could be there.

Mr. Ian de la Roche: Yes.

Mr. René Canuel: For that, there has to be the will.

Mr. Ian de la Roche: Yes.

Mr. René Canuel: Thank you.

The Chairman: Thank you.

Mr. René Canuel: I have one last question.

They say that when trees have to be transported to the mill to be processed, etc., it's very expensive. Could I have your point of view on that? Most transportation is done by truck. Wouldn't it be much less expensive—I don't know if a study has been done on the subject—to send them by train? It all depends on where you're sending them, whether it's on the river or on the Great Lakes.

Mr. Daniel Guimier: It's true that most wood transportation in Canada, especially in the East, is done by truck. The train is used whenever possible. Unfortunately, we see situations where, even when there's a railway line with a road running parallel to it, they use the road. It's a question of economics. It's a question of CN's and CP's rates compared to the others.

Mr. René Canuel: There haven't been any studies done on that?

Mr. Daniel Guimier: Studies have been done. There were even some development projects done in Quebec. We used a truck-train combination. A part of the trip was by truck, as far as the station, and then the truck itself was used as a boxcar. What generally kills that is the prohibitive transportation rates at the moment, because of CN-CP's monopoly.

Mr. René Canuel: Thank you.

The Chairman: Thank you, Mr. Canuel. Mr. Godin.

Mr. Yvon Godin (Acadia—Bathurst, NDP): I just want to say that I agree with my colleague: the wood comes from where we live and industry is in the big centres. I just want that to be written into the minutes. You don't have to answer me, because you already have. But, if you have any comments, go ahead.

When you're from New Brunswick, you don't see too many big laboratories. There is, however, the forest that's cut, that's gone, and quite big mills. Stone, Repap and NBIP are big mills. The mill in Saint John... That's what the people where I come from tell us.

I don't agree with you when you say that technology kills jobs, but you have to think about the jobs that have been created. We don't see that where I live. Six hundred jobs at Stone, 400, 500 or 600 jobs at NBIP... Don't come and tell me that creates jobs. If it does create any, it's in Toronto or in Montreal, not where I live. I totally disagree with you on that. Technology hasn't created jobs for us. It destroyed them. I wanted to make those comments.

You were talking about training on equipment. What do you propose for a region like ours. Where I live, we have big equipment: the big stumpers and the slashers like they call them. They cut the wood into eight-foot lengths. The producers come to me and say: "Listen, we don't have anything for training. We have to train people ourselves. There's no training program. It'll be really expensive for us if we have to hire new people." You seemed to be saying a little while ago that we have good training programs or that you were working on it. Again, I don't see that where I come from.

Mr. Daniel Guimier: I was misunderstood if I said that there were good training programs... I don't know what part of New Brunswick you're from.

Mr. Yvon Godin: Bathurst.

Mr. Daniel Guimier: Bathurst. You know that in Miramichi, there's a training centre where workers learn to work on multi-purpose machines. It's a centre that was created in cooperation with Irving and Repap that invested money to train forestry operators. It's not restricted to training employees from those two companies. It's open to others.

I was showing you the simulator, for example. It's those centres that are interested in that technology. The first simulator facility will no doubt be established either in Nova Scotia or in Miramichi, in your area. So, that's the kind of things we're doing.

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Research centres aren't usually there to train people, but to work in close collaboration with existing training centres. There are some in your area, as well as in Nova Scotia and in Quebec.

I didn't say that there were no jobs disappearing in the forest industry as such. I think we said that perhaps some jobs were disappearing, but that there were jobs being created elsewhere, in the area of...

Mr. Yvon Godin: In Montreal or Toronto.

Mr. Daniel Guimier: Not necessarily. In the area of forestry equipment, the manufacture of felling heads and trailers, for example, is done locally. It isn't big factories in Montreal or Toronto that build truck trailers. In general, it's little shops, that build 200 felling heads a year. So, it's quite decentralized. In the area of trailers, it's the same thing.

Mr. Yvon Godin: But that doesn't create many jobs, compared to what we lost.

Mr. Daniel Guimier: No.

Mr. Yvon Godin: The unemployment rate in our area is 19%.

[English]

The Chairman: Does anybody else want to offer a response to Mr. Godin?

