For Ontario and Quebec sawmills to prosper they need free, unencumbered access for softwood lumber exports to the U.S. market, Resolute Forest Products president Richard Garneau told Parliament’s Standing Committee on International Trade this week.
“We need to be able to sell freely to the U.S. Indeed, that was the whole point of the Canada-U.S. Free Trade Agreement and NAFTA. Just about every industry enjoys free trade, except for softwood lumber,” Garneau said.
Drawing on over 40 years of experience and leadership in the forest products industry across Canada, Garneau challenged the claims by some that the previous 2006 Softwood Lumber Agreement between the United States and Canada, which expired last October, produced predictability and stability.
This last managed trade arrangement, he said, was incredibly destructive, particularly for Central Canada. The 2006 agreement managed the flow of Canadian lumber to the United States by imposing export charges whenever prices fell below a predetermined floor.
“The purpose of a deal must not be simply an alternative to litigation. It must be to assure fair and equitable trade,” Garneau said, noting that Canadians have won every legal fight with the United States over softwood lumber.
Canada has played by the rules and proven according to the law that its industry is not subsidized, and does not cause injury to any U.S. industry. Softwood lumber producers in Quebec and Ontario need and deserve nothing less than free trade, he said.
“If there is to be a deal, it must recall a principled purpose: that the Canadian softwood lumber industry does compete fairly in North America and pays a fair market price for timber, and that our forestry regimes are market-based.
“The Government of Canada must not negotiate a deal that does not fully recognize Central Canada’s right to free trade,” Garneau told committee members who are studying possible options for a new softwood lumber agreement.
In his presentation, and in the question and answer period that followed, Garneau made the case that managed trade increased volatility, creating an unpredictable and unstable trade environment between the two large trading partners.
He went on to note that while Western Canadian softwood lumber producers benefited from China’s extraordinary economic development, logistical limitations meant that Asian markets remained out of reach for Central Canadian producers.
Additionally, Western softwood lumber producers’ purchase of some 40 sawmills in the U.S., with a production capacity of some five billion board feet, afford them an important measure of insulation from future restrictive measures, he said.
“To put this capacity into context, it is over 150 per cent of the total existing capacity of Ontario’s sawmills. Canadian demand is simply not enough to absorb all the production of Central Canadian sawmills,” Garneau added.
Resolute is Canada’s largest forest products company and the largest producer of softwood lumber east of the Rockies.
When the 2006 Softwood Lumber Agreement expired last Oct. 12, Canada had hoped to simply renew the agreement, but the U.S. refused. Instead, there is now a one-year grace period in which the U.S. is obliged to refrain from bringing new trade cases against Canadian lumber until at least October.