SINT Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL TRADE, TRADE DISPUTES AND INVESTMENT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

SOUS-COMITÉ DU COMMERCE, DES DIFFÉRENDS COMMERCIAUX ET DES INVESTISSEMENTS INTERNATIONAUX DU COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 21, 2001

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[English]

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): We have a quorum, but before we proceed we have one housekeeping item.

On March 28 we were scheduled to have a one-hour meeting. I want to have the permission of the committee to extend that by an additional one hour for some further hearings on the softwood lumber issue. We will be having Mr. Frank Schiller, from the Canadian Lumber Remanufacturers Alliance, who will be here to talk to us about softwood lumber. Do we have the consent of the committee to an additional hour?

We have that consent. That's good.

We have a very good list of witnesses today. We have five witnesses and exactly two hours. So if I have the permission of the committee to be as strict as possible in terms of time allocation, each one of our speakers will have a maximum of ten minutes—that does not mean they need to take all of the ten minutes.

At the end of the presentations, we will have questions and answers. Each member of the committee will have exactly five minutes. That five minutes will include the questions and the answers, and I will be quite firm in respecting that time limit also.

Mr. Bill Casey (Cumberland—Colchester, PC): On a point of order—

The Chair: Let me finish this point, Mr. Casey.

The witnesses we have with us today are, from Government Policy Consultants, Mr. Gerry Shannon, senior consultant; from the Canadian Lumber Trade Alliance, Mr. David Emerson, co-chairman; from the Industrial Wood and Allied Workers of Canada Union, Mr. David Haggard, president; from the Maritime Lumber Bureau, Ms. Diana Blenkhorn, president and CEO; and the legal counsel for the Free Trade Lumber Council, the Honourable Bob Rae.

Welcome, all of you. Welcome, Mr. Rae.

Mr. Casey, you have a point of order.

Mr. Bill Casey: Yes. Thanks very much.

I want to bring to the attention of the committee that the background notes provided by the parliamentary research branch have some fundamental errors in them, specific errors, and do not reflect the real situation. I'd like to see the branch go back and do them over again.

There are four provinces in the country under the Softwood Lumber Agreement, four under the Maritime Accord, and two under the free trade agreement. Essentially, this deals only with the softwood lumber provinces. It doesn't even mention the Maritime Accord, and the other two provinces are completely omitted.

It has factual mistakes in it that I think should be corrected. I'll list one here:

Both the American lumber industry and environmental groups claim that the Canadian system of land tenure and provincial government forestry management practices result in unfair subsidies to Canada's lumber industry.

The Chair: Mr. Casey, it's a point well taken.

Why don't we receive them from you, and maybe you and the researchers can look at this and hopefully be able to deal with it.

Mr. Bill Casey: It's misleading and should be corrected. Thanks.

The Chair: Thank you very much.

With that, we'll proceed straight to Mr. Gerry Shannon.

Mr. Gerry Shannon (Senior Consultant, Government Policy Consultants): Thank you, Mr. Chairman.

This committee's study of the softwood lumber issue is very timely, and I'm very pleased to be able to contribute what I can to your deliberations.

As some of you may know, I have a considerable history with Canada-U.S. trade, including the softwood file. I was deputy minister of international trade when this issue forcibly erupted in 1986, and later during negotiations on the Canada-U.S. Free Trade Agreement. I served as our chief negotiator for the Uruguay Round in Geneva, which renegotiated the subsidy countervailing duty agreement that established the WTO rules to be applied in cases such as these. I spent a considerable portion of my career on Canada-U.S. relations, much of it in Washington.

Since time is limited, let's quickly cut to the chase and address what I think are the real issues at hand.

First, why are we faced with yet another softwood war with the United States?

Make no mistake about it, softwood lumber is a recurring trade dispute not because Canada unfairly subsidizes its softwood exports to the U.S.A. The U.S.A. likes to take the high road and argue that, because of unfair provincial stumpage practices, our producers have a built-in and illegal advantage in trade.

No, the real issue is not unfair subsidization; it's market share. Put simply, the U.S. does not want Canadian softwood exports to gain more than 30% of their market. When we do, the hammer drops and U.S. lumber companies invoke their considerable power in Washington to get what they want one way or another—that is, action that reduces Canadian exports to a level where they feel comfortable, or in effect a continuation of managed trade in this sector.

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Economics has little to do with this, nor does subsidization. The issue is market share, and the U.S. has made it a bottom line in their dealings over the years with Canada that we must live with what is in effect an ongoing waiver for the U.S.A. of its obligations under NAFTA.

If the situation were reversed, that is, if the issue was an American share in the Canadian market for one of their key export commodities, and we had built into our system a rider that said on no account would the U.S.A. be permitted to achieve more than a third of the Canadian market, I think we can safely assume that the NAFTA agreement never would have taken place. Yet years after NAFTA, we find the U.S.A., for the fourth time, arguing for the imposition of barriers to effectively limit how much lumber Canada can sell into the U.S. market, notwithstanding that we share a free trade area that we have bought and paid for.

The U.S.A. expects to win this case. Why? First, because they've won at least twice before, if you look at the ultimate outcome. The pattern is obvious. We win the battles, but they win the war.

In 1986, under duress from Washington, we entered into a memo of understanding that imposed that export tax on softwood, pegged at 15%, the precise level that the U.S.A. asked us to levy it at. We had reason to believe at that time that a GATT panel then looking at the case would have come down in our favour, but as the GATT was not a binding instrument in those days, those favouring a negotiated trade outcome prevailed.

There are those today making the same arguments on behalf of an export tax as a means of achieving temporary respite and of keeping the duties paid in Canada. Make no mistake, in passing an export tax on lumber, we sold the principle so that we could keep the money and recover the tax for good reason. It was highly intrusive for the provinces because it gave the U.S.A. too much leverage in how we manage our forests and it was punitive and excessive. But 15% pales beside the numbers being discussed today.

In 1996, having exercised our legal right to terminate the MOU five years earlier and having successfully defeated the U.S.A. in multiple NAFTA panels, under intense U.S. pressure we imposed the current Softwood Lumber Agreement on our exporters. The result in effect was an export quota-based system, which also achieved for the U.S.A. its goal of blocking free trade in this sector.

In both cases, they started off with an unfair trade complaint. But on both occasions, the U.S.A. happily abandoned their cases because, through direct pressure on the parties, they got what they were after.

Secondly, the Americans know Canada well. The U.S.A. market is the market for softwood exporters, and Canadian companies and the producing provinces became the lightening rods for American complaints. For their part, Canadian companies were reluctant to engage in a legal trade war with the U.S.A. on softwood because of the uncertain nature of the outcome and because under current U.S. law, even if the U.S.A. eventually lost the case in the WTO, nullifying their imposition of duties, the duties would not be refunded. Also, for those with a strong export position at the time of the imposition of the agreement, a quota system provided an edge over others, including new entrants.

As for the provinces, stumpage is an important revenue source. As importantly, or perhaps more so, the harvesting system had been forged internally and met their concerns. They were concerned not to lodge a process that would give the U.S.A. an undue say in how many of our trees are cut and how to do and pay for this.

Thirdly, and perhaps most importantly, the Americans have won because we on the Canadian side have never been able to get our act together in order to repel the U.S.A. on this issue and decide for ourselves, in light of the possible legal consequences, the appropriate course of action. Instead, either one province or another has been willing to yield to the U.S.A., or, as was the case in 1996, the federal government itself yielded to some of the provinces and permitted the process to give birth to the Softwood Lumber Agreement.

The question before the federal government and before Parliament is whether there is a viable option other than giving in to U.S. demands. There is, but it will not be easy sledding.

First, it's a given that with the demise of the SLA, the Softwood Lumber Agreement, the U.S. industry will launch a countervailing duty suit on April 2. They may also launch dumping suits as part of a scatter-gun approach to ensure they hit the target and achieve the desired outcome.

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A countervailing duty investigation will launch a process that will call for investigation into subsidy and injury before a preliminary determination can be found and the imposition of duties commence. Knowing the Americans, they will use that period to increase the pressure on the various players in Canada to urge us to forego our NAFTA and WTO rights and accept a deal that will ensure a continuation for several more years of managed trade, not free trade, in this sector. Canada will have little choice but to fight the imposition of countervailing duties should the U.S. legal system produce that result.

The ultimate Canadian recourse is to take the issue to the World Trade Organization, where, happily, Canada has not been sitting on its hands waiting for events to unfold.

There are two factors I'd like to cite briefly that should make the U.S.A. nervous about the case going to the WTO. First, during the course of the Uruguay Round of trade negotiations, negotiators, except those for the United States, agreed that the economic impact of export controls would not be counted as a countervailable subsidy. In the last case the U.S.A. brought against Canada in the 1990s, the U.S. system determined that more than half of the subsidy was caused by export controls on the primary product. If the U.S.A. persists in counting this factor as part of a subsidy, the regulation would be inconsistent with the WTO and would have to be withdrawn.

The Americans, of course, reject this outcome even though the European Union, Japan, and others, including the GATT negotiating secretariat, share the Canadian version of the negotiating committee's work. Instead, the U.S.A. set out the opposite conclusion in its statement of administrative action, which accompanied the Uruguay Round implementing legislation through the Congress.

It was argued by the Americans that this change in law would have meant that Canadians might not have won subsequent NAFTA challenges on softwood, as NAFTA only rules on whether the country is applying their domestic law appropriately. This is one of the reasons that Canada agreed to the Softwood Lumber Agreement in 1996, but the SAA, or the statement of administrative action, will not hold much sway in Geneva, where the WTO should take the contrary view. As you know, Canada has launched a case against the U.S.A. on the issue of countervailability of export controls to confirm that our interpretation is in fact correct.

Secondly, Canada has launched another panel before the WTO alleging that the U.S. practice of not refunding duties imposed on the basis of a preliminary determination would be inconsistent with WTO obligations and would have to be withdrawn.