Dr. Ron Crotogino: I'd like to just make some comments on the decentralization of research. I happen to like that idea myself.

Mr. Yvon Godin: Good, then do it.

Dr. Ron Crotogino: I mentioned that in the 1950s we did have research centres up in Baie-Comeau, Kenogami, and Trois-Rivières, and in the mills, such as in Powell River, where I was. We need to do that again.

Your colleague said the researchers are tourists in these mills. It may appear that way, but what we need in those mills are people who can take that research and apply it in the mills. This is the one thing we're drastically lacking.

It is not important that we do world-class research in these mills. It is important that the world-class research that's done around the world is applied in these mills. There's a big difference there.

The way you have to do that is to grow your own. You have to grow your own people. One example of that is the University of New Brunswick in Fredericton, where there is a centre that does some world-class research. Local people go to that. These are people who don't want to go to Toronto. These are people who want to stay out there. Trois-Rivières is a very good example that caters to people who want to stay in those areas. This is the thing we have to strengthen: the local education that is plugged into these research centres elsewhere.

The communication is there. The possibilities are there. The possibilities of distance learning are excellent, so there's no reason we can't take these local people who have the talent and who have the will to stay in that mill and give them the right kind of education and plug them into this worldwide network so they can take that research and apply it in those mills for the benefit of those people.

It's not a question of moving research institutes out there. We have a fair number of those spread around. It is the application of the stuff in the mills that is absolutely crucial, and that has to be done by people who want to be there, who want to live there, who want to stay there, and who want their children to grow up there.

The Chairman: Dr. de la Roche.

Dr. Ian de la Roche: I just wanted to add that there are certain things that are appropriately done in centres, where you need a critical mass in terms of equipment and what have you. But an important point is that this country failed badly in what was mentioned: transferring technology and having the appropriate receptors in the mills to pick that up.

We've started, at least since I've been at Forintek, a much more aggressive approach to tech transfer and techno services in the mills, and our people are out there, whether it's in Matane, the Lac-Saint-Jean area, Prince George, or wherever.

However, in terms of Quebec, it was felt that even that wasn't enough. This was one reason the Quebec government decided to enter into a further partnership with us, to the tune of something like $6 million, to get technology transfer specialists out there. These are highly capable people who know gluing, drying, and what have you. That's important.

With respect to New Brunswick, our situation has been a bit unfortunate. We don't have a strong presence in terms of membership in New Brunswick and the Maritimes. It's a bit of a catch-22: if you're not servicing them, then you don't get them to join. But what we have done is, for the ones who are members, we're there working with them.

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We just signed a memorandum of understanding with the University of New Brunswick, and that means we're going to put in the Fredericton lab people tied in—we already fund some research down there—for tech transfer. The only stumbling block is that Mr. Graham, provincially, has to be willing to come to the party.

Mr. Yvon Godin: It's just a matter of time.

Dr. Ian de la Roche: Okay.

The Chairman: Mr. Bernier.

[Translation]

Mr. Gilles Bernier (Tobique—Mactaquac, PC): I have five or six questions I'd like to ask, but I'll only ask one. Before asking it, I would like to say that I'm completely in agreement with my colleagues that research centres...

[English]

The Chairman: Five or six questions, Gilles?

Mr. Gilles Bernier: I had five or six, but I'm only going to ask one.

[Translation]

Research centres should be where the forests are. I also come from New Brunswick. There are lots of forests in New Brunswick. There are two big companies in my own riding, Irving and the Fraser Pulp and Paper Company. Those are big companies. There is no research centre at all. You have to go to Montreal, Toronto or Vancouver. That's not acceptable.

My only question is for Mr. Guimier. When you did your presentation, you talked about equipment. You said that 40% of the equipment was manufactured in Canada and that 79% of the machinery inside the mills was manufactured in Canada. The rest, you buy it from other companies. What is happening in Canada? Don't we have the resources needed to manufacture more than 40% of the equipment here, in Canada? If we manufactured more, we wouldn't have to go and buy it in other countries and that would create jobs in Canada.

