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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 2 - Evidence - Meeting of May 18, 2006


OTTAWA, Thursday, May 18, 2006

The Standing Senate Committee on Agriculture and Forestry met this day at 8 a.m. to study the present state and future of agriculture and forestry in Canada.

Senator Joyce Fairbairn (Chairman) in the chair.

[English]

The Chairman: Honourable senators, I would like to start our meeting now.

Senator Tkachuk: Before we go any further, I would like to clarify an impression that was left at the meeting on May 11, and an issue brought up by one our witnesses, Mr. Friesen. He stated that his organization had been ``trying to meet with the Minister of Agriculture since the budget came down but have been unable to.''

I took the liberty of investigating this issue of recent meetings the CFA had with the Minister of Agriculture and Agri-Food. In response to my query, the minister's office confirmed that prior to the budget, the minister met with Bob Friesen on March 30 at 3 p.m. Present at the meeting were the minister's chief of staff and the Deputy Minister of Agriculture and Agri-Food. In addition, on April 5, the Prime Minister and Minister Strahl met once more with the representatives of the CFA. Furthermore, the minister's office also confirmed that on April 2, at 4 p.m., the minister's chief of staff met again with Mr. Friesen. However, with respect to the issue of the post-budget meeting with the Canadian Federation of Agriculture, the minister's office has informed me that they did receive a request from the CFA's board of directors on May 5, three days after the budget and six days prior to the head of the CFA's appearance before the Standing Senate Committee on Agriculture and Forestry.

Owing to previous scheduling commitments out of Ottawa, the minister was unable to have a meeting with the CFA prior to the May 11 meeting of the Standing Senate Committee on Agriculture and Forestry. In addition, members of this committee will also note that a recent email was sent to us by David Anderson, the Parliamentary Secretary to the Minister of Agriculture for the Canadian Wheat Board, on May 15 in which Mr. Anderson asserts that neither he nor his fellow parliamentary secretary has received a request for a meeting from the CFA since the budget was announced, contrary to what Mr. Friesen said at the meeting. Since the May 11 meeting, there have been no requests from the CFA to meet with the Minister of Agriculture.

The Chairman: Thank you, Senator Tkachuk. We will make sure that those words are conveyed to the Canadian Federation of Agriculture, and they can hopefully go forward in a productive way following your comments.

For our listeners and viewers who watch this committee on CPAC, I would like to welcome, to the first committee hearing he has attended since becoming a minister in the new government, the Minister of Natural Resources, Gary Lunn. We are very pleased to have you here, minister, that you are on the job, and that we are your first visitation.

We are also joined by Richard Fadden, the Deputy Minister of Natural Resources, who is no stranger to this committee; and his colleague, Brian Emmett, the Assistant Deputy Minister. Thank you both for coming.

This is the second hearing of our Standing Senate Committee on Agriculture and Forestry, and the first, of course, on the issue of forestry.

Canada has the third largest expanse of forested land in the world, including 30 per cent of the planet's boreal forest. Forests are at the heart of an $80 billion industry, providing over 361,000 jobs. This is a major part of the industrial core in this country.

In varying degrees, forestry has been a key industry across Canada throughout its history. Of course, the softwood lumber dispute has been the main concern for the industry and the country in past years, and in recent weeks an agreement appears to have been reached on this longstanding dispute between Canada and the United States. I am sure Mr. Lunn will want to say a few words about that.

In addition to trade issues, factors such as a higher Canadian dollar and increasing energy costs continue to have an impact on the forestry industry. They have sparked structural changes. For example, we have seen a trend toward mill closures; we have heard this from people around this table and across the country in the past year alone. Because forestry supports more than 300 communities, and from which at least 50 per cent of the wages are earned, its future is also the future of our rural communities, about which we are concerned.

Today, we on the committee want to wish Minister Lunn well in what clearly is a difficult portfolio, but an important one for this country. He will be with us for the first hour and a half of our time here today and then will have to leave. However, Mr. Fadden and Mr. Emmett have agreed to stay for that extra half-hour to answer our questions.

We have two and a half hours, honourable senators. I would invite you, as I always do, to keep questions short, concise, and also respectful of the answers of our guests. We will allow everyone to take part in this discussion today if we follow that path.

Hon. Gary Lunn, P.C., M.P., Minister of Natural Resources: Thank you very much. It is great to be here. As you said earlier, this is one of my first meetings. I see a lot of friendly faces around the table.

The Chairman: They are all friendly.

Mr. Lunn: They are. We could start by telling some stories about those friendships, but we had better save them. I have had an opportunity to work with members of the Senate from both sides and we have had a great working relationship over the years. I am pleased to have this occasion to talk to you about the forestry.

Before I begin, I would like to acknowledge the work of my officials. You have acknowledged the work that both the deputy minister and the head of the Canadian Forest Service do. We as elected officials rely heavily on what they do, and I have been greatly impressed by their dedication, their professionalism, and the advice they give us; they give us the straight answers we need to do this job. As you said, we sometimes face difficult issues. That is important to acknowledge.

Obviously, as minister, I want to work hard on all facets of my department. However, forestry is a priority for me. As a British Columbian, I am aware of how important it is to that province, where that industry alone creates some 80,000 jobs.

It is an industry facing major challenges. We have been facing the mountain pine beetle infestation in British Columbia for a decade or more. At the same time, we are all familiar with the difficulties in the recent trade relations with the United States on softwood lumber. As everyone is aware, we have reached an agreement on that, which I am happy to talk about in more detail via your questions.

Forestry is a key priority for this government. The recent budget set out $400 million over the next two years for forestry. More specifically, $200 million of that will be for work on the pine beetle infestation.

We believe partnerships are the best way to address these forestry sector issues. That is why we want to work with both the industry and the provinces. We want to look for solutions to ensure that the forestry industry across Canada can continue to move forward and have a long-term future in this country. We want to partner with them in the restructuring of the forest industry. We want to accelerate R&D. We are looking for new, competitive forest fibre products; we are looking for new markets.

At the end of the day, what do we want to achieve? We want to ensure that the forestry sector is as strong as it can be, and we will be there to support it.

I would suggest the recent softwood lumber agreement with the U.S. was a great victory for the industry. We can get into the specific details of why. I have worked on this file for many years. I have seen the impact that this has had on our forestry sector, and I think we will turn the corner.

Having said that, there is a lot more work to do. We cannot just believe that this softwood lumber deal will solve all of the challenges that the industry faces. I have recently met with FPAC to address the long-term competitiveness of the forestry industry. Forests are Canada's largest biological resource, and I believe we can be a world leader in finding ways to successfully merge the growth of the forestry sector with sustainable forestry management practices.

Canada has 10 per cent of the world's forests and 30 per cent of the world's boreal forests. Each year, we harvest 0.3 per cent of our forests. Far more is lost every year to both insect defoliation and forest fires.

I am confident this committee welcomes the budget's investment of $400 million over the next two years. I believe this demonstrates how important this sector is to this government.