Both of these outcomes, should they materialize in our favour, would be binding on the U.S. In the event the U.S. failed to comply, Canada would be authorized to take measures damaging to U.S. trade interests of a comparable value. It is small wonder that the U.S.A. has put the heat up in Canada now to reach the managed trade outcome of this dispute and that this will continue to dominate the U.S. approach to the issue until they get a clear no from Canada to going down the managed trade route once again.

Their next step will be to make the link in Congress that fast-track trade authority for the administration to conduct international trade negotiations will carry with it a price tag for Canada: no fast-track authority unless we in Canada are brought to heel on softwood.

Finally, what realistically should Canada's approach be this time around? The government is currently seeking the U.S. government's support in the appointment of special envoys—an expression of hope that wise individuals can pull together in their approach to a problem that has defied successive governments on both sides of the border.

It begs the question, however: to what end? In other words, exactly what would the special envoys be expected to do?

First, is there reason to believe the U.S.A. could be deterred from launching its countervailing duty investigation immediately after the Softwood Lumber Agreement expires? If so, this avenue should be pursued, but frankly, under the circumstances, it's highly unlikely the U.S. would try to deter its own companies from exercising the options open to them under U.S. law.

Secondly, is there any evidence to expect the U.S.A. will make any concession at all, or are all the changes expected to be made on the Canadian side?

Thirdly, would such a process buy time for Canada to persuade the U.S.A. of the reasonableness of its position, or would it just give the U.S. more time to leverage its considerable power over Canadian players in this process, adding to the likelihood that we will once again be sucker-punched into another managed trade outcome, if only as a means of avoiding waging a trade war with the new Bush administration?

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Mr. Chairman, 20 years is a long time to let a bilateral irritant fester. This might have been resolved in the course of the Canada-U.S. trade negotiations in the mid-1980s, but the U.S.A. made sure it didn't happen by explicitly including the provision that nothing in the new agreement altered the terms and conditions of the 1986 agreement on softwood.

A solution was available in 1996 had the parties agreed to let the law take its course. But Canada, having won the first legal skirmishes, instead opted to agree with the U.S.A. by accepting the unilateral imposition by ourselves of quantitative limitations on our exports. And it's available now, but only if the Canadian players this time succeed in getting their act together under federal leadership, reject an export tax or a continuation of the current quota agreement as demeaning and as unacceptable trade policy in a free trade area, and insist on the right outcome based on international law.

Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Shannon.

Now we will hear from the Canadian Lumber Trade Council, Mr. David Emerson. You have ten minutes.

Mr. David Emerson (Co-Chairman, Canadian Lumber Trade Alliance): Thank you very much, Mr. Chairman, ladies and gentlemen.

My name is David Emerson. I'm the CEO of Canfor Corporation and one of three co-chairs of a group called the B.C. Lumber Trade Council. I'm also one of three co-chairs of a pan-Canadian—if I may use that phrase, carefully—group called the Canadian Lumber Trade Alliance.

I have to say that I'm going to make some fairly general comments today, but I don't want it interpreted that I am speaking for the groups I am involved with, although I do not believe there would be substantial differences of opinion with much of what I'm going to say today.

There are less than two weeks to the expiry of the Softwood Lumber Agreement. It looks certain that we will face the fourth round of trade litigation on softwood lumber since 1982. The battle is shaping up as the ugliest and probably the most expensive yet.

Let's look at the Softwood Lumber Agreement for a minute, because it does represent, in my view, a very perverted arrangement in terms of public policy. It represents a fragmented, quota-based, interventionist trade regulatory scheme. It's anti-Canadian in the sense that it permits non-Canadian lumber to enter the United States quota free.

It's divisive within Canada in that some provinces are quota-exempt and some are not. Some companies have a substantial quota and some companies have little or none.

Look at some of the results over the life of the Softwood Lumber Agreement. The non-Canadian—that's the third-country market share in the United States—is up over 100%, about 106%. Canadian exempt regions have increased their market share over 130%. British Columbia, Canada's strongest forest-producing region, has lost 20% of its United States market share, and has actually undergone a significant absolute reduction in exports of softwood lumber to the U.S.

From 1995 to 1999, 26 of 55 lumber mill closures in North America were in British Columbia. The average return on capital employed in the B.C. industry over that period was 2.9%—you would have done better in Canada Savings Bonds.

Despite all this, we continue to hear ill-informed commentary that the lumber trade issue is really a B.C. problem. If B.C. would just stop subsidizing its industry and flooding the U.S. market, all would be well.

In reality, what we have is a trading framework that is worse than archaic. It unfairly punishes our industry, it costs Canadian jobs, and it devalues our companies, thereby creating fire sale assets for hungry foreign acquisitors.

What about the rhetoric in the United States versus the reality? It's very difficult to separate the rhetoric from the reality. But the storyline we hear in the United States is that Canadian timber, largely because it's owned by the crown, is transferred to companies on subsidized terms. This was previously tested by panels, which found no subsidy, but protectionist measures continue.

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The reality is that the U.S. producers resist Canada's market share growing beyond roughly one third of the U.S. market. Once that threshold is crossed, the artillery comes out—biased, self-serving, punitive litigation using carefully crafted laws that ensure U.S. producer interests are realized. Would policy changes in Canada make a difference, as is claimed by some of the protectionist members of the industry in the U.S.? Not likely. Once market share thresholds were again crossed, new and more refined artillery would be brought out, and we've seen it in the past.

Where do we go from here? We should first recognize the obvious. North America is, in reality, an integrated economic and environmental zone. What we lack are mechanisms to manage it well. For softwood lumber I believe this means, number one, negotiate an immediate ceasefire that must include a short, well-defined path to free trade. Second, establish a code of principles reflecting the imperatives for sound, sustainable forest management in an integrated, competitive market. Third, establish a bilateral commission or mechanism for overseeing North American forest policies and providing first-line trade dispute resolution on a fair and objective basis.

In the absence of a new North American framework, dispute resolution in softwood lumber will remain a veil behind which forces of protectionism will continue to grow and prosper.

In conclusion, solutions do exist that would serve Canada and the United States well. The road ahead will be difficult, but we cannot give up. Too many in Canada depend on us, and one thing is certain: free trade in softwood lumber is unlikely to be achieved in isolation from other Canada-U.S. bilateral issues.

Thank you, Mr. Chairman, and I would be happy to take specific questions later.

The Chair: Thank you very much, Mr. Emerson. Now we'll hear from Mr. David Haggard, president of the Industrial Wood and Allied Workers of Canada Union. You have ten minutes, Mr. Haggard.

Mr. David Haggard (President, Industrial Wood and Allied Workers of Canada Union): Thank you very much, Mr. Chair and committee. My name is Dave Haggard. I'm the president of the Industrial Wood and Allied Workers of Canada, which represents workers right across this country in the solid wood sector.

When NAFTA was implemented, we, obviously with many of my colleagues in different unions, were one of the unions out there saying we were going to pay a stiff price for it. On the other hand, my union relies very much on trade around the world because the products of the people I represent, probably 85% of them, are sold around the world, most of which goes to the United States.

We started to face this challenge a couple of years ago and started to figure out how we could do something about it. We talked to our colleagues in the U.S. who represent the forest workers in the solid wood sector there and asked them how we can avoid a major battle every few years between the United States companies and our industry in Canada. We wondered how, if the industry couldn't get along with each other in each country, they would ever learn to get along with each other across the borders, other than buying each other up.

They seem to have done that in a very big way, and yet the trade wars continue in the forest industry. We believe, quite frankly, that there is an avenue that could stop the trade wars. Europe has found a solution with the European Union, the Eurodollar, and everything else that goes along with it, as they build a bigger and bigger trading group to trade around the world. Why is it impossible to do the same thing in Canada and the United States?

We worked with the federal government to try to put market development moneys together, and are still working on that with the industry in Canada. We believe that should be expanded with industry in the United States as well. We believe that as we sit on the threshold in China, India, Korea, and other countries, there wouldn't be a problem, either with the price or the amount of wood shipped around the world from our two countries, if we could ever get our act together. I'm not sure we can.

I still live and believe in the dream that we should have the ability to overcome our differences in our two countries; to be able to move ahead to do that on a worldwide market development scheme. But instead, all we seem to do is continue with the new free trade agreement that seems to be pending with the Americas, which, once again, will create another major problem in the United States, if you stop and think about it. It may also create a problem in Canada because they too are in the forest industry.

Are we going to be faced in Canada with the Americans sending more wood into the U.S. while restrictions continue at our border? I would hope that our government doesn't go down that path because I think that would be a major detriment to our country.

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We believe we have the opportunity, and we believe we must work very hard on it. We don't believe in managed trade in this country. We think that has created a major problem with the people I represent in the province of British Columbia, where many mills shut down because they didn't have quota. It created unequal fairness across this country, where those who had quota did quite well, thank you; those who had no restrictions did even better; and those who didn't have quota suffered a great deal of problems with the people who worked for them.

We believe the federal government should lead this initiative on the market development. We believe it should be done with the industry in both of our countries and with the two labour groups in the U.S. and in Canada, which have stepped forward to the plate to be willing to participate in this type of thing. We think if we don't do that we'll both continue this fight for as long as any of us in this room are around, and we think this will do nothing but harm for both of our countries.

We talk about export taxes at the border. Personally, I don't believe that's the right way to go if we have a North American Free Trade Agreement. We could live with this for the short term—and by short term I would say no more than one or two years—if it's the only way we could get over the hurdle we face with the rhetoric that's been in the press for the last two months and the threats of the Americans that they plan to do something on April 1. We could live with something that was very short and had a definite end to it as we sat down and talked about how we develop a North American strategy in the forest industry.

If we don't get there, I think we'll continue this trade war forever. Thank you very much.

The Chair: Thank you very much, Mr. Haggard. We now have Diana Blenkhorn with the Maritime Lumber Bureau. You have ten minutes, Ms. Blenkhorn.

Ms. Diana Blenkhorn (President and Chief Executive Officer, Maritime Lumber Bureau): Thank you very much, Mr. Chairman. I would like to thank the members of the committee—many of them are familiar faces to me—for this opportunity to be here.