Mr. Daniel Guimier: I agree with that. That's why I presented those figures. The 40% figure applied to carriers. So, it means skidders, tractors, tracked vehicles. It's obvious that that market is dominated by Caterpillar, Komatsu, Japanese machines, etc. Except for Timberjack, which is owned by Finns, and some companies like Tigercat or others... Forty percent, that's not so bad but, in my opinion, we should try to develop that industry.

As for that 79% figure, I didn't make myself clear and I apologize for that. That's not for sawmill equipment, but rather for felling heads, grapnels and all the accessories used by the forest industry.

We weren't so bad off in Canada with what is call debranchers, etc. However, we now manufacture 79% of those things where, two years ago, we made perhaps 85%; next year it might be 75, 70 or 60%. So we are losing steam because we lost a large part of the market, that of multipurpose machines that are imported from Finland and Sweden. As a country, as a forestry group, we could get together and try to find a solution so that those figures go up and not down.

Let me make another comment. I'm very glad that there are two representatives from New Brunswick here. I have to tell you that I've been fighting for a year now to have a FERIC office opened in New Brunswick. It wasn't for lack of trying on our part. We said clearly that we wanted to regionalize and the first province we chose was New Brunswick. So, any help you could give me in that regard would be really useful.

Mr. Gilles Bernier: Leave me your card, Sir, and we'll get back to that.

[English]

The Chairman: Are there any other comments?

Dr. Ron Crotogino: I have a comment on the equipment industry. In order for the equipment industry to be competitive, they have to sell all over the world. So I don't have any problems about the industry buying only 40% from Canadian companies, as long as there are Canadian companies that are also selling abroad.

What we need to do first of all is focus on getting the right kind of equipment manufacturers who will deal with specifically Canadian problems, and to make sure these problems also have export potential. For example, with the smaller scale of paper machine manufacturer, I believe there's a tremendous opportunity, because Canada can't afford to put up many $1 billion projects, but it can afford lots of smaller ones. And a lot of the developing countries, where there's a huge business opportunity, have the same problem.

So I think we have to focus on building this industry to suit us on the first hand, but also to look at this global business. As long as we export more machines than we import, I'm happy. I don't care if our industry buys only 40% as long as we export a lot more than that other 60%.

Mr. Gilles Bernier: But right now it's the other way around.

Dr. Ron Crotogino: I know.

Mr. Gilles Bernier: We export more than....

The Chairman: Okay, Gilles?

Mr. Gilles Bernier: Yes.

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The Chairman: We have a short question from Mr. Chatters.

Mr. David Chatters (Athabasca, Ref.): I have a quick comment on the remark that the secret is to put personnel in the mills who implement the technology. Maybe there's some merit in that, but you also need a mill ownership willing to spend the bucks to implement the technology. I can remember in this parliament championing the pulp and paper industry against the chairman of the environment committee, who was raising a motion condemning your industry for continuing to put dioxins and furans into our environment. I was completely surprised to find that was still going on under exemptions to licences and those kinds of things. So there's more politics going on than just having someone there to implement the technology. You must have the ownership ready to spend the dollars to upgrade that equipment.

Several times you talked about the development of an equipment industry in Canada and that we need focus from government to do that. I can think of a couple of examples where we've seen that focus from government and it's been very successful. For example, I'm thinking of Atomic Energy of Canada Limited and the development of the CANDU reactor and what's going on. The government poured huge sums of money into that over many years. They had that focus to develop it and have been successful. I think of the aerospace industry and Bombardier and how they seem to have received it.

Why have not the natural resource industries been able to receive that kind of focus? It seems to me that the natural resource sector in this country is more responsible for the standard of living we enjoy than any other sector of the economy. Is there a mentality within the industry that says we're too proud to take government money? Or are you too timid when you come to Ottawa?

I notice that our resource industries, when they come to Ottawa and I see them in Ottawa, are extremely timid around the ministers. I'd like to have a comment on that.

Mr. Daniel Guimier: It's strange that you're using those words, because I could have given the same speech in reverse to you: why is it that CANDU reactors and the aeronautics industry are getting that government support while the forest industry is almost taken for granted, even though it represents, as we've demonstrated here, a huge—

Mr. David Chatters: I could say that, never having been in government.