Through the small proportion of Canada's forests that we harvest each year, the forestry sector contributes over 3 per cent of Canada's GDP and over 2 per cent of Canadian jobs — jobs that are important. Madam Chairman, as you have pointed out, many of these are found in remote communities where there are no other sources of employment. They are single-industry communities, which puts an even greater emphasis on those small communities.

There are over 300 communities that depend on the forestry industry for their livelihood. I have lived in these communities in British Columbia; I was raised in these communities, and I can attest to how important the forestry sector is to their livelihoods. These communities are very vulnerable to the cyclical downturns and the structural changes in the industry.

At the same time, the industry is facing other challenges. The workforce is aging; the skills required are changing in response to new technology; and it is becoming more difficult to retain younger generations in many of these communities. However, with these challenges also come opportunities. There are opportunities with First Nations' communities. I believe that they can help us in many of these areas.

Another area of the budget where we have invested is in the worker adjustment programs and the creation of a sector council to address the development of workplace skills and longer-term human resources. We can also make a difference by encouraging the wise use of the forest resources and promoting research and innovation that creates value-added products that compete more successfully in the global market.

Canada is the world's largest exporter of forest products. We account for over one-sixth of the total world exports; in 2004, this contributed almost $35 billion to Canada's balance of trade. The softwood lumber agreement will provide a high degree of certainty and stability to our exports. I strongly believe this is good for the governments of both Canada and the United States.

However, at the same time, we need to look at new markets for our forest products. Over the years, we have enjoyed enormous success in opening markets in Japan for Canadian softwood. We have to build on that. As everyone is aware, there are emerging markets in China and Korea. I know both the industry and industry associations are doing research. They are looking at ways to help train the tradespeople in those countries to create a greater impact for us in those markets.

Asian builders do not usually use softwood lumber for frame construction. I am a journeyman carpenter and have worked in the forestry sector. It has had a huge impact on my life. In fact, I worked for Crestbrook Forest Industries and ended up marrying the president's daughter, so it has had a significant, positive effect on my life.

I worked in the housing and construction industry. Our work has demonstrated that how we build can have an impact in other parts of the world. Our frame houses have withstood earthquakes where other kinds of construction have not. People in the industry here have a story to tell the world, and we want to support them and to ensure that we open up new markets.

Many of these value-added products come as a result of innovation, research and development. I believe that the forestry sector is knowledge based. Our competitiveness in the global economy will depend not only on the availability of the resource, but also on how well we encourage investment and create value through innovation. It depends on how smart we are in our stewardship of the resource; how smart we are at cutting the costs of production; and how smart we are at creating additional, new value-added products. I believe we can influence and shape the sustainable forestry sector to benefit Canada's continued growth and prosperity and to strengthen international leadership in advancing sustainable forest management practices. The government will invest in research and development and innovation. We intend to consolidate three forest research institutes to improve performance and to create a new fibre centre to research and develop ways to use the forest's resources more efficiently.

Madam Chairman, I am looking forward to getting on with the job. I truly look forward to working with this committee over the coming months and years. Together we can find solutions that will allow us to work with the industry to help them to advance. I look forward to senators' questions, including the specifics of the recent agreement with the United States on softwood lumber. I understand that there has been some keen interest in that area.

The Chairman: Thank you, Minister Lunn. I was interested in one of your comments toward the end about the importance of value added in the industry. We have been promoting and encouraging that a great deal in other areas of the committee's study on agriculture. You are likely well ahead in terms of value added in the forestry industry so perhaps you could talk about that at some point. First, we will move to questions of senators.

Senator Oliver: Thank you, Madam Chairman. Minister, I extend to you my warm welcome to this committee. We are delighted that you are here and we thank you for your opening remarks. You gave a broad overview of some of the areas that you are looking at in detail in the forestry industry, which is so incredibly important to Canada, and I thank you for that overview.

I am particularly interested in the pine beetle infestation. In your opening remarks, you said that in the recent budget you had set aside $400 million for the forestry sector, one half of which — $200 million — will go to the pine beetle infestation in Western Canada. I know that many of the pines that have been affected by the beetle can be commercialized. Could you provide the committee with an update on that? Where does it stand now? How much can be commercialized? How much can be saved? What new activities will you undertake with the $200 million to prevent recurrences of the infestation?

Mr. Lunn: Thank you for the questions, senator. Allow me to begin with the last one, on preventing future infestations. The magnitude of the infestation is truly devastating, because it equates to the area of New Brunswick. You can fly for a long time over British Columbia and see the vast expanse of dead pine forest. Now there are concerns that the pine beetle might move into Alberta and the boreal forests. Intensive research is under way to try to contain the beetle. Someone made the point to me that even if we were able to eradicate 98 per cent of the pine beetles, there would still be billions of the critters left chewing away on the forest. It is an enormous problem.

Research is focused on how to control it, but the larger issue is whether we can mitigate the problem by containing the pine beetle, and the experts are looking at that. Scientists are not certain whether it can be contained through harvesting. There are questions about how and when they move to another area. No one knows those answers for sure.

As to how long the timber is merchantable, science suggests somewhere between five and 15 years. Pine undergoes a rapid deterioration in the first two to three years, after which it stabilizes somewhat, until about 15 years, but that science is not exact. It varies, depending on the climate and levels of dampness or dryness. As you move through that continuum, the wood becomes much drier and more brittle, which results in more damage during harvesting. Some things are being done to mitigate that damage through different forestry techniques.

In respect of how we intend to spend the $200 million, the previous administration committed approximately $140 million over recent years. I have been working with my counterparts, specifically in British Columbia, where the head of the Canadian Forest Service and I were on a call with the Minister of Forests and Range, the Honourable Rich Coleman. We outlined some of the principles we want to follow with this money. Some would suggest that there are provincial and federal jurisdictions to keep in mind, but the most important thing is that we work collectively and not duplicate our efforts.

What are the province's priorities? Two forestry community beetle groups have been working in various regions of British Columbia. There is a beetle action plan in British Columbia in which we participate. The Pacific Forestry Research Centre, a federal government facility in the Saanich district of Victoria, B.C., is doing a tremendous amount of research. The federal department will continue to fund those agencies, but we want to focus this money to ensure that we get the best value for the industry and for the people in those communities.

Senator Oliver: Is there any natural predator of the pine beetle?

Mr. Lunn: Yes, the natural predator is not another kind of a beetle but the enzymes in the lodgepole pines themselves. The beetle bores into the bark of the tree, which results in the death of the tree. A natural enzyme is produced that pushes the beetle out and kills it. However, because there are so many beetles, the trees natural defence mechanisms cannot contain or control them. That is the explanation offered to me by the scientists. I was at a research laboratory at the University of British Columbia last week where they are looking at genetics as a possible solution, although this area of research is not complete. However, they have found that certain ways of harvesting can ensure that the new-growth trees are more resilient to the pine beetle.

There are many different areas of research. One that the province is looking at currently is in the harvesting methods. The greatest value of this fibre is at the front end, before it is damaged. They are trying to focus much of the pine beetle research money in these communities so that we can get the timber out as quickly as possible while it still has a higher value.