The Maritime Lumber Bureau has presented a unified position on behalf of the softwood lumber industry in Canada on all issues affecting it for the past 62 years. The bureau was formed in 1938. So we have a great deal of experience in presenting the opinion of the industry in Atlantic Canada on a unified basis.

On the issue of softwood lumber trade with the United States, I've come here today to represent the unified position of the industry in four Atlantic provinces: Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. This fully unified position is not just among industry in those four provinces, but it also affects the four provincial governments. This was best exemplified by a letter to Prime Minister Chrétien that was signed on February 28 by all four Atlantic premiers.

I was pleased to receive the invitation to appear here today because this is one of the most important and critical issues facing the softwood lumber industry in Canada, and indeed in Atlantic Canada.

I welcome the opportunity to discuss with you the position of the Atlantic industry, and I will take any questions you might have, as you'd expect.

There has been much discussion in this country over the past few weeks, and certainly in the previous presentations today, on the expiration of the Softwood Lumber Agreement on March 31. But what has not been discussed in detail in this country is that there are two different agreements.

I'm certain you're familiar with the SLA, or the Softwood Lumber Agreement, which was signed by both Canada and the United States on May 29, 1996. This agreement has in it the components that were proposed by industry at the time, and which imposes a quota on the provinces of British Columbia, Alberta, Ontario, and Quebec.

But the second agreement also covers four provinces. Those provinces are Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland. This agreement provides continued free trade in softwood lumber that originates in those four provinces provided that the logs originate there or in the state of Maine.

The exchange of letters that constitutes the second agreement, which we refer to as the Maritime Accord, was also signed on May 29, 1996, by both the Canadian federal government and the United States government. It's the second agreement I intend to address today.

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There are three key components of the Maritime Accord: first, it records the historical reasons the Atlantic provinces have always been exempt from previous trade remedies on softwood lumber issues between the two countries.

I'm going to quickly review that history. In the 1986 preliminary determination of the countervailing duty case, 92% of all Atlantic sawmills were exempted on company-specific exemptions. That means that was reviewed and determined by the United States Department of Commerce. Whether it was right or wrong, the balance of exporters paid a 15% countervailing duty penalty.

Then we move on to 1987, when Canada implemented a 15% export tax, covered under the MOU, on all other shipments. One year after that export tax was put in place, the entire Atlantic region was exempted, and the 15% tax was paid by the balance of Canadian industry.

But when in 1991, at the urging of British Columbia, Canada terminated the memorandum of understanding that imposed the 15% export tax, the United States retaliated with a self-initiated countervailing duty investigation. Once again Atlantic Canada was exempt. We further understand that this was probably the first time in United States history that a political subdivision of a country was exempted from this type of action.

But the 1991 countervailing duty petition contained the following statement:

The United States domestic industry does not claim that countervailable subsidies are being provided to the Maritime Provinces. Timber from the Maritimes is sold competitively and in an open market. Furthermore, because the bulk of timber harvested in the Maritimes is from private lands, the domestic industry does not believe that there are any subsidies provided to the Maritime Provinces that result in imports causing or threatening material injury to the United States softwood lumber industry.

While that statement was contained in the CVD petition, the balance of the Canadian softwood lumber industry paid a CVD of 14.47%, which was later reduced to 6.51%.

The point here is that Atlantic Canada maintained free trade throughout that dispute.

In 1996, following a year of lumber consultations between our two countries, where we attempted to resolve this and to have a better understanding of the problems between the two countries, and where the negotiated settlement we're talking about today, the SLA, ensued, Atlantic Canada obtained the agreement we are talking about now.

That's the first component of the agreement.

The second component is that the agreement sets out certain obligations, which have been maintained by the Atlantic region. In an attempt to provide additional assurance that only lumber that qualified for the continued free trade with the United States was shipped and declared as originating in the four Atlantic provinces, the Maritime Lumber Bureau voluntarily reinstituted a certificate-of-origin program. I say “reinstituted” here because in the earlier 1991 to 1994 CVD, a statement of province of origin was required. It was a program we had managed.

But when we got into the current agreement, we reimplemented a program. The new program, which began on April 1, 1996, was designed to accompany a shipment; to provide assurance that the lumber did originate in Atlantic Canada; and, most importantly, to establish a database on the volume of lumber being exported. Quarterly reports are produced and submitted to the United States Department of Commerce through the Canadian embassy in Washington. This data is then compared with U.S. Customs data and reconciliation meetings occur.

Both United States industry and various United States government departments have indicated this is a model program. More importantly, it is an indication of the due diligence we are willing to undertake in order to respect and protect the market in the United States. To our knowledge, no other Canadian industry association has undertaken such an extensive or similar program. In addition, when the Maritime Lumber Bureau became registered under ISO 9002 in August 1998, in order to further build in credibility for this program, the certificate-of-origin program was included in the scope of that registration.

The final component of that particular program is that all participants must voluntarily sign legally binding contracts, which would subject them to the penalty of perjury should the program be misused.

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Another obligation of the agreement we accepted and maintain is that crown forest policies will not be used to reduce costs to the industry. Stumpage rates have continued to increase in Atlantic Canada since the first exemption in 1986. More importantly, they're based on a formula that reflects both the selling price of lumber in the United States and the selling price of timber generated from private lands. There are 72,000 private woodlot owners in Atlantic Canada. This is exactly why there have never been any allegations of subsidy for softwood lumber production in that region.

The third component of the separate agreement, which covers the four Atlantic provinces, is that it provides protection from litigation and trade remedy actions in the event the larger SLA was breached or terminated.

Atlantic Canada's legitimate exemption should be maintained after March 31, and we want that particular agreement renewed.

There have not been any allegations of subsidy against our region. The obligations of the agreement have been maintained, and we continue to exercise due diligence in ensuring that softwood lumber that is declared as originating in Atlantic Canada does so, as determined by the certificate-of-origin program.

The Maritimes has had free trade with the United States in softwood lumber and logs throughout the various trade disputes between the two countries. This history traces back to the Ashburton Webster Treaty of 1842, which I believe is still in existence.

The simple facts that support the Atlantic status is that we are unique. It's particularly unique in that we have a fully unified position between four provinces and both government and industry. Also, we are unique in other important ways.

Minister Pettigrew's statement before this committee on Monday confirmed that 94% of Canadian forest land is under public ownership. In Atlantic Canada over 60% of productive forest land is privately owned, and there are 72,000 private woodlot owners who contribute to their livelihood through good stewardship of that forest land. As a result, 74.4% of Atlantic Canada's softwood lumber is derived from private land sources. This compares to 7% of softwood lumber from the balance of Canada.

We are unique compared with the rest of Canada. We are not making allegations compared with the rest of Canada. We simply state our case before this committee.

The facts supporting an escape from any trade remedy imposed by either Canada or the United States on the softwood lumber shipments originating in Atlantic Canada are as valid today as they were in 1986, when the Canadian and United States governments first recognized them: 74.4% of our softwood lumber is sourced from private lands; there have been no allegations of subsidies; stumpage rates in the region are market-based; and after 14 years of maintaining free trade with the United States, we continue to be considered fair traders.

Any increase in production and exports rose and fell with market demand. Most importantly, this increase was sourced from private landowners, who in times of good markets attempt to reap the benefits of their labours and in poor markets quickly reduce the available supplies at their own choosing. The system is market-based.

Given the detailed and legitimate evidence I've outlined, the Maritime Lumber Bureau, again on behalf of the 250 members and the 72,000 private woodlot owners, believes it's the responsibility of the Government of Canada to ensure there's no erosion in our free trade status with the United States. We respectfully request the support of this committee in maintaining that status.

Thank you, and at the appropriate time I'd be pleased to answer any questions.

The Chair: Thank you very much. Finally, we have the Honourable Bob Rae speaking on behalf of the Free Trade Lumber Council. Mr. Rae, welcome to the committee.

Mr. Bob Rae (Legal Counsel, Free Trade Lumber Council): Thank you very much, Mr. Chairman. I appreciate the chance to say a few words.

The Free Trade Lumber Council is a Canadian organization that represents over 80 companies in five provinces. It was founded two and a half years ago with one simple objective, and that was to establish free trade in lumber between Canada and the United States. This dispute is not just a few years old. In fact, it's as old as the industry itself.

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It's important for us to have that understanding. Obviously this industry has deep roots in every part of the country. All of us recognize, from the work that we do, that this industry genuinely brings Canadians together in small and large communities.

There are 140,000 people directly employed in the industry. That doesn't include the owners of woodlots and the literally tens of thousands of Canadians whose jobs and livelihoods depend on this industry.

As has been said by others—and I'm delighted to be on the panel with my friends today—this is an industry profoundly oriented towards the American market. It's a $10-billion-plus export trade for Canada. So it's a very serious big-ticket item for Canadians.

I must say, as I attended question period today and noted that there was not a single question on the subject of the trade agreement, I was struck by the fact that we're about to enter into a very, very difficult dispute with the Americans on an issue that's going to affect Canadians from coast to coast to coast. It seems entirely appropriate to me that parliamentarians and governments focus a good deal of their attention on the importance of this question.

The position of the Free Trade Lumber Council is quite straightforward. Let me stress that I agree with much of what has been said. I don't agree with everything that's been said, but I do agree with much of what's been said by my friends.

Our first view is that the Softwood Lumber Agreement should be allowed to expire on March 31. I don't think anybody could have put it better than Mr. Emerson as to the reasons why this quota agreement cannot and should not be sustained as a matter of public policy. The real risk we run as a country is that if it were to be extended, which I think would be a very serious error in public policy, it may then become a permanent feature of the Canadian economy.

I would like everyone to reflect on the absurdity we would then be faced with. You literally would have public servants in Ottawa telling companies across the country how much quota they get, where they trade, how they trade. As Mr. Shannon has said, it restricts new entrants into the industry, it discourages innovation, and it distorts the markets in the most serious way. I haven't found anyone offering a serious defence of the quota system.

So our view is, let the quota agreement die. It should not be extended.

Secondly, we have supported for several months now, and would continue to support—indeed we would urge the Prime Minister to appoint right away—a Canadian envoy on softwood lumber. We believe there's enough work to be done in Canada itself in getting the industry together, in getting provinces together, and in getting us all to recognize the importance of this issue, and it would be a good idea to move ahead with that.