Mr. Daniel Guimier: At the detail level, we sense that the government is more likely to support the Bombardiers, Atomic Energy of Canada, and others. We know that when we submit proposals for funding. If the proposal doesn't have the sexy words “high tech”, etc., it's likely not going to be funded. We are doomed from the start when we go from basic, very needed research and development for the forest industry. We have to kind of disguise the proposals to make them look like high tech and aeronautics to get them accepted.

Maybe it's problems on the two sides, but my feeling is that the government perception is that the forest industry has been there, it has provided good support, but they don't need help, they don't need support. But we do, within these major challenges that would require support.

The Chairman: Dr. de la Roche and then to Dr. Crotogino.

Dr. Ian de la Roche: I have a short comment on the culture. Mr. St. Denis, I think you are well aware of it as your riding has both mining and forestry.

Owners of these operations are fiercely independent. As you find in rural communities, people shy away from hand-outs. They might take a hand, but a hand-out is something they're not too keen on taking. I think it's a lot of the culture. This is why we did the benchmark—to show that other countries in the world do it as a partnership.

I've been after some of my members who were strong supporters of foreign tech, to say maybe we should ask government to be there also. They say I really have a tough time—on the one hand I'm telling them to reduce the deficit and on the other I'm going to ask for a hand-out. There's a pride there, and it's a psychological dilemma that they suffer. Some industries, especially some of the newer high-tech ones, have no qualms about doing that.

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Dr. Ron Crotogino: There are some examples that are far less timid than I'd like to see.

As for the question of why it is not working, sometimes we have government programs and industry needs that don't really match all that well. A perfect example is the energy program. We do tremendous research to save energy, rather than do research on how to use the energy to make products that will have a market advantage. That's an entirely direct focus. We've got to come up with energy savings come hell or high water.

Mr. David Chatters: That's simply because the government's focus on environmental issues is bigger than the government's focus on developing the technology in your industries.

Dr. Ron Crotogino: That's correct.

I think if you want to have success stories in this area, you have to develop programs together with industry, rather than give industry some programs with which they can then try to leverage some dollars.

Mr. David Chatters: It's unimaginable that this government is actually funding some of those groups that are spreading misinformation in Europe about your industries, and nobody seems to be saying anything about it.

The Chairman: Is that true, Dave?

Mr. David Chatters: Yes, it's true.

The Chairman: Mr. McCloskey.

Mr. Kelly McCloskey: I have one brief comment on that.

The provinces own the vast majority of the forests. If you look at the issues our industry is dealing with, you will see they tend to be provincial in scope. These kind of issues are federal, but most of our industries' issues these days are provincial, and so we're not as much in contact at the federal level as are some other industries. We don't have that profile. Our needs are equally significant, but we just have not—

Mr. David Chatters: That's what Darrel talked about, the problem with the split in jurisdictions, which perhaps takes some of the focus away. That's unfortunate.

The Chairman: Thank you, Mr. Chatters.

I have just a short question on behalf of Mr. Calder, who had to leave early.

Dr. de la Roche, in your presentation there was the composite, the wood I-beam. They use glues in that. Can you use or do you use fire retardant glues? Is that why it doesn't burn like we expect wood to burn?

Dr. Ian de la Roche: I didn't say they wouldn't burn. If you look at it, you will see that the web part can be OSB or plywood and the flange along the top and the bottom can be laminated veneer lumber or what have you.

The Chairman: Are the glues themselves fire retardant?

Dr. Ian de la Roche: No, the glues wouldn't be, but you can put fire retardants in those potential systems.

That's the answer to the question.

The Chairman: On behalf of the committee I want to thank our witnesses today. I think we've just started this process. I don't think we're going to have it all answered by June. I think as we got near the end of our two hours of discussion, we were getting closer to getting down to the nitty-gritty of it.

I hope it will act as a launch pad for future committee discussions such as on where the real problems are. Forestry is different from the mining sector, which is different from the energy sector. Clearly government has to be there at some level.

Given the degree of networking that goes on in your industry, at some point it would be good for us to understand how effective your networking is compared with that of other sectors. Can that networking be somehow supported and expanded for the betterment of all?

I think the idea of getting the people who help with technology transfer is a critical front-line issue.

With that, I want to thank you and look forward to dealing with you in the future.

This committee is adjourned.