Obviously, if we leave it standing longer, it is more susceptible to fire as it dries out. Silviculture forestry, for example, has been an area of interest to the province. As I said earlier, according to the principles that we have enunciated, we want to ensure that there is one team working on this — federal, provincial, the industry — and that we are cohesively moving together to find solutions.

Beetle-killed wood also presents unique challenges on the manufacturing side. The saws become dull much quicker because the wood gets harder as it dries out, and it also requires modifications to the mills; and again, this is being done. Some of the larger producers are investing heavily at the heart of this, in the Prince George area, to ensure this is accomplished.

I wish to make a final comment. Madam Chairman raised a point about the value-added products. It is interesting to note that when the beetle kills the tree, it stains the wood blue, which also presents unique challenges. They are studying ways to make that a positive enhancement to the value added. I have observed some things they are doing with flooring and staining techniques. It is unique to the beetle-killed wood. Again, it goes back to the value added. This is the research being done by the industry, science and the federal government. Again, it is not all bleak. We have to mitigate the damage and move forward as best we can.

Senator Mahovlich: Is there a certain bird that is attracted to this beetle?

Mr. Lunn: I am not aware of that at all, but I will attempt to find out. That has never been suggested to me.

Senator Mahovlich: I have a cottage, and the person who cuts down my trees often recommends leaving some of the dead trees because the birds are attracted to the bug that lives in that particular tree, and they feed off those dead trees. I have not heard of a bird that is attracted to this particular beetle.

Mr. Lunn: I am not aware of natural predators, other than the tree itself, to combat the beetle. There is a variety of species of beetles across the country, but as far as the mountain pine beetle is concerned, I have met with the scientists and researchers and that has not been raised. I will look into that and provide an answer.

The Chairman: One short comment: You mentioned that you are closely watching the border with Alberta. Has it spread into that boreal forest, or are you worried that it will?

Mr. Lunn: I believe it is creeping in. The question is, how far does the beetle move, and does it move at certain times of the year? The department is focused on ensuring we do everything possible to protect the boreal forest.

Some would argue that the infestation is so massive in British Columbia because completely eradicating the beetle is very difficult. It is just beginning to creep into Alberta's boreal forest. We are focused on finding a way to contain it so it does not spread.

The deputy has handed me a note about cold weather. The best way to control the beetle is with cold weather. I have been told that in the early fall, three or four days of cold weather — minus 40 degrees, which we have not had for a while — will have a huge impact on the pine beetle, or, later in the season, a sustained period of cold weather. I am talking about minus 30 or minus 40 temperatures. The beetle could not survive those temperatures, but we have not seen that in years in British Columbia.

Senator Segal: Is the inverse true? Is the absence of cold weather because of climate change in fact increasing the incidence of beetle infestation, as far as your department is concerned?

Mr. Lunn: Again, there is no question. The beetle cannot survive in cold weather, so obviously, the inverse is true. How much of an impact is climate change having? I do not have those kinds of weather patterns.

As a young child living in British Columbia, I remember much colder winters. Has climate change dramatically affected the temperature in the winter? I do not have that level of detail. We can report back to you on that. I do not think it would change it that dramatically, but it is obviously a concern. Climate change will have an impact on the future of the forest.

Senator Callbeck: Thank you, minister and deputies, for attending this morning and presenting your overview.

I want to ask about the future of a number of programs that are of concern to my province of Prince Edward Island, the first of which is the Forest 2020 Plantation Demonstration Assessment. That was part of the climate change plan in the budget of 2003 for the Canadian Forest Service to work with the provinces and industry to build tree plantation sites. Several people on P.E.I. are currently involved in this, as we only have so much land, and we are concerned about our land usage.

The trees were grown on marginal or abandoned agricultural land, but the climate change plan has essentially been cancelled. As this program was part of it, will it or a similar program continue? I invite your comments on that.

Mr. Lunn: I defer on this question to Mr. Emmett. He can give us the detailed answer on the specifics of this plan.

Brian Emmett, Assistant Deputy Minister, Canadian Forest Service, Natural Resources Canada: Senator, this was, as you said, a demonstration program. I believe we have established these demonstration projects in every province.

The program has come to the end of its foreseen life. We wanted to see what the economics would be, what the rates of growth would be, and whether this was an economically attractive way of taking carbon out of the atmosphere. Those results are now coming in. Our preliminary assessment is that they are not very attractive economically, and my own view is that the program has come to the end of its natural life.

Senator Callbeck: I am sorry to learn that.

The next program I wish to hear about is the Model Forest Program, which we do not have at the moment on Prince Edward Island, but there has been great interest in it. Presently, it is a five-year program that ends in 2007. Has there been any thought given to continuing the program?

Mr. Lunn: I will defer on this question to my deputy, but before I do I would like to say that I am familiar with a few of the model forest programs that we run across the country, and there are changes coming. An example of an area that has enormous potential within the forestry sector is biofuels. People think of biofuels as coming from the agricultural sector. There are opportunities for biofuels to come from the forestry sector. That is happening now in Europe. Places like Norway are only a few years away from using enzymes from the forestry sector to create biofuels. Research in those areas is having an impact on the environment and on our fuels.

There are opportunities coming on stream that did not exist four or five years ago. The department is looking at these areas. We are committed to launching our biofuels strategy in the near future. That will be significant not only for the agricultural sector, but as the science evolves, also for the forestry sector.

Things will change, and change is sometimes a good thing. Sometimes, as you close doors, new ones open.

Mr. Emmett: We are in the process of evaluating the Model Forest Program. It came before the department's audit and evaluation committee just this week. The committee has a tough chairman, my boss, Mr. Fadden. The program survived and our proposal is to extend it past the year 2007 and send out requests for expressions of interest from communities that wish to be involved. As long as we can get through the government-wide approvals process, our intention is to continue with the program.

Senator Callbeck: That is good news. Thank you very much.

Senator Segal: Welcome. I am delighted to hear about the Model Forest Program's continuation, and I hope that proposals from Eastern Ontario are given fair and appropriate consideration, based not only on their technical merits, but also on the compelling role that Eastern Ontario has played in forest development over a long period.

My first question is with respect to rural poverty in those communities affected by changes in the forestry industry, and my second relates to our most important natural resource, water.

On the first front, your own statement, plus the work done by your department, has carefully reflected on mergers and acquisitions in the industry, closing of mills, the need for enhanced productivity and cost savings so that our wood can be competitive on a global basis. That produces, by definition, some measure of unemployment. Long before this government came into place, we saw radical changes in communities that used to depend upon the forestry industry as a source of employment. People with a moderate level of education could engage in an honest day's work for an honest day's pay over a lifetime. Those opportunities have evaporated for reasons of technology and economic forces.

On the issue of biofuels, is your department able to do anything with respect to generating economic opportunity related to the forestry industry so that the conditions of rural poverty due to changes in the industry that we see more and more in communities associated with forestry can be modified or perhaps corrected?