I heard somebody suggest at one point that this was sort of a diplomatic nicety. It's not at all. This is an indication by the Prime Minister and the Government of Canada that this issue is seen as a top priority. It is seen as a matter requiring the full-time, focused attention of several departments of the federal government, as well as many ministries of provincial governments. Indeed it requires the focused attention of all of us.

I certainly agree with Mr. Emerson when he says this is not a “B.C. problem”. It is not a B.C. problem; it is a national issue affecting every province and all parts of the country. Neither the solutions nor the problems lie in any one part of the country.

• 1615

The third position of the FTLC, which I want to express to you as clearly as I can—and this is where we probably have a tactical difference with some others you've heard from—is that we should deal with the CVD and the anti-dumping measures as they come. That is to say, let us see what the basis of the petitions is, the factual basis that is argued with respect to the CVD and anti-dumping.

None of us welcome this litigation. All of us recognize the litigation process itself is going to be expensive and difficult. Let us see what is alleged and where it is alleged, and then let us deal collectively—and I stress this word “collectively,” because we do have to deal with it together—with the substance of these arguments.

Let us develop a national common strategy, hopefully with the support of the Prime Minister's special adviser. Let us remember that each of my fellow panellists here today has made a clear statement that the common objective we share is free trade.

There are some tactical arguments over how we get there, what is the best way, because we don't have an easy map to get us there.

Let me also say, Mr. Chairman, that when the market is down, as it is today, when prices are low, when communities are hurting—and MPs know that as well as anyone—and when people are on the edge of their chairs wondering about whether there's going to be a market there tomorrow and what's going to happen, of course there are concerns. None of us can dismiss those concerns. We all have to recognize that the litigation route is tough.

But I also want to take some note of what Mr. Shannon said. Over the last 20 years, we have come up with a series of so-called settlements that did not end up resolving the basis of the initial dispute. It should be a public policy objective of Canadians to say to our American friends, enough already.

This industry is fundamental to this country. We are free traders. We're also fair traders. We're not subsidizing our industry. We're not engaging in any practices that are in any way, shape, or form improper. We have provincial governments with strong environmental policies. We have a federal government engaged in environmental action. We have discussions with native groups across the country that are leading to negotiations.

Canadian public policy is transparent. We have nothing to hide or to be ashamed of, and we are determined to find a genuinely comprehensive solution to this question. The Free Trade Lumber Council will just keep on going in that spirit.

It's going to be tough sledding, as Mr. Shannon has said, but we believe that at the end of the day we shall prevail, because what we're saying makes good sense. It's good for consumers and homeowners in the United States. We have a great many common interests with the U.S. The impact of dramatically restricting Canadian exports would be to increase prices in the U.S., hurting consumers and the American economy, effectively amounting to a tax increase.

So that's not our favoured route. Our favoured route is to persist in working together with others to prevail and, if I may say so, not to be afraid to negotiate, but, as President Kennedy said, not to negotiate out of fear.

That should be our attitude. We should be prepared to discuss the issue with the Americans, but not be forced into another short-term deal that in our view would have a very negative impact on the long-term interest of the economy.

Thank you, Mr. Chairman.

The Chair: Thank you very much, Mr. Rae, for your thoughtful presentation.

• 1620

Now we are opening the meeting for questions to our panellists. My suggestion is that we stick to the exact five minutes, so I'm going to be quite strict with that. The five minutes are for the answer and the question. If you have two or three questions, you may want to lump them all together so you'll get your kick at the can right away. We will hopefully have a couple of rounds of questions if we stick to the time.

I'm going to proceed with Mr. Duncan now.

Mr. John Duncan (Vancouver Island North, Canadian Alliance): I'd like to ask a question of Diana Blenkhorn. If the Softwood Lumber Agreement expires on March 31, and the Maritime Accord laterally expires along with it, the Atlantic provinces would then still have free trade as they do now. Under NAFTA, all of the mechanisms, such as either anti-dumping or countervail, are available. Is that not...? I'm not sure why you're asking for an exemption when NAFTA would essentially accomplish the same thing.

Ms. Diana Blenkhorn: There are two points I'd raise in answer to that. First, the agreement provides protection against litigation. Second, the history of NAFTA to date relative to softwood lumber shows it has not done the job, quite frankly. That's why we have the separate Maritime Accord. That's why we've been exempt from the other agreements and have continued to push the case over twenty years. I don't have the same confidence in that type of protection.

So the accord addresses that uniqueness in terms of the protection against litigation and the concerns over the effectiveness of the agreement.

Mr. John Duncan: But isn't it almost a foregone conclusion that the U.S. Congress will not unilaterally disarm themselves once again in the absence of a softwood lumber agreement?

Ms. Diana Blenkhorn: That's certainly not my foregone conclusion, not if you're referring to whether they would consider a separate arrangement for Atlantic Canada. Is that what you're referring to?

Mr. John Duncan: Thank you. Charlie's going to ask a question.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Mr. Chairman, and thank you to the panel for being here this afternoon. I certainly know some of the members. I know Mr. Shannon has had a long, distinguished career in this very business, and Mr. Emerson and I went to school together a long time ago. I also welcome all of the rest of the panel members.

I guess I ask my question to play a little bit of a devil's advocate. After twenty years, aren't we really heading for a showdown at the O.K. Corral? Aren't we going to have to have this out some place along the way to decide—and my suggestion is to let an international body do it—whether we are subsidizing or not? That's the essence of this argument that's been going on for twenty years.

We've tried all kinds of methods. How soon five years of managed trade has passed. Some of us were advising against that five years ago. Trying to put the market-oriented industry under a supply management system, like eggs and dairy, didn't make any sense at the time, and I don't think it makes any sense now. But isn't that what this really boils down to?

Mr. Shannon, I would like your input. Don't we need to resolve this issue one time? Are we subsidizing? If we are subsidizing, we'll have to change our forest practices. If we're not subsidizing—as I believe we're not—let's get it on the record from an international panel. What would your response be?

Mr. Gerry Shannon: My response is that if it's possible to reach an agreement between Canada and the U.S.A. on what is and what is not a subsidy, what is a countervailing subsidy, and what is injurious and what is not, well, God bless. But experience doesn't dictate that as the likely course of action. You have very strong interests involved on both sides of the border here, and each side feels strongly about their point of view.

That's why my argument would be that, at the end of the day, you're going to have to have a decision take place in an impartial forum like the NAFTA or, preferably, from my vantage point, the World Trade Organization, which will come down on this issue. If we win that case, then the Americans are obliged, because the decisions are binding, to either get out of the agreement—that is, the WTO agreement, which I think is unlikely—or to live with the consequences and amend their laws accordingly.

• 1625

Similarly, were we to lose, we would face the same sort of ramification. On our side, we'd have to look to whatever actions are necessary to remedy our policies in a way that would make them deemed to be harmless or not inconsistent with our obligations as trading partners in the WTO.

Mr. Charlie Penson: Mr. Shannon, time is short, so could I just interject?

Mr. Gerry Shannon: Yes.

Mr. Charlie Penson: There are some people who suggest the United States might not honour the decision if Canada wins at the WTO, somewhat like Brazil is doing on the aerospace thing. What's your assessment of that situation? If that should occur, should Canada win that case, what would you suggest would happen?

Mr. Gerry Shannon: At the end of the day, the biggest losers of the Americans not accepting a WTO outcome are the Americans themselves. They themselves are, in some cases, thoughtful people who look ahead. A lot of the raison d'être for the WTO is American inspired, and it's an organization designed to put in place some sort of a regime establishing laws and regulations to govern trade.

There are cases now where the United States has not accepted, for example, losses they have incurred with the Europeans on certain case issues. My view is that, in due course, they will accept those. To take the contrary position is to call into question the viability of the WTO itself, and that would be a major loss.

[Translation]

The Chair: Mr. Paquette.

Mr. Pierre Paquette (Joliette, BQ): Thank you for your presentations.

First off, I would like to tell you why no one has asked a question today on lumber. Last Thursday, we spent an entire day debating this issue and last night, we passed a motion that I had the honour of tabling which reasserted the support of all parliamentarians for the government's position. In other words, getting back to plain free trade and warning the Americans against any type of retaliation. This resolution was supported by all parties, except the NDP. Their reaction is somewhat surprising when you think about the employment-based concerns they should have.

There has been 10 years of free trade between Canada and the U.S. now. During this period trade between our two countries has increased. That is a fact. However, we have also seen the integration of American and Canadian corporate interests. Mr. Rae, how is it that this integration of interests, if it has indeed taken place, has failed to enable the Americans to fully understand our price-setting system?

I disagree with Ms. Blenkhorn's take on the issue, because even if our forests are publicly owned, the setting of prices is market driven. Especially in the case of Quebec, which is an area that I am very familiar with. Given that fact, how do you explain the fact that the American do not fully appreciate our price-setting mechanism and the fact that they are always beating the subsidy drum just because our forests are publicly owned?

Mr. Bob Rae: Mr. Paquette, I think that Mr. Shannon set out the problem that we are facing pretty clearly in his presentation. What American producers are really concerned about are not our policies or whether land is publicly or privately held. That is not the real concern of American producers. What really worries them is that we have a major market share and that we have a competitive edge. For example, our industry is strong, well managed and our production methods provide opportunities for companies to make investments where they need to. For some time now, productivity in the industry throughout Canada and in each of the provinces has been increasing. That is the real crux of the matter.

The issue is not simply changing a policy or two so that we can go to the Americans and tell them that we've changed our policies and that consequently, they should allow us unto their markets. If we thought that was the real problem, well, I think that we would have done something a long time ago.

The real issue is that, for several years now, we have built up a 30 to 34% share of the American market, and as that continues to grow, the American lumber industry has reacted as we have seen recently. The American lumber industry is now worried about what is going to happen to Canadian lumber exports in the absence of quotas and restrictions. Will the Canadian market share continue to increase?

