Federal forestry strategy called good first start

The federal government’s forestry package released last week is a good first step in alleviating the economic pressure on Canadian companies suffering from U.S. softwood lumber duties, which will, in turn, help the pulp and paper industry, according to the Ontario Forestry Coalition.
“It was a good, all-round package,” said Greenstone Mayor Michael Power, who also is president of the Northwestern Ontario Municipal Association (NOMA).
“The companies are positive about it.”
The Forest Industry Competitiveness Strategy—a five-year plan worth almost $1.5 billion—was announced last Thursday.
“Canada’s forest sector is a major contributor to the Canadian economy and is one of our most essential natural resources,” said federal Natural Resources minister John McCallum, whose department is leading the strategy, supported by Industry Canada, Human Resources and Skill Development Canada, and FedNor.
“We worked very hard to get Northwestern Ontario input into this,” noted Thunder Bay-Rainy River MP Ken Boshcoff, who sat on the National Forestry Caucus this year, chaired by Kenora MP Ken Dryden.
The strategy includes $215 million for an advanced forest technologies initiative.
“This will allow the Canadian forest industry, especially the pulp and paper industry, to enhance its competitive position, improve its environmental performance, and take advantage of the growing bio-economy,” Natural Resources Canada explained in a press release.
Some $90 million had been earmarked for forest innovation and value-added wood products. Another $66.3 million will be used to help the Canadian forest industry develop new markets for wood products, such as China.
An additional $50 million will be spent to expand the existing Renewable Power Production Incentive to include a thermal co-generation incentive for electricity production.
“This initiative will encourage bio-energy investment in the pulp and paper industry, and provide the forest industry with added opportunities to reduce energy costs and lower greenhouse gas emissions,” the department noted.
Another $10 million will go to “improve the competitiveness of the workforce through identifying existing skills gaps within the Canadian forest industry, promoting development and upgrading of workplace skills, and recruiting youth and under-represented groups to the forest sector.”
Regional development agencies and FedNor will offer support for forest-dependent communities across the country through a $150-million National Forest Community Adjustment Fund.
This fund will “support economic diversification and capacity-building in communities affected by recent job losses in the forest industry,” and help rural communities diversify their economic base.
This $150 million portion of the strategy is the only part that may require legislative approval and so will be put on hold until after the federal election. The rest of the money had been budgeted previously.
The bulk of the funding—up to $800 million—will be used to create a loan insurance program. This program is different from the loan guarantees offered by the Ontario government back in June, which largely were regarded as inadequate by industry reps.
“The Government of Canada will set aside funding to insure loans through third-party financial institutions to firms affected by the unique circumstances of the softwood lumber dispute,” providing “immediate, short-term relief to firms, pending the resolution of the Canada-United States softwood lumber dispute,” the department noted.
“Companies who have had to pay the illegal tariffs to the U.S., that money is held on deposit in an escrow account. They can’t get at it. That’s come right off their bottom line,” Mayor Power explained.
“Although it’s sitting on the balance sheet of the company, banks don’t necessarily regard it as a good receivable, so the federal government has stepped in and said, ‘If you go to your financial institution and you take out a loan, we will guarantee up to 25 percent of what you have on deposit,’” he continued.
Because the tariffs have been ruled illegal several times over, Ottawa is confident the $5 billion already collected will be returned.
“The feds are convinced that the money will come back, that the tariffs are illegal, and they look at it as just tiding the companies over in their liquidity crisis,” Mayor Power explained.
Though the lion’s share of the forestry package is aimed at softwood companies, the pulp and paper industry also will see benefits.
“Between pulp and softwood, the integration is incredible. If one hurts, the other hurts,” he said. For instance, pulp mills depend on the chips that come from softwood companies.
Overall, the package is good news for the forest industry in Ontario, Mayor Power noted.
“It’s a good, good first start. Better than the first start that the province provided,” he said.
Earlier this fall, the provincial government released a forestry package including a $150-million fund over three years to leverage new capital investments, and up to $28 million annually to maintain primary forest access roads.
However, the package only would reduce Ontario’s delivered wood cost of $55/cubic metre by $1-$2. The global average is $35.
The federal package also likely will do little to reduce the province’s delivered wood cost.
“Funding for programs like the $215 million to boost competitiveness and the $90 million for product research can help in the long-term,” said Kenora Mayor Dave Canfield.
“However, for Ontario, unless the cost of getting wood to the mill and the cost of electricity to run the mills becomes more competitive, there won’t be much of an industry left on which to build a future,” he warned.
“Globalization is challenging the industry across Canada, but what makes Ontario unique is that made-in-Ontario problems are making this province the choice for closures and that has the change,” argued Thunder Bay Mayor Lynn Peterson.
For now, the Ontario Forestry Coalition will continue to lobby the provincial government to assume 100 percent of the maintenance cost of primary logging roads and 50 percent of the cost of secondary roads, as well as reducing energy costs.
“We’re pushing them very hard on the roads, and we’re going to push on the energy file,” Mayor Power vowed.
Meanwhile, the U.S. government was quick to denounce the package—which largely was aimed at mitigating the effects of the U.S. softwood duties—calling it another example of Canadian subsidies.
“Today’s announcement is disappointing,” U.S. Trade Representative Rob Portman said Thursday. “Only days after we fully complied with a NAFTA decision, Canada responds by announcing huge new subsidies.
“Canada’s actions illustrate what the U.S. has been saying all along: the Canadian industry is the beneficiary of subsidies that create an unlevel playing field to the detriment of the U.S. industry,” he added.
But Canada’s International Trade minister defended the plan.
“Canada will vigorously defend its efforts to help sustain an industry that is being unjustly persecuted while the United States continues to ignore NAFTA panel decisions,” said Jim Peterson.
“Panel after panel has found that Canadian softwood lumber is not subsidized.
“The United States claims that it has complied with NAFTA,” added Peterson. “In fact, the United States will only have complied with NAFTA when it stops collecting the duties and refunds the deposits.
“The people of Canada and the United States alike have unjustly suffered for years due to the continued harassment by the U.S. Coalition for Fair Lumber Imports,” he remarked.
“If the United States actually does the right thing—that is, drop the duties and return our money—the support package can be reviewed,” said Peterson.
“Until then, the Government of Canada will stand behind our workers and we will keep reminding the United States of the need to respect the letter and spirit of NAFTA,” he stressed.