Mr. Lunn: Thank you for that question. I believe there are things we can do. The question is what the solutions are and how to implement them. I believe that we have turned the corner on a most difficult decade for the forestry sector in general across Canada. It is no secret that the years since the expiry in 2001 of the previous softwood lumber agreement have been very difficult for the forestry sector. Countervailing and anti-dumping duties approaching 30 per cent have put enormous strains on the industry. As the chairman correctly pointed out, we have seen mill closures, causing devastation in single-industry communities. As you said, young people used to be able to get high-paying jobs in that industry.

In order to bring stability back to those communities, there will be some restructuring. The Forest Products Association of Canada has asked me to participate on a committee looking into how we can support the industry as it moves forward. There will be changes. There will be more mill closures as a result of how the market is driven, but I think those closures can be mitigated. I think there will be new opportunities in the future.

The sector is desperate for certainty, and that is coming with the new softwood lumber agreement. That will come through research and innovation, finding new products and value-added products. That will create opportunities for these companies in smaller communities if they can have stable markets.

Forestry industry jobs were high-paying jobs. I am personally not a great fan of subsidizing industries to keep them afloat. I do not believe that is the solution. That does not mean we will not invest money, but we want to find the root causes of these problems. We want to help them develop products that are not produced today. There is an enormous amount of fibre supply in British Columbia and across Canada, and jobs can be created in that area. We will invest with our provincial partners, the industry, and various institutes to ensure that fibre is used as efficiently as possible in order to ensure a sustainable future. That is how we will win this game.

Senator Segal: On the issue of water, I believe that the areas that have the worst forest fires coincide with those that have the more serious conditions of drought and erosion of groundwater.

You are aware of the debate around the Great Lakes Basin agreement with American governors. River systems across the country are affected by the water issue. My question is about focus and priority. Are you comfortable that, with regard to its impact on natural resources, the department as you found it was sufficiently constructively engaged in groundwater issues? Are you comfortable with the linkages that existed between the Department of the Environment, Foreign Affairs and yourselves on the water issue? Are you happy with the level of interdepartmental cooperation? Are you comfortable that as minister, you are getting the information you need on water issues to make appropriate decisions and representations to cabinet and colleagues across the border, as necessary?

I understand that it is yet early days, but I think that Canadians would want to know that not only the Minister of Natural Resources, but also his colleagues in other departments, has a focus on water. I am interested in your perspective on that.

Mr. Lunn: I have already had discussions on that with my colleague, the Minister of the Environment. It is interesting that you raise it. It is important that we look forward. One of the questions was: Were you comfortable with the state in which you found it? It is not about how we found it; it is about today's reality that we do not do enough with water. In fact, there is far more beyond that. This is an area that we have virtually ignored until now, and there is a lot more that we could be doing across the country.

This is not to suggest that previous governments and administrations did not do enough. I do not want to look backwards. I am not apportioning blame. It is an area to which we have to pay more attention in the future. It cannot be just a natural resources issue, an environment issue or an agricultural issue.

Again, there is an opportunity there, and I have talked about this with the Minister of the Environment. We need to focus on what is happening with the groundwater and our freshwater supply in Canada. Are we doing enough research? Are we protecting our water resources? Do we have a federal government policy? In all of those areas, the answer is no.

However, as I said earlier, there are opportunities, and we are starting to get our heads around the issue and realize that we need a long-term strategic plan.

I admit that these are high-level discussions that we are having now. The important thing is that we recognize — and interestingly enough, you raised the importance of this as well — that this is something that we have to embrace and that we need a long-term strategic plan across departments. This is not, as I said earlier, a single-department issue. That approach will not work. This is an area in which we will move forward.

Senator Christensen: I will get back to bugs. In the Yukon, the part of the country where I am from, we have a large infestation of the spruce budworm, which has come up from the coast, through the Kluane Park area particularly. It has taken 15 or 20 years to get through the mountain chains and the narrow valleys, but it is starting to spread through a lot of the interior forest. This is spruce, whereas in British Columbia you are dealing with pine. If the spruce start coming down, it is merely a matter of time before the two start to merge.

Certainly the changes in temperatures north of 60 — I think we see these changes perhaps more than in other areas of Canada — is what is allowing this to happen. As you mentioned with the pine beetle, it is the cold weather that controls it, and we have not had, in the Southern Yukon particularly, these cold weather events to kill it.

There does not seem to have been much attention paid to it. We have a small forestry industry in the Yukon. The Kluane Park area, in the Haines Junction area, has a small forestry industry, and there is a larger one on the B.C.- Yukon border in the Watson Lake area.

Again, being a boreal forest, and with the higher temperatures and the greater incidence of electrical storms, which we get a lot of now, and because we have been so good at being ``Smokey the Bear,'' we have created forests with huge fuel supplies on the floor. When we get forest fires now, they burn right through the topsoil as well because they are so hot.

In the future, with the increasing temperatures, whatever their cause, this should be a major concern of the forestry industry, from both the federal and provincial viewpoint and that of the industry itself.

Could you or your department comment on the long-term forecasts for that area? Forest fires are certainly on the increase in boreal forests in our area, as are these infestations. What are we looking at to control that?

Mr. Lunn: You raised an important point. The beetle is not just in British Columbia. I am familiar with what you are talking about in the Yukon, the beetle infestation and the spruce. The Minister of Forests from the Yukon has raised that with me.

Again, it is not just in the Yukon. There is the longhorn beetle in other parts of the country. We have many different beetles in Canada. There is also the western pine beetle in the Okanagan.

Our department is looking at this issue and has invested in a national pest strategy. This is not something that we are confining to the mountain pine beetle. The presence of the mountain pine beetle, obviously, has had enormous economic consequences for British Columbia and caused damage to the forests. There are beetle infestations and pest infestations in our forests across the country, and they have a number of impacts, as you have correctly pointed out, for example, increased forest fires.

The scientists in the department are looking at this. They are doing their research, looking at ways of mitigating this situation and how to get these areas under control. I have had discussions about where this is happening and what we can do to contain it.

The other issue that we are working on is a Canadian wildfire strategy. The provinces are working and funding the strategy together, sharing a resource and an information base. Fires and pests have no provincial borders, and so we need to work together.

The wildfire strategy has been unanimously supported by the Council of Forest Ministers. It is on the agenda to be discussed at our upcoming meetings. The Council of Forest Ministers is meeting in Whitehorse in September, and we will have extensive discussion on exactly this issue, into which our department is putting a lot of resources.

Senator Tkachuk: I would like to cover two areas. I will continue with the beetles. First, I would like to congratulate you on your appointment and welcome you to our committee. I just checked with the chairman; I think it was in 2002 we did a study on climate change and its effect on agriculture. We did not address what was causing it; we focused instead on whether there was climate change and what its effects were.

At that time, I remember hearing witnesses — as did, I am sure, other members of the committee who were present — talking about the warmer weather having an effect on the pine beetle infestation — in other words, more pine beetles than we need.

However, there was another scientist, from either UBC or the University of Victoria, who said that he had warned the Government of British Columbia years before, when they instituted their forest management practices on forest fires of containing fires, putting them out right away and not letting natural fires burn. He had said that the pine beetle infestation would be the direct result of that practice. The Americans have, for years, practised a slightly different policy. In Saskatchewan, as soon as there is even a little brush fire, we go out with water and planes and put it out, and most of the time they are caused not by man but by lightning, and are just part of the natural process.