• 1630

In my opinion, that is the real issue. Despite the integration of the industry, this underlying concern remains. This is the problem we are facing and that is why we think that we have to hold comprehensive talks with the Americans, but at the same time they have to recognize that we have wide-ranging rights under international law and this law is not geared to punishing those who have made the necessary investments. That is our problem.

Mr. Pierre Paquette: May I ask another very short question?

The Chair: Very brief.

Mr. Pierre Paquette: My question is for you, Mr. Haggard. You talked about the ties between lumber industry unions and companies on both sides of the border. Indeed, I believe that we should indeed promote exchanges as much as possible. Could you tell me whether the unions from the various Canadian provinces are talking to each other on the issue of lumber? Let's take the example of Quebec, which produces one quarter of all Canadian lumber. Are you in partnership with any Quebec unions, such as the FTQ or the CSN?

[English]

Mr. David Haggard: We have much less communication with unions in Quebec, although we are re-establishing those links. For many years, our union wasn't involved very much in Quebec, but we are now starting to be involved again with some of our fellow trade unionists there.

I have been involved with some companies that come out of Quebec and are our members. They're mostly in northern Ontario, of course, but there are also some in Quebec as well. But we are just starting to get back into Quebec. Mostly, the unions we have been dealing with are the ones representing the solid wood sector in the United States, not the pulp sector.

I did spend some time today talking about one of the unions that represents pulp workers in Quebec, as well as in other provinces in Canada. To be polite, I guess we still have some work to do with that union.

The Chair: Mr. Speller, for five minutes.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you very much, Mr. Chairman, and I welcome our witnesses.

Very quickly, my question is to Mr. Emerson, and it goes on some of the comments that Mr. Rae made in terms of the role of a person who might be appointed to not only sit down to discuss this with the Americans, but also with our own industry, in order to try to get some sort of common front.

Given some of the comments coming out about a possible export tax, and with certain groups in Canada disagreeing with each other, do you think there's any possibility of getting to some common ground in the industry on an issue like that?

Secondly, to Mr. Shannon, what role would you see for such a person? Do you think a special person who was appointed would have any luck in terms of sitting down with the Americans to negotiate? Doesn't a negotiation mean there's going to have to be some sort of quota? How can you get a settlement without a quota or without some sort of basis?

Mr. David Emerson: Perhaps I can lead off.

You did mention an export tax, and I know Minister Pettigrew might have even alerted this committee to a comment that British Columbia would come to Ottawa to promote an export tax. First I want to clarify that we did not do that. We came to Ottawa and suggested to Minister Pettigrew and to others that U.S. trade representative Zoellick had mentioned an export tax as one possible way to avoid trade litigation.

That comes back to Mr. Rae's comments about where there are very minor differences between some regions of Canada. For example, in B.C., we are not comfortable at all with proceeding down the path of trade litigation and then embarking on negotiations later. We feel trade litigation will be arbitrary, it will be punitive. We could be looking at duties as high as 20% or 30%. Yes, there will be adjudication processes that one can take advantage of. I think most in this room know that those mechanisms can take you as long as five years. At the end of five years, you may have paid multiple billions of dollars in duties that you won't get back even if you win. So that is a danger in terms of going down what we would call the litigious route.

• 1635

During that period of time we would be laying off literally thousands of people. So for those who like rules-based trade and want to use the softwood lumber industry to run experiments on how we can play with that and see what will happen, I have to tell you that is an extremely high-risk strategy with possibly dire consequences for workers. So we would caution you about that.

On the envoy concept, we would be very supportive. We think there is work to be done to help to identify some of the key issues that we will have to deal with anyway.

My guess is the Americans would be reluctant to give any authority to such a person, but I don't think it could hurt. It may reduce the incentive to be quite as aggressive on the launching of anti-dumping litigation and CVD litigation, which we think is like a neutron bomb. Frankly, we don't want to get ourselves down that path because we think you lose an awful lot of bargaining leverage when you have a duty sitting over your head and you're laying off workers.

Mr. Gerry Shannon: Mr. Chairman, may I answer Mr. Penson's question, please?

The Chair: Briefly, yes. You have 53 seconds left.

Mr. Gerry Shannon: Well, point one, if the envoy's appointed, would the U.S.A. agree not to launch CVD action or dumping action as a first step? That's question number one you just asked. My suggestion is they would not, for reasons which I laid out in my opening remarks.

Secondly, Mr. Emerson talks about the dangers of getting into negotiation with branches unclear down the road, and I understand that point of view.

My concern about the special envoy process is that it too takes time. A special envoy could in fact lead to significant delays in terms of bringing all of our resolutions to problems with the industry. You'd find that it's just one other way of extending what is currently an inequitable agreement between Canada and the United States.

I guess the third point I would make in response to that is that I've seen no evidence at all so far that the Americans are seriously interested in a special envoy situation. It may well be that Mr. Pettigrew can give us much more information than I currently have, but from what I've been able to determine, their interest is clearly not acute.

The Chair: Mrs. Desjarlais.

Mrs. Bev Desjarlais (Churchill, NDP): Thank you for coming and being very informative. I appreciate that.

I just want to start off by clarifying the New Democratic Party's position on the vote that took place the other day. I guess New Democrats, as well as Ms. Blenkhorn, don't have the greatest faith in the NAFTA process and therefore wanted to ensure that the environment was considered as part of the whole motion, as it was noticeably neglected in the motion that took place. We've been very clear that if we're going to go along with what's considered free trade, it has to be fair overall for all those involved.

I guess what I want to understand here is that if we were to have a process where you didn't have to necessarily live in constant fear of the litigation and the job losses, Mr. Emerson, would you be supportive of the free trade—of letting this agreement drop with nothing else put in place? Would you have faith in the process that was there?

Mr. David Emerson: We do not have any faith in the trade litigation framework that exists today because it has been designed by Americans, for American producers, to be as punitive as it possibly can be.

I guess, to be candid, Canada appears, I'm advised, to do much the same thing—to deal with import penetration into Canada. So we don't have any faith at all in that process, and our belief is that there probably should be, for softwood lumber, some kind of a mechanism that would allow at least first cut at dispute resolution, which could also get at some of the complexities of environmental and forest management policies.

• 1640

We hear Senator Baucus of Montana coming out recently and alleging that Canada's environmental practices are lax. Things are said without any information to back them up. My own personal view is—and we operate primarily in Alberta and British Columbia—that our environmental practices will stand up against any in the United States. I would challenge any in the United States to do an impartial, objective assessment of our environmental practices.

We are heading further down that path and are quite willing to accelerate that move. But as soon as we get into wasteful spending on duties and fighting millions of dollars' worth of court battles, that money can't be put into environmental systems and environmental management.

Mrs. Bev Desjarlais: You don't think it would be worthwhile to possibly take the bull by the horn and let the process run its course, as Mr. Rae suggested, and then deal with any countervailing duties or anti-dumping processes as they come up? My understanding is that this would be really the first time we're allowing that to happen in the softwood lumber industry.

Mr. David Emerson: Well, it's a judgment call. We have paid what we think are some of the best legal advisers in the United States, and we've done the same in Canada. The best advice we can get is that it would be a crapshoot with it much more likely to be a loss, at least for a period of some years while the thing got sorted out. When we start to model what we think the effects of some of the countervailing duties would be on job loss and community disruption, the implications would be very, very substantial.

It's something that really bothers me because people say with great ease, well, let's just go and fight it in the courts. But when people are losing their jobs, I can assure you nobody's going to stand up and say, “Yeah, I was the one that suggested they go and fight this one right to the end”. Because there will be job loss if it goes the way we are advised it will go. I'm not a lawyer, but we pay people a lot of money to give us the best advice we can get.

Mrs. Bev Desjarlais: Is the issue here that we have a trade agreement that doesn't make sure its beneficial to the Canadian industry, Mr. Rae?

Mr. David Emerson: Yes.

Mr. Bob Rae: Yes, absolutely, that's our problem. I want to make it clear that I don't think there's anybody in the Free Trade Lumber Council whose view is, let's just close our eyes and let her rip. That's not the position. Our position is, as I say, let's take the CVDs and the anti-dumping as they come.

If they come on April 2, let's look and see what they say. Let's have the special envoys and others look at what the alternatives are, and then let us make a rational judgment as to which is the path that's most likely to serve the interests of Canadian workers, of Canadian industry, of the Canadian environment, of all the issues we want to balance. That's all we're saying.

What we do has to be fact-based and has to be based on real alternatives. I think we have to make those judgments, and I don't think there's a huge gap out there in terms of the Canadian approach. I think there are some tactical differences as to when and as to the positions we should take. But our basic view is...no one's saying let's not have any discussions. No one's saying, let's just let it go for five years. Everyone's saying, yes, there's going to be litigation. Let's not immediately blink; let's look at it. Let's look at it hard and long, let's see what's there, and then let's see what the alternatives are. If we can find alternatives that are better, fine.

But from the perspective of the Free Trade Lumber Council, Canada should not sell itself short and should not settle for anything that doesn't ensure that we have a solution that is longer-term than what we've had so far. We've had these series of makeshift agreements that were supposed to resolve the problem and that haven't resolved the problem.

Let's not forget that the last softwood lumber agreement, the one we're just coming out of, was put forward by people saying “This is just going to be short term. We'll make the changes we have to make domestically, and then we'll be able to come out of it.” That isn't what happened.

I'm just saying, let's learn a little bit from that history, too, before we try to concoct another speedy agreement. This thing is going to take time. It's going to take a lot of national discussion; there's a lot at stake. But I don't know anybody who would say, “This is a law project, and let's see what happens at the end of five years—maybe the World Trade Organization will save us.” I don't know anybody who's giving that advice. I'm certainly not giving that advice as counsel to the Free Trade Lumber Council. I'm simply saying, let's take this a step at a time, work together, and make sure we're bargaining as hard as we can on behalf of Canada.

• 1645

The Chair: Thank you, Mr. Rae.

Mr. Casey, and then Mr. Comuzzi.

Mr. Bill Casey: Thank you very much.

I have a quick question for Mr. Shannon. Mr. Shannon, who do you represent? Do you represent an industry or a province?

Mr. Gerry Shannon: Mr. Chairman, I have currently been advising the Province of Ontario, the Minister of Natural Resources. I made clear to the secretary when they invited me today that I was appearing on my own behalf.

Mr. Bill Casey: Okay.

Before I go into it, I want to say two things puzzle me about this whole thing, such a gigantic issue for Canada. I do not understand why the Department of Trade has not got consensus in the industry. We have four provinces under the SLA, four provinces under the Maritime Accord, and two provinces under the free trade agreement. It truly puzzles me why they haven't got consensus before they start to negotiate with the U.S.

I know you can't answer that, but the other thing that puzzles me, Mr. Emerson, is what the strategy of the British Columbia lobby is in attacking Atlantic Canada. It seems to me it would be a lot more positive if you tried to work with the other provinces, instead of trying to divide and create these.... Yesterday you were quoted in the paper—and it's in The National Post, so it must be right:

...the British Columbia industry blamed the Atlantic provinces for part of their predicament, and also lashed out at Quebec's position. ... Mr. Emerson lashed out at the Maritimes....

—and then down below, Mr. Kerr in that meeting said:

“The plain and simple truth is we're facing anti-dumping because of the Maritimes. We wouldn't be facing that without the Maritime exemption,”....

It's a strange strategy when the competition here, the opposition, is the United States. They must be just wringing their hands when they read that article. What is the strategy in attacking the other provinces, rather than trying to work together with them?

Mr. David Emerson: I'd like to say categorically that we're not attacking any particular region. What we are attacking is a bunch of special deals that basically fragment the country. To be candid—and you're being a bit provocative, so I'll be provocative back—we've seen correspondence from people representing the Atlantic provinces in the past conveying a message to, I believe, the Government of Canada of the day, suggesting that they too were suffering competitive disadvantages because of subsidized lumber from British Columbia.

Even with the arguments that were made today, as well as they were made—and I respect that—the implication is somehow that if you're buying wood from private sellers, you're not being subsidized, and if you're buying it off public land, you are being subsidized, which is exactly what the Americans have used as their tool to attack us.

This whole thing is plagued by miscommunication, with a lot of people concerned about their interests. We simply want to see a one-Canada solution. We don't want to hurt anybody, but we don't think anything but a unified Canadian approach is the way to go.

Do I want a consensus in Canada? You bet I want that. Mr. Rae alluded to the question of how to deal with litigation. We don't disagree with him, and we know we're going to end up in litigation. All we are saying is, let's not wait until we're deep into litigation to commence some discussions; let's get going on it. Candidly, it should have been under serious discussion a long time ago, but there were a number of factors relating to elections and other things.

Mr. Bill Casey: Mr. Plecas was here about a month ago, and he said much the same things. He attacked Atlantic Canada too at the press gallery.

I'm serious—I don't understand the strategy of trying to divide the Canadian position. I think the federal government failed to create a consensus, but I really don't understand the strategy. You haven't addressed that—maybe there's no way to address it.

Mr. David Emerson: You're dead wrong. What Atlantic Canada wants is to be exempt and have a special arrangement that other parts of Canada don't have. How is that unifying Canada?

Mr. Bill Casey: Nobody's ever tried to get a unification, nobody's tried to get consensus. You can't get consensus by lashing out—

Mr. David Emerson: I think you're overstepping there.

• 1650

Mr. Bill Casey: Well, you can't get consensus if you blame everybody. There's nothing in here that says British Columbia may be partly to blame for this.

The Chair: Time out. We'll come back to you. You still had three more seconds, but they're gone now.

Mr. Comuzzi, and then Mr. Eyking.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you, Mr. Chairman, for letting me come into your committee. With the short time, let me get right to it.

What I really want to try to establish, and what has really caused us a great deal of concern over the last 48 hours, is the appearance of a break in the position of Canadian negotiating. Whether it's right or wrong or whether it's poor reporting, there is nothing more drastic for our position, insofar as arriving at a free trade agreement is concerned, than not having a united front when our Canadian negotiators and our Minister of International Trade are at the table. I just draw that to your attention, because I think we've been harmed in the last 48 hours because of the press reports.

Now, what I want to know...as you know, the Americans are tough when it comes to dealing. We can't go to that table and continue to go to that table with any form of weakness. What I want to know, Mr. Emerson and Ms. Blenkhorn, is whether there is any way we can put forward a united position that is much the same as what Mr. Rae alluded to. We have to put forward a united position with respect to the softwood lumber industry in Canada. Is that possible for us to do? I'm going to leave that question with you two.

The second question I want to ask is to Mr. Shannon and Mr. Haggard. Inasmuch as we talk about the softwood lumber industry, really there have been substantial changes in the sustainability of our forests. What the softwood lumber business was twenty years ago isn't the same as it is today. It is so integral to the entire forestry industry that what we're really talking about is the fact that when the Americans pick on the softwood lumber, they're picking on Canada's single-largest industry. They're picking on the forestry industry. I don't see the forestry industry operating with the shackles being put on the softwood lumber industry. It's integral to the entire process, but we're not making that point. I'm going to leave that question with you two.

And the third question is to Mr. Rae. I know that in the negotiating process, Mr. Rae, the Americans don't like to use this word “linkage”. They want to deal in softwood lumber. They don't want linkage with any other issue, but there is linkage inasmuch as the softwood lumber industry is the forestry industry. That's a natural linkage. But if they're going to be as tough as they are—and it appears they will be—a good number of my colleagues and I feel we must look at the forestry industry as a natural resource.

I address this to you, Mr. Rae. I don't see this as any different from natural gas, the production of electricity, the preservation of fresh water, or the production of crude oil. Any of those energy factors are like our forestry and our mining. Forestry is a natural resource, what this country is based on and founded on, and I don't see why we're allowing the Americans to make that linkage in that they only want to deal exclusively with softwood lumber.

Those are the three questions.

The Chair: Okay, that's quite a bit to chew on. Gentlemen, ladies, maybe you can briefly address—

Ms. Diana Blenkhorn: I'll take a lady's prerogative, since you named me first. Thank you.

Your point was whether there is any way we can get together. In response to an earlier question, I said the industry does work together on issues of mutual concern in many respects. But the fundamental background of this issue is that there's a difference—and I am not making the statement that because they're crown lands, there's some sense of subsidies. We have 25% crown land in Atlantic Canada, but there have been no allegations against Atlantic Canada because of the private landowner. Going back in history, there has been no respect in the industry of the fact that it is different in only those four provinces.

• 1655

So going back to 1991, we've come forward to the point Mr. Emerson made on comments that were made by my bureau. Actually, they were made by me, and I'll make no apologies for them. Those comments deal with British Columbia's insistence that an agreement be terminated prematurely to deal with a specific issue of pulp and paper within that province. That dealt with Canada terminating the 1986 MOU, and our efforts—

Mr. Joe Comuzzi: Let's not go into the history; let's find out if we can—

Ms. Diana Blenkhorn: No, I'll make it very quick.

Mr. Joe Comuzzi: Let's go forward.

Ms. Diana Blenkhorn: Well, he brought history up, so I was trying to respond.

Mr. Joe Comuzzi: No, let's go forward. Can we get along?

Ms. Diana Blenkhorn: Can we get along? We get along on almost every issue except for this issue. We can always get along if there's a mutual respect for differences that exist.

The Chair: Mr. Emerson.

Mr. David Emerson: I think it's possible for us to get along. When we all face a similar level of threat, I think we'll find a way to get along.

I just wanted to say something in response to your earlier comments. Mr. Rae will know I've spent much of the last two years working with my colleagues in B.C., and in other parts of Canada—in Quebec and in Ontario, in particular—trying to bring together a consensus and a focus that would allow us to have a unified Canadian position. So I take some exception to people pointing fingers, albeit implicitly, at British Columbia and suggesting we're somehow fragmenting the effort and causing the weakness.

Mr. Joe Comuzzi: I meant no disrespect by that.

Mr. David Emerson: No, I know you didn't mean disrespect, but the meaning was clear and I reject the meaning, that's all. We've tried very hard, we continue to try hard, and we'll be right there to try to unify the industry. You can be sure of that.

The Chair: Mr. Rae.

Mr. Bob Rae: I would just make one observation in response, Mr. Comuzzi. I think you were asking me specifically about the linkage question.

I would perhaps mention one of the reasons why the Free Trade Lumber Council believes we should be fact-based in terms of waiting for what it is we're being accused of. Before we talk about how we're going to get out of this, let's see what we're accused of. Let's see whether the Americans...maybe the Americans will manage to unite us, because it'll be pretty clear that what they're saying is what they're saying. But let's see what they say. Let's see whether it's the same this time as it was before, or whether it's a different petition. Those are all things for which we'll have to just see what happens. That's why I say it has to be fact-based.

On the question of linkage, Mr. Comuzzi, I think it's a fact of life that we have a very integrated trade relationship with the United States. My view is that if you're an American, you can't in the same breath say you'd like all our electricity and you'd like our energy, but, by the way, you're going to smack the hell out of our softwood lumber industry, and then expect us to say that's okay. To me, that would just be really contradictory.

I don't think you have to get into formal linkage, and I don't think you have to get into threatening one thing or another. I certainly don't advocate that, and it has never been the position of the Free Trade Lumber Council. The position we have is simply that trade is a two-way street. There are Canadian interests and there are American interests, but there's a common North American interest in resolving this dispute in a way that allows for greater productivity, greater exchange, and a better deal for consumers on both sides of the border. I think that view is widely shared among American consumers, and I think there are lots of opportunities for us to remind people that's the case.

The Chair: Thank you, Mr. Rae.

Mr. Eyking, for five minutes, and then Mr. Lunn.

Mr. Mark Eyking (Sydney—Victoria, Lib.): My question is for Mr. Emerson.

From what I understand, one of the biggest issues here is the stumpage rates. What I understand is that the rates in Atlantic Canada have been going up. What's been happening in B.C. over the last ten years?