Are we are doing any research on that to see whether perhaps we should let forests burn when lightning strikes, or at least let them burn more than we do now?

Richard B. Fadden, Deputy Minister of Natural Resources, Natural Resources Canada: The short answer is that fires are an important component of forest development and forest management. The question, to which there is no perfect answer, is which fire gets to burn how long and where? Without fires, the forests effectively die.

There has been a growing concern over the last couple of years that we have had rather too many fires in Canada. There is a variety of factors that affect whether the provinces, which primarily have jurisdiction over forests, will allow them to burn.

Dealing with the bugs is not the only issue to take into consideration. How close they are to communities, the effect they have on industries and issues of that nature must also be considered.

The short answer is, absolutely, we have to have some forest fires. The difficult issue for those who actually manage them is in the particular circumstances of how they deal with them.

Senator Tkachuk: I wish there was a way we could have exported that 40-below weather from Saskatchewan last February. That would have looked after your problem.

I want to move now to the April framework agreement on lumber. There has been a lot written and said about it. Could you give us a synopsis of what you think of the agreement? Perhaps you could point out not only some of the problems with the agreement, but also some of the positives. Did the United States get a better deal than Canada? Are there downsides and upsides for Canada? How do we prepare for the next round? Is there an end date to this agreement? I am sure there will be negotiations while this agreement is in force. That way, we will perhaps have some longer-term stability and a return to real free trade.

Mr. Lunn: It is a great topic, worth addressing.

I have been quoted in the news as saying that this is a great agreement for Canada. It was an enormous victory. I know some of our political opponents would like to suggest otherwise. As one who has worked in the forestry industry and lived in single-industry towns, I have seen the direct result of ongoing trade disputes and their impact on these communities.

Before we get into why it is such a good agreement, we should talk about some of the specific details. Right now, lumber is trading on the open market at about $365 per thousand board feet. When lumber is above $355 per thousand board feet, we have absolutely unfettered access to U.S. markets. There are no quotas, no tariffs and no import duties. There is totally free trade across this country.

Atlantic Canada got its exemption, something important for them.

The Province of Quebec had some issues with some of the border mills. Some 32 border mills — with the possibility of extending the agreement to cover two other mills, a topic now under discussion — are also exempt. That was important to the Province of Quebec.

The industry in Ontario and British Columbia was looking for flexibility, especially with regard to what will happen when the market falls. That is because the U.S. was saying, ``We want some give-and-take here.'' Different parts of British Columbia, such as the coastal region, wanted different provisions. They wanted to ensure that they would be protected. At the same time, those in the interior were saying, ``We cannot live with quotas under any circumstances. If there are quotas, we are not on board.''

There were some unique challenges from every part of the country for the negotiators in coming up with an agreement. Basically, each province has the option of going with just a pure export tax, again with no quotas, if the market begins to drop. They can export as much as they want. If the market starts to drop below $355 to $335 they will have to pay a 5 per cent export tax. It is a sliding scale, up to a maximum of a 15 per cent export tax. Under the worst conditions, they would pay less under an export tax than under the current situation.

Other parts of the country, such as Ontario, have said that they could live within their share of a quota. Thus, they have a much reduced export tax, which is on a sliding scale from 2 per cent to 3 per cent, depending on market conditions. We can give you those specific numbers if you want.

The point is that under the worst market conditions, there would be an export tax that would be far less than what we are paying today and that money would stay in Canada. That is significant, and why it is a huge victory.

Let me talk about the $5 billion, about which we have seen so much in the press. Some ask why they get to keep any of it. Why did they get to keep $500 million?

An Hon. Senator: It was $1.2 billion.

Mr. Lunn: I will correct you, senator. In fact, there is about $5 billion. Some 80 per cent, at a minimum, is guaranteed. Some $4 billion is coming back to the forestry industry in Canada. This is money that the industry desperately needs. No, the United States did not get $1.2 billion, or 20 per cent. They got 10 per cent, set aside for a joint fund to help the industry on both sides of the border move forward. There is a fund for humanitarian causes, like the Hurricane Katrina cleanup. There is a fund for joint research projects on how this industry can move forward in a competitive way. It is in both our interests to do this.

The other 10 per cent, or about $.5 billion, is for the U.S. industry to recover their legal costs. That is what they got out of it. They got $500 million, or 10 per cent, to recover their legal costs. Most people know that when you enter litigation you rarely get all or nothing. The people who have been making money on this issue over the last decade are the lawyers. They have been making hundreds of millions of dollars. Look at the people who have been opposing this. Who have the spokespeople been?

We have appeared before WTO and NAFTA panels. We won the majority of them, without question. We have lost a few battles, but you never win them all.

Throughout all the negotiations, we have never had an agreement this comprehensive and this good.

I emphasize again that we have absolutely wide-open free trade under current market conditions. We have flexibility for every region.

Some have said that we have given up our sovereignty. That is utter nonsense. We have done exactly the opposite. We have negotiated an agreement in which our sovereignty is protected. When you think about the original dispute, you have to ask, what were they attacking us on? They were attacking us on our provincial forest policy. In British Columbia it was the stumpage policy. That is exactly what we protected. We have a negotiated framework whereby those provincial policies are protected.

There are some other issues concerning the stumpage in British Columbia, which we can get into in more detail if you want. However, those issues will be resolved.

You asked about the certainty and the length of the agreement. This agreement provides certainty for the industry for seven years, with the option of extending it for two more years. That makes for nine years of certainty. That is why we have turned the corner. Business can manage certainty; they cannot manage uncertainty.

I am the biggest proponent of this agreement. We were desperate for this agreement. I give full credit to our new Prime Minister for making this a priority. He put a lot on the line to make it happen, as did the President of the United States.

I could not be a stronger advocate of it. There is no downside to this agreement. I will say this about some of the industry players opposing it: They have a vested interest in doing so, and I understand that. There are companies in Canada for whom it is in the interests of their bottom line to oppose this agreement. They have invested in their mills. They are larger, modern players. They know they have a greater chance of squeezing some of the other players out of business, and that is exactly what they want to do. It is in their long-term interest. However, it is not in the interests of Canadians, and it is not in the interests of the forestry sector, and that is why this government has made this decision. We will see that this agreement is concluded.

Senator Tkachuk: Was I asking questions? That was such a long answer, I forgot.

The Chairman: You were.

Mr. Lunn: I apologize for being so long-winded.

The Chairman: It was a full answer, indeed. We have the minister here for slightly less than 25 minutes. If you could all be crisp in your questioning, we can get through. We have the deputy minister and the assistant deputy minister here for another hour.

Senator Mahovlich: I apologize for intervening there.

Senator Cordy: Welcome, minister. The Prime Minister has put you in a portfolio for which you feel great passion, so congratulations on your appointment. I would like to go back to the softwood lumber agreement. I am not a member of this committee, but I think you would have to have been hiding in a closet for a number of years to not be aware of the agreement.