Mr. David Emerson: We've had some very dramatic increases in stumpage. In fact, when the memorandum of understanding just preceding the Softwood Lumber Agreement was removed and replaced with that agreement, then as a condition of getting rid of the 15% export tax, British Columbia was required to raise its stumpage by an equivalent amount. So we have very high stumpage in British Columbia now, and that was exacerbated by some very high regulatory costs as the Forest Practices Code was first implemented. That's beginning to subside, but our stumpage levels are very high.

• 1700

I can also say that the Government of British Columbia has expressed a willingness to look at policy change. I believe there is a willingness in B.C. amongst public policy-makers to look at policy change, but not to make policy changes outside the context of a negotiation of what will be acceptable to the Americans. Coming back to some of the earlier comments made by Mr. Shannon, Mr. Rae, and me, while the Americans say stumpage and log export controls are an issue, when it comes right down to it, I've heard in recent discussions that log exports aren't even something they want, because the southern producers in the U.S. don't want the northern producers in the U.S. to get access to our logs.

Many of the issues around stumpage and regulatory requirements are really a bunch of hot air designed to put a legal foundation under an attack on our market share. So if you don't deal with the market share through a negotiation....

Mr. Mark Eyking: You're saying it's a red herring, and that your rates have been going up in the last ten years.

Mr. David Emerson: Absolutely, they have gone up by a dramatic amount.

Mr. Bob Rae: They've gone up across the country. There are some regional differences, but the pattern across Canada is very clear.

In the last ten years, there's been roughly a 100% to 125% increase in stumpage and in stumpage revenues for provinces across the board. That's an across-the-board phenomenon affecting all provinces. Also, lumber provinces have engaged in quite substantive regulatory change since the last time we had a major countervail action launched by the U.S.

The Chair: Mr. Eyking, we have time for a very brief point.

Mr. Mark Eyking: A question I'd like to ask is, if it's going to hit the American pocketbook, in the cost of homes and the costs to the building industry, how come we're not putting ads in the New York Times and the Washington Post to let people know what's going to happen to the costs of their lumber and wood building products?

Mr. David Emerson: I'll comment on that.

We haven't been putting ads in on softwood lumber issues because we've carefully considered how to target our scarce resources to maximum impact. There are a couple of things going on around this issue.

Mr. Rae's group, the Free Trade Lumber Council, has been very active in promoting U.S. consumer awareness of the costs of protectionism. Canfor is Canada's biggest supplier to Home Depot. Yesterday afternoon, I spent a half an hour on the phone with one of their senior executives, who was going in to meet with U.S. Trade Representative Zoellick. The executive wanted to be fully armed, to understand how to best put pressure on USTR Zoellick to get to the table and resolve this, and to not put in place a punitive duty system that would jeopardize their sources of supply and hurt their customers. We're into it.

The Chair: Mr. Lunn, and then Mr. Valeri.

Mr. Gary Lunn (Saanich—Gulf Islands, Canadian Alliance): Thank you.

I'd like to ask my questions quickly and give you time to answer them.

First, David, you suggested we should be doing something in the interim, so we don't face a CVD. I can't remember your exact words. My question is, is it really dangerous for us to go down that road at this point in time? Does it weaken our position? Could it be a problem?

I understand the rationale for that, and that's my second question following up. How many employers are in B.C.? If we end up with a CVD going down that road and we end up having to pay, what's going to be the impact to those employees in the short term?

The last question for you, David, is on the linkage issue you also raised quite clearly, if I can use that word. I want to throw that out to both you and Mr. Rae. Can we win this without linkage, if we really end up getting a valid CVD? I'll specify where I'm going with that in a minute.

When we do bring in terms, are you referring to issues that we can bring in legally? Obviously, we have legal commitments under existing agreements, under existing power agreements, but there are also new ones coming forward.

I know Prime Minister Chrétien, President Bush, and President Fox are meeting in Quebec City to discuss a North American energy grid. The Americans are looking for cooperation on a pipeline to the lower 48 states. Are those the types of issues you're talking about? Can we win without bringing those in?

• 1705

My next issue I'd like to bring to Mr. Shannon. The ownership of the forest industry in Canada has changed dramatically. This was provided to me by my colleague Mr. Duncan. Weyerhaeuser now owns MacMillan Bloedel and I.P. owns Weldwood. To bring a valid CVD forward, they need 51% of the industry to sign the petition. Are they going to have a difficult time to get that percentage considering the Canadian ownership by these American companies? Can we end this thing in the first 20 days when they have to justify standing for a valid CVD, and can Canada use any leverage against some of the Canadian companies that are owned by the Americans if their American cousins—if I can use that word—sign on to the petition? Do we have any leverage we can use against those companies since their parent companies are signing a petition against them?

I appreciate that there are chapter 11 rules in NAFTA by which we have to provide the same, equal rights on both sides of the border. So I'd like Mr. Shannon's comments on that, please.

Mr. David Emerson: First, on the dangers and pitfalls of negotiations now, we've been calling for some time, and I think even the Free Trade Lumber Council people have been calling for, commencement of discussions. We have called for the appointment of envoys, as Mr. Rae has spoken of. This is really to reflect the fact that there's been governmental change in the U.S. and governmental elections in Canada. We've had provincial elections in the wind in British Columbia. So there's been a tremendous transition period generally going on in the key regions of North America. We felt it imperative that we have discussions so that we could get better definition of the issues and alternatives so that when decision-makers were ready this would allow it to be facilitated.

We have always recognized that if there was any discussion or negotiation, it would be completely without prejudice to the legal suits that would undoubtedly be coming. We have never thought we could get the legal suits off the table. What we have hoped, though, is that some of the judgmental neutron bombs that could be dropped, such as the threatened retroactivity of a duty that is disrupting the lumber market today in an unbelievable way, or the possibility of a section 301 or a special duty because of a surge of imports after the expiration of the Softwood Lumber Agreement.... We have felt that if we got discussions underway, they might stop some of those add-ons to the destruction we could face anyway.

On the linkage issue, my view, and I think British Columbia's view, is that any trade negotiation works better if there are more pieces on the table, if there are more sectors, if there are more countries, frankly. That's why multilateral negotiations are sometimes a very effective way, particularly for smaller countries, to get progress on free trade. So we like linkage, but we don't like to specify specifically what the linkage should be. I think there would be very few successful cases of linkage simply because when you admit it and make it public that there was some kind of a trade-off, it usually undermines the support for the concept. So we like the concept but at a more discreet and general and background level.

The Chair: Okay, we've got Mr. Valeri and then Mr. Paquette. We're running out of time. I know, Mr. Shannon, you have a brief comment to make.

Mr. Gerry Shannon: Mr. Lunn did address the question to me, which I would like to answer very briefly.

I'm not aware that changes in ownership would have that much of a material impact on the capacity of those proposing dumping or countervailing duties measures to get the necessary support in the industry. If it would, God bless. I'd be surprised if that were to be the outcome.

As for what you do in a case where a Canadian corporation is not supporting a Canadian position on that, I think that's a matter for the government and the corporation to be concerned with. But, no, it's not an issue that I would personally be qualified or prepared to address. Each corporation, after all, looks after its corporate interest and is accountable to the jurisdictions in which it operates. So I don't see that as being a fruitful path to go down.

• 1710

The Chair: Mr. Valeri. We've got a second round, I know, but we're really running out of time. You'll have a second round, and the other two individuals will have a chance to comment when Mr. Paquette or somebody else asks a question.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chair.

Federally, I guess it's no secret as we sit around this table that we can't fight this thing unless we have a united front. That's a given. Mr. Rae has said, in the time that I've been here—and, Mr. Rae, you can correct me—the issue is going to take some time. Let's see what we get. We want a long-term solution. Let's take it a step at a time. This needs to be fact-based. Right? What is it that—Mr. Shannon, Mr. Emerson, Mr. Haggard, Ms. Blenkhorn—you disagree with, with respect to Mr. Rae's comments? I'd like to understand what it is you disagree with because I think it would help us better understand how it is we're approaching this thing.

The second question I have is, why don't we appoint one spokesperson to speak on this issue so that Americans cannot point to a number of different people in different parts of this country—in essence, just divide the Canadian team before we even get to the table?

The Chair: I think that's probably enough for the rest of the five minutes. Why don't we start with Mr. Haggard, then Mr. Rae, and then Ms. Blenkhorn, Mr. Emerson, and then Mr. Shannon.

Mr. David Haggard: We do in general agree with Mr. Rae's and the Free Trade Lumber Council's position in the IWA. I think our concern is that going into negotiations with Canada and the United States has sometimes been drawn in analysis as a mouse going in to negotiate with an elephant. You have to take all the tools in there that you can get if you're going to be successful. We in the IWA know that just as the poor working people's representative when we negotiate with industry in this country, as they always try to take us to the cleaners. But we usually manage to come out of it with a fair and equitable agreement.

I really think we have to find a way to get to free trade, and I agree that we should use every linkage possible to get there. You don't go into negotiations with anybody with a free tool kit—or with an empty tool kit, I should say. That appears to be what some of the feelings are. I think the unified position in this country would be the IWA, which represents people right across Canada, with the exception of parts of the Maritimes, which we're working very hard on right now.

The Chair: Mr. Rae.

Mr. Bob Rae: I think the question was really addressed to Mr. Shannon, Mr. Emerson, and Ms. Blenkhorn. I think my position is out there. You summed up my position, so—

Mr. Tony Valeri: I really want to understand what it is you disagree with.

The Chair: Ms. Blenkhorn.

Ms. Diana Blenkhorn: We don't disagree with the concept of free trade. How could we? We already have—

Mr. Tony Valeri: What is it that you disagree with, with respect to what Mr. Rae has said?

Ms. Diana Blenkhorn: How to get there. What Mr. Rae is suggesting is that both agreements...I think you're intending to suggest that both agreements should expire on March 31—that the Atlantic agreement should be lumped in with yours, with the overall SLA?

Mr. Bob Rae: Our view is that if you have free trade, and if the SLA expires, you don't need a maritime accord because you've got free trade.

Ms. Diana Blenkhorn: Well, we would disagree with that point, Bob, on the basis that even the free trade agreement—the FTAA or the NAFTA—gets into writing what the obligations are. So we simply say we have free trade, we've had fair market, free market access, and the agreement sets out minor obligations much like any other arrangement would. I don't think you would disagree with that aspect of it.