Could you take me through what happens now? We have a framework agreement, or an agreement in principle, but it has not been signed yet. I would like to know what happens next and when you expect it to be signed. You mentioned previously that there is litigation. What effect will that have on when the agreement will be signed? Also, there certainly are comments in news media, and I am not suggesting that I believe everything that is in the media, that the federal government is pressuring companies to accept the agreement and drop their litigation. Could you take us through from where we are now, with an agreement in principle, to what will happen next?

Mr. Lunn: Thank you, senator. We do have a framework agreement, as you know. The negotiators are now putting that into a final text, and they are working hard. We will focus on this in the coming months. I cannot give you an exact time — and I am always reluctant to do that — but it is a priority to put that framework agreement into a final text in the months ahead. I am saying months; I am not saying beyond that. It is a priority to make it happen as quickly as we can. I am confident we will get there.

A few issues are bubbling to the surface. For example, British Columbia was in the process of changing its stumpage system in the interior to a market-based system. It is not quite there yet, but that British Columbia stumpage system is one of the reasons we ended up with a dispute in the first place. Again, these issues will all be resolved, but it is a matter of months, not much beyond that.

As to the return of the $4 billion, you have to unwind a lot of clocks and some are easier to unwind than others. Some larger companies have kept better records and so their clock can be unwound quicker. There is no doubt that it could take six or nine months to actually return the $4 billion to the industry. You have to unwind all of these individually. However, it is an asset that the industry can rely on and leverage or borrow against. It is an asset on their bottom line.

There is litigation on both sides of the border. I suspect that, when we put the final ink to paper, these companies will drop the suits. They are commercial disputes between the industry and governments, and they have a right to put those litigation suits forward. I suspect they will remain until they no longer see a need for them. That is between the industry players that have put those suits forward and the various governments that they are filed against. They have a legal right to do that, and they will take their course. I do not believe that the fact that they are sitting out there will have a direct impact on the actual signing of the final agreement. Everyone is aware these are commercial disputes, and they happen all the time.

Senator Cordy: Is the federal government putting pressure on these companies?

Mr. Lunn: I give my speech to all of them in their boardroom. Is that pressure? When they push back, I push back even harder, because I passionately believe it is the right thing to do. If that is pressure, then there is pressure. I make no bones about talking to any of them. I have met with them. I am aggressively and actively meeting with forestry companies. They are calling me and I am returning their calls. I had dinner with the members of the Forest Products Association of Canada and was well received; it was positive. I have also put in calls to CEOs of companies that have been opposed to the agreement. I want their feedback. I want to hear it, and I want to share it at the cabinet table. It is important that we know all the concerns. You can probably get a sense of where I am going on this. If that is putting pressure on them, so be it.

Senator Cordy: Is it possible to have tabled with this committee a copy of the agreement in principle, the framework agreement?

Mr. Lunn: If it is possible, I am happy to do that, but I cannot answer that. Is it in the public domain?

Mr. Fadden: I think it is.

Mr. Lunn: If it is in the public domain and we are technically allowed to do that, I would be more than pleased to do so.

Senator Mahovlich: My office would like a copy, too.

The Chairman: Senator Nolin is next. I am wondering, Senator Mahovlich, if you might step back from your questioning to let others have a turn. Thanks.

[Translation]

Senator Nolin: Thank you, Mr. Minister, for having accepted our invitation. I too would like to congratulate you on your appointment. I think that the Prime Minister made a good choice. Obviously, your passion for this work will guarantee your effectiveness and success.

There are two areas I would like to touch on in my questions this morning, and they are the issue of sustainable development and the matter of jobs related to the forest industry.

First, French Canadians in Quebec who are listening to us are familiar with a debate that has been going on in Quebec for about 10 years now. The forest industry is the pre-eminent industry in Quebec; whether we are talking about wood or paper, this is where the most important economic activity is generated in Quebec. And Quebecers have been witness to a debate which has been going on for a decade. On the one hand, there is a pop singer, Richard Desjardins, who promotes his point of view very articulately. He attacks the industry outright and accuses it of not adequately promoting sustainable development techniques. He even produced a movie to support his claims and Quebecers in many areas were frightened by what they saw. Indeed, many Quebecers are city-dwellers, as I am, and forestry activities are often very much removed from our sight. And when we see a film like the one made by Mr. Desjardins, we are concerned.

On the other hand, there is a very articulate producers' association, whose spokesperson is a former Parti Québécois minister, Mr. Chevrette, who does his work well and who claims that the industry, on the contrary, is applying the principles of sustainable development.

Would it be a part of your mandate to guide Quebecers in this debate? We are confronted with contradictory opinions, often supported with images, which shock public opinion. As this is the most important industry in Quebec, Quebecers are looking for indicators. Do we have a sustainable development strategy in Canada for forestry, and if that is the case, are there any indicators available to the population to help them to see what is really happening in this sector?

[English]

Mr. Lunn: Thank you very much. First, it is a priority; sustainable forestry is crucial. If we do not focus on that we will lose it all. It is an absolute priority for this government and the provincial governments. Within Natural Resources Canada we invest a lot in the sustainable forest management practices across the country. We have the largest area of certified forest anywhere in the world.

[Translation]

Senator Nolin: Mr. Minister, allow me to interrupt you. You are saying this and Quebecers are listening. On the department's site, is there some way for a citizen to obtain information, to go and see whether an independent arbiter could guide Quebecers so that they might know whether it is Mr. Desjardins, or the former minister Mr. Chevrette, who is telling the truth? You can tell us that.

Finally, are there any success factors in this area that might be available to the population?

[English]

Mr. Lunn: As a federal department, we use 46 different indicators. We look at a variety of these indicators across the country to ensure the long-term sustainability of the forest, to monitor areas that are being neglected or things that are happening. They address a broad range of indicators, from environmental to social to the economic values.

Some indicators monitor, for example, the changing of the forest in protected areas; the population levels of selected forest species; the areas disturbed by fire or insects. What impact are these having? The scientists — and I do not pretend to be one — monitor all of these indicators to ensure that we are closely watching the long-term sustainability. Other indicators include the annual harvest rates, to ensure these areas are sustainable; direct employment.

There is extensive consultation with Aboriginal people on the forest management planning. The Canadian Forest Service does extensive work in these areas and they work with the industry.

I would submit that the industry has as much of a vested interest as the government in ensuring a sustainable forest. They want to be there for the long term. That is what they are expressing to me.

How we harvested forests 20 years ago is a lot different from how we did it five years ago and from how we do it today. There is no question that what we did 20 or 30 years ago is not acceptable now, but that has changed dramatically, with selective logging practices, where we harvest, the conditions under which we harvest, and how we harvest.

I was surprised to learn that there are areas on the coast where they take the tree out of the forest upright, by helicopter. They do not drop it to the ground. They send a person up the tree and limb the tree while it is standing; it never touches the ground. It is hooked up by a helicopter with a grappling hook and broken off at the stump, then taken out standing, which minimizes the damage to the forest.

[Translation]

Senator Nolin: Mr. Minister, you should say that in your province, the smallest trees are five feet in diameter while in my province, the biggest trees are one foot in diameter!

[English]

Mr. Lunn: They have looked at practices there in terms of ensuring the long-term sustainability, and it is important to do that. There are unique challenges in each part of the country. I would conclude by saying that this is an important area for everyone's interests and one where we will continue to put resources at the current levels to ensure a sustainable forest.

Do you have anything to add, Mr. Emmett?

The Chairman: Mr. Emmett, could we continue with that issue after the minister leaves; if that is all right, Senator Nolin?

Senator Peterson: Thank you to the witnesses. I come from Saskatchewan, where we have the Dutch elm beetle, so we all have our beetles in order here. That will not be my question.

I want to deal with the softwood lumber issue again. I certainly commend the negotiators for at least getting the export tax in place. It is not the most desirable tax, but at least the money stays in Canada.

The root cause of the issue seems to be the matter of ownership of the natural resource, and particularly in Canada, where it is on Crown land. Is there not some way that we could structure that to be acceptable to the other side and therefore keep us in the game, whereby we could have the exemptions? You would think there must be some way this could be done.

Mr. Lunn: I will probably get into trouble because I will give you my assessment of this.

Senator Tkachuk: That is what the Liberals want, minister.

Mr. Lunn: The deputy is kicking me on the shins under the table.

Let me say that is a very real question, and I do not believe that is the crux of the problem. British Columbia, where 50 per cent of the softwood lumber comes from, is primarily Crown lands. As you know, in Atlantic Canada it is private, and they have an exemption. British Columbia was accused of heavily subsidizing the stumpage, so what did the province do? They moved to a market-based stumpage system.

The United States accused them of certain practices and they tried to address all of them. They brought in legislation in the last four years to change their stumpage system to a more market-driven approach, trying to find a way to resolve this.

I do not think that is the issue. I think the issue is market share. That is my personal opinion. If we go above 34 per cent, the U.S. industry starts to become unglued. We have seen that in other sectors in the U.S., for example, potatoes or steel; it is not new. The U.S. lumber industry is one of the strongest lobby groups in the U.S. My personal opinion is that it has more to do with market share and that is why this agreement brings that certainty to what we do.

It allows us to go beyond the 34 per cent under today's market conditions. Traditionally, our market share has been anywhere from 28 to 32 per cent, but as you approach that higher number, it really starts to impact the U.S. industry.

They target British Columbia in particular because 50 per cent of the softwood lumber exports to the U.S. come from that province. They have gone after British Columbia, which made significant reforms to the stumpage policies to a more market-driven approach. There is more to come that I believe will likely be part of the final agreement — which will only serve everyone's interests.

Senator Peterson: I agree with you on the market share issue. Once we have hit that, are even the exempted areas, like Atlantic Canada, closed off too?

Mr. Lunn: All four provinces in Atlantic Canada have a complete exemption, so they have unfettered access to U.S. markets under all conditions, I believe. It is important to note that they have traditionally had that. This is not something new.

Senator Mitchell: I have two quick questions. I am interested in getting a copy of the agreement. You are not certain whether it is in the public domain. Why is that and when might we receive it?

Mr. Lunn: I know that when I was on Mike Duffy's show the forestry minister from Ontario read it out on national television. We did not have an agreement at that time but he was reading it out on TV. I kept saying there is no agreement until there is an agreement. All there is at the moment is the framework agreement. It contains the principles on which the text is now being negotiated. A couple of issues have arisen. The negotiators are working hard on a final text, but that is the basis for it.

Senator Mitchell: There is some suggestion that Canada would have to get Washington to vet any forest policy changes under the terms of the agreement. Is that true? If so, what would be the implications for our sovereignty?

Mr. Lunn: You are referring to the anti-circumvention clause. It says the agreement is in place for seven years, with a possible extension of two more, and you cannot change the rules in midstream. That works both ways. That protects us as well. They cannot make changes.

That is a fairly standard clause. I submit it protects the sovereignty of our forest policies — which we have not had previously — that they have been attacking. As far as vetting is concerned, it is a common clause in agreements and works both ways. All they are saying is you cannot change the rules; this is the basis of the agreement for the next seven years. If there is a good reason to change forest policy and it is in everyone's interests, we will work together. It works on both sides of the border and is a necessary clause.

Senator Mitchell: There are two implications of the forest industry for positive environmental policy. One is the forest as a carbon sink and the other is forestry products as biofuels. What specific role do you play with the Minister of the Environment in developing that; and are you aware of the organization BIOCAP, which is doing a lot of work at a high level out of Queen's University? Are you working with them at all?

Mr. Lunn: I am not sure if we are working with them. I have heard of them because I have a keen interest in this. I am familiar with their research.

Mr. Emmett: We are working with them.

Mr. Lunn: I believe we fund them, but I was not familiar with that detail. Regarding the biofuels, the Minister of the Environment, I and the Minister of Agriculture are launching our biofuel initiative next week in Saskatchewan, with a significant announcement.

From my own reading of this area, there is research on the forestry side. Brazil has been doing it for a long time with sugar cane, which is easy to turn into a biofuel. We are using agricultural products, which you have to turn into sugar and then into biofuels. In the forestry area — this is relatively new; Europe is ahead of us — there is enormous potential. I believe Norway is establishing a commercial ethanol plant using forest products, so there is potential in the markets there.

This government made a campaign commitment to ensure that there is a 5 per cent average of ethanol in fuel by 2010. We are committed to and moving forward on that.

The Chairman: Thank you very much, minister. Undoubtedly, we will want you to come back. Perhaps we can have an evening meeting that could go longer. We appreciate the time you have spent with us today.

Mr. Lunn: Thank you very much; I have enjoyed it.

The Chairman: Colleagues, we have our two senior officials from the department and they are prepared to stay with us for half an hour. Let's get on with it.

Senator Oliver: I have a question for Mr. Fadden. I noticed in the minister's remarks that he said he intended to consolidate three forest research institutes to improve performance. Could you tell us which ones those are; what form will the consolidation take — will some be eliminated; where will it be located; and where will the new fibre centre for research be located and what will it do?

Mr. Fadden: I will ask Mr. Emmett to answer that question because he is the godfather of this initiative.

Mr. Emmett: If I could approach your question, senator, in reverse order, the fibre centre is a creation of the Canadian Forest Service, which is part of the bureaucracy. We have decided to make our operations in support of the industry and commercial profitability much more transparent and more closely linked to the priorities of the industry.

Therefore, we have created what we call a ``virtual institute'' in the Canadian Forest Service, with five laboratories across the country. People will not change or lose jobs. We will have a quasi-board of directors to help us set priorities, focus our research and make sure we are doing what the industry needs to be profitable.

As a government department, we have a responsibility for public policy research as well. We do not want to crowd out any of that. About 80 per cent of our resources will continue in public policy research. The remaining 20 per cent will be in the virtual institute, the fibre centre. We have hired an executive director who is working hard now to get things up and running and create a board of directors and a design team. He is working out of Ottawa now, but the people are scattered in the five laboratories across Canada.