So all we're saying is we want our agreement renewed, and we will not be obstructionist or opposed to the way the rest of the provinces want to go forward. That is coming closer to building unity.

One other comment I would like to make is, if we go the route that's suggested, or if the affected provinces now go the route that's suggested, and we let the Americans file and see what's filed, my understanding from high-paid legal advice is once you get into an anti-dumping suit there is quite a number of days before a suspension agreement can take effect and stop the case. So you've got to play that out in the first 90 days. That certainly may not be in the interest of the country.

The Chair: Mr. Emerson.

Mr. David Emerson: Thank you, Mr. Chair. We really don't have fundamental disagreements with the Free Trade Lumber Council in the position you articulated. We want to be fact-based, and we want to see what will come of the CVD in an anti-dumping case. We think we don't have to make a decision. We're going to see that no matter what we do. What we are concerned about is that there has been an awful lot of discussion in the public that has led a lot of people to believe this could be a way to win big. There has not been disclosure of what the real risks are going to be for the next few years if those duties are as we expect they may be—they could be punitive, they could be high, and we think it's our obligation to our workers and our communities to be very clear as to what could be coming. That's why we're saying, don't delay negotiations, accelerate them.

• 1715

We also may have a slight difference of opinion on whether our bargaining leverage is stronger when we're in the middle of litigation, as opposed to before it gets too advanced. We can't see it getting stronger, and that would be a slight difference of opinion. But it's minor, it's tactical, it's not fundamental.

The Chair: Mr. Shannon.

Mr. Gerry Shannon: Mr. Chair, I've learned over the years that it rarely pays to disagree with Mr. Rae, and in this case I can happily say I don't disagree with Mr. Rae in any fundamental way.

The thing I would urge on the government, in fact on all concerned, is to keep your eye on the ball. As I tried to make clear in my statement, the Americans' concern is market share, and our response has to be to make sure the rules that are established under law in fact work to our purposes and for our ends. They have been negotiated, they're there for our use, and we should use them.

That doesn't mean I would favour going pell-mell into a CVD suit. If there's another way, God bless. But at this point in time I have to say I see very little alternative to going down that road, unless it's made clear that in pursuing something like a special envoy process, the United States is prepared to see change take place on both sides of the border. Then maybe we can look at that as an avenue for recourse. Other than that, it's off to Geneva. Thank you.

The Chair: Thank you. Mr. Valeri.

Mr. Tony Valeri: I have one quick follow-up. Can we get a spokesperson over the next two or three weeks, an individual who can speak for Canada?

Mr. Bob Rae: That's why we have been urging the federal government, as you should know, in cooperation with a number of other people, to have the Prime Minister appoint a special adviser. We're a fairly talkative country: Canada's a big place, and people have different views. So I don't think you're ever going to get people to stop talking, because it's in our nature to talk. But I'm quite confident.

What you're going to see over the next while is a coming together. The Canadian government's position is clear. Parliament has stated by a very strong vote what its position is and what its preferred route is. And I think you're going to see that expressed in Canadian public policy, with the strong support of the industry. We strongly support what the minister is doing and the expression he's given to it. I think you're going to see that unfold. I think along the way there are going to be occasional differences of opinion, nuances, and so on. My view is, so be it.

I certainly would share the view, as somebody who has done a fair bit of bargaining in my life—I used to do it for a living—that it's better if you can get everybody talking from the same script, the same song sheet. If that's possible, the sooner we can get there, the better off we'll be. I think ultimately that's where we're going to be.

The Chair: Mr. Paquette.

[Translation]

Mr. Pierre Paquette: First, I have a brief question following the ones that were put. Some argue that the price of houses in the United States will go up. This argument may be valid for American consumers, but it seems to present the situation as if the Canadian industry were the only one to export to the United States, and Canada did not import any American forestry products. I do not know who can answer this, but what is the current amount of Canadian imports of forest products? Maybe the difference is not basically all that big.

Mr. Bob Rae: In Canada we import more than $5 billion worth of forestry products from the United States and we export more than 10 billion dollars' worth.

Mr. Pierre Paquette: Thus, there is approximately a 5-billion dollar deficit. I think that it would be important to emphasize that exchange as well.

In conclusion, following Mr. Valeri's question, I think that the big issue—and this has already been said before this committee—is our ability to maintain a consensus despite harassment from the American industry.

• 1720

I think that Mr. Valeri said that the industry has some things to get done. We feel that there is much regional tension and it is good to express that in order to work on it. What could the committee recommend to the government to make it much more proactive than it is now and more efficient, more useful, because it cannot simply wait for the consensus? It must play a part in strengthening it, in constantly renewing it, and all the more so to face the tension in the coming months.

I address this question to all our guests: what could the Canadian federal government do to help the industry to maintain the needed consensus to carry it through this crisis?

[English]

The Chair: Very briefly, Mr. Rae, and move on towards the right.

[Translation]

Mr. Bob Rae: I think that the government must be positive. It is doing that now. After extensive consultation with the government, the minister clearly stated that there was no consensus to carry on with the quotas. Thus, we are waiting for the current agreement to expire and the government wants to appoint a special delegate to work on this problem with a US spokesman. We recommend that the minister continue doing this. I think that we must establish a common approach with the industry and the provinces, but as I said previously, this is already being done. It is not easy. This is a diversified country with differences and distinctions among provincial policies, and specific problems in every region of the land. We must take this into account, but basically, I think that we might all be united by the common threat. I fully agree with those who say that it will be neither pleasant nor easy. Let us do whatever we can to lessen the impact of this American assault on our positions.

[English]

The Chair: Ms. Blenkhorn.

Ms. Diana Blenkhorn: I don't have much to add to what Mr. Rae has said as regards the attempts on the Government of Canada. There has been an ongoing consultative process for the past two years, where provinces and industry have been visited. But I will again stress that one very significant thing for us has been that the Government of Canada has historically recognized and respected, as I said earlier, that difference, and to the extent it's possible, they've attempted to display that with other divisions within the country, in the hope of building some recognition and consensus.

The Chair: Okay. Mr. Haggard.

Mr. David Haggard: I believe the federal government is not doing a bad job of facilitating the Canadian position. I believe the federal government could do more in facilitating how we.... Because for the long term, we can continue every five years to have what we're having, and that's trade wars in the lumber industry. If we don't find a North American solution on a marketing strategy, we'll continue to have these trade wars, regardless of how much we capitulate to America or how much we try to meet their demands on managed trade. We'll be unable to do it, because they'll continue to change the goal posts. They have. That's proven over the last twenty years in our trade wars in softwood lumber.

I think the government should be the facilitator of that. Until we sit down and talk about how we develop North American strategies to—if you'll excuse the terminology—quit peeing in each other's cornflakes, we'll continue to have these types of trade wars. I think the solution, as I said to begin with, is to develop some form of strategy where we work together, instead of fighting with each other.

The Chair: Thank you, Mr. Haggard.

Mr. Emerson.

Mr. David Emerson: We very much agree with Mr. Rae's earlier comments. We're heartened by the participation of the Prime Minister and the Prime Minister's Office in this issue recently in discussions with President Bush and Mr. Zoellick. We very much support the appointment of a representative to the Government of Canada on this issue. We would respect and value having a unified voice, and we would give it all of our support. While B.C. has been, I suppose, a bit provocative in the last few days, I have a view, and I guess a lot of us have a view, that you sometimes need a little bit of chaos before you can have order. We're getting it.

The Chair: Thank you.

Mr. Shannon.

• 1725

Mr. Gerry Shannon: I have no further comment. Thank you.

The Chair: I guess we still have three more minutes to sum up.

First let me thank you very much on behalf of my colleagues, who—

Mr. Joe Comuzzi: Mr. Chairman, why can't we appoint an envoy? The question was just raised—why not?

The Chair: I think you have just heard from everyone that they're supportive of the idea of having an envoy. I didn't hear anybody opposed to it. Is anybody opposed to the idea of an envoy?

Mr. Tony Valeri: The point I was making to Mr. Comuzzi was that everybody would welcome an envoy. The U.S. is resisting appointing an envoy. This gets back to the one spokesperson in the last couple of weeks or the last week—why couldn't we appoint an envoy?

Mr. David Emerson: I believe we could.

The Chair: Mr. Rae.

Mr. Bob Rae: I've expressed it today, I hope as clearly as I can: our view is that it can be done and it should be done.

Mr. Gary Lunn: The U.S. has been rejected twice.

Mr. Tony Valeri: I understand that.

The Chair: Okay. In fact, what we have heard from the panellists suggests there is unanimity on two issues—that's what I have heard, unless I'm wrong. First, there is the idea to have one voice, one spokesperson, and second, we all wanted to have free trade. Every single one of the representatives has communicated that, taking into consideration the fact that we don't want any kind of an agreement that pits one region of the country against another one. So I would say that, in essence, this particular forum has helped us out in bringing together all of the different opinions in one unified one. I think our industry is far more unified than anyone would like to give it credit for.

From looking at the briefs, as well as the presentations and answers to the questions, I believe we have a very unified group here. It's my hope that we'll go to the government and encourage it to press ahead with making representation to the Americans that they should establish an envoy and that our government should establish an envoy, and that we will continue to work with our industry very closely, so that the team effort will continue between now and then. We can hope that at the end of the day we won't have to use other means in order to talk about any kind of linkage, whether it's water, natural resources, or any other area. I know the trade between Canada and the U.S. is in excess of $300 billion, and this is frankly a small hiccup in the system. Mind you, it's one of the largest industries in Canada, and it's far more important than anyone would believe.

We wouldn't want this state of affairs to carry on any longer. So we hope our friends and allies will come to the conclusion that free trade is here to stay, we do have agreement with them, whether through the World Trade Organization or through NAFTA, and we have to respect the rules of the law.

So with this, I want to bring a conclusion by thanking, on behalf of the committee members, our industry representatives, and telling them it has been a very informative meeting. We hope we will see you again, so we can celebrate victory for free trade.

The meeting is adjourned.