Moving on to the three forest research institutes, they are the Forest Engineering Research Institute of Canada, FERIC, which has labs in Vancouver and Montreal; Paprican, which has labs in Montreal and Vancouver; and Forintek, which is basically solid wood research. It has labs in Quebec City and Vancouver. They are member- supported, non-profit institutions, so they run on assessed contributions from the forest companies that are members. We provide core funding for two of the three institutes, FERIC and Forintek, and we sit on their boards of directors.

It has been the view of, especially, the larger players in these institutes that the three-institutes structure results in a fragmented approach to research in the country. As well, it results in forestry innovation being obscure and difficult to understand and it prevents it from claiming its rightful place in the national R&D picture. It has been the desire of the private sector and the government members of these institutes to bring them together as a single institute with one CEO, but with CEOs at the division level as well. We are aiming for a vote at the boards of directors of these non- profits in June to agree to merge. I do not anticipate any of them closing and I do not anticipate any change in the regional structure. I would like to put the new virtual Fibre Centre in the Canadian Forest Services under the board of directors and CEO of the integrated research institute, so that these four different institutes, which are fragmented today, will become, in the summer or fall, the world's largest single forest research institute. Innovation is the key to survival in this industry. We cannot grow trees quicker than they can in Brazil and we cannot grow a bigger forest than Russia has, so we have to be smarter, have our institutes wind up, and in some sense focus on the right priorities.

Senator Oliver: It is exciting that you are modernizing our research institutes and making them work.

[Translation]

Senator Nolin: I would like to allow the Assistant Deputy Minister, Mr. Emmett, to continue his reply concerning sustainable forestry development.

Can an ordinary citizen who is interested in this matter have access to online date to see whether his neck of the woods is being developed in a sustainable way? If not, what measures would be available to the population to indicate that sustainable development is taking place in their region?

[English]

Mr. Emmett: I would suggest beginning with the Natural Resources Canada website and navigating to the forestry sector. We are in the process of making that site much more accessible and user-friendly. I would also suggest visiting the FPAC website. I would be delighted to provide these addresses to the committee. I would want to look up two or three other addresses of institutions outside government and outside the industry so that senators can get a balanced view of what people think about the industry.

Your question about indicators was fascinating. My problem is that I cannot keep 46 indicators in my head. The best indicator is consumers, because they are extremely conscious of the practices of the people who produce the products they buy. They can walk through Wal-Mart and read the tag that claims a product was produced without child labour. People take the same attitude toward forestry. They want to know that the forest has been harvested in a sustainable way that respects the environment, communities and Aboriginal people. The true indicator is whether the forestry industry has the ability to continue to sell its products in a socially conscious marketplace and to have the permission of the citizens of Canada to harvest the trees to do so. The industry is extremely conscious of those two requirements and is working hard to meet them. The minister said that when going into the forest today, as opposed to 20 years ago, one can see that the industry is unrecognizable because things have changed so much. Is it perfect? Absolutely not. Is it working on a continuous basis to do better as it learns? I believe that the answer is yes. It has a solid record among Canadian industries as a responsible and sustainable industry.

[Translation]

Senator Nolin: Mr. Deputy Minister Fadden, we are barely immerging from a long trade conflict with the Americans, and I am convinced, as are many other Quebecers, moreover, that we have a good agreement.

All through this conflict, local communities and jobs were affected. That is an undeniable fact. Did the minister follow the development of this deplorable situation? Are there any studies supporting the content of the agreement, whose purpose would be to resolve the problems which accumulated over the years as this horrible trade conflict dragged on?

Mr. Fadden: There is not much in the agreement itself concerning the topics you have raised. However, as the minister mentioned earlier, approximately $200 million are available in the budget of 2006 for insects and $200 million are available for community adjustment and adjustment at the individual level.

Senator Nolin: Specifically pursuant to the trade conflict?

Mr. Fadden: I would not say specifically in relation to the conflict, but when these amounts were allocated, the Minister of Finance was aware of the fact that with or without the trade agreement, both individuals and communities were experiencing difficulties.

In his reply, the minister stated that it would take some time to recover the money from the United States. The problem is a longer-term problem. Accordingly, in the budget a sum of $200 million was allocated to support restructuring by the industry.

The minister is also developing programs to assist communities and individuals. It is not clear whether our department will be responsible for the management of those programs. I believe it will be, rather, the Department of Human Resources and Skills Development.

Yesterday, I attended a deputy ministers' meeting which examined this issue, and we hope to be able to provide recommendations to the minister in the near future.

Senator Nolin: Have studies been done to examine the scope of the damage done to communities, individuals, families and workers in the industry?

Mr. Fadden: Yes, but they are mostly studies coming from the Department of Human Resources.

Senator Nolin: Are those studies available?

Mr. Fadden: Some of them are, certainly. It will be our pleasure to send them to you.

Senator Nolin: I would like the committee to receive that type of information. Rather than relying on headlines and newspaper articles, we prefer to refer to the most rigorous studies available to form our opinions.

Mr. Fadden: It would be a pleasure, Madam Chair.

[English]

Senator Mahovlich: Many questions that I wanted to ask have been answered. However, I do have a problem. If I were playing for the Stanley Cup and lost, I would not be happy. When I go down to the United States, I hear them say that both Canada and the U.S. should be pleased with the softwood lumber agreement. Certainly they seem to be happy, but I have my doubts about who truly won the game. Today, Minister Lunn sounded like one of those Americans that I talked to in Charleston about a week ago. They seemed very happy, but I have my doubts. I have many friends in the industry out West whom I will visit to hear how they feel about this deal that we made, because $1.2 billion is a great deal of money to be leaving Canada.

I still have my doubts about the softwood lumber deal.

Second, are you pleased with the industry? I grew up in Northern Ontario, and many of the forestry companies that were there then have gone. Huge corporations have taken over. Tembec is one of them. Are they cooperating with the forestry industry and doing a good job of reforestation? Do you feel they are cooperating as much as they should?

Mr. Fadden: With respect to the first question, I will not contradict my minister because I think that, fundamentally, he is right.

In a commercial negotiation between two parties who have important interests, you cannot look at it as zero sum game. You have to have some measure of compromise in the end. Over the years, a number of individuals have tried to come up with a solution that is acceptable to both sides. We do this in all kinds of commercial undertakings. If someone is going bankrupt, as a creditor, you negotiate some percentage of return.

The minister has stated, and I would agree with him, that this is the best deal under the circumstances. Is everybody happy? No way. He admits that, and the industry will tell you that. However, in our view and in the view of the government, it was desirable to get over this impediment to good relations with our principal trading partner.

You are right. We do not have the entire $5 billion, but there is an element of politics here. We have to acknowledge with whom we are dealing. We could have gone on fighting for the next 10 or 15 years.

My sense of the United States is they would not have gone away. In the view of the negotiators and the government, this is the best deal we would get, and it is not a bad deal. You are correct that not everyone is happy on either side of the border. It is, however, a reflection of a desire on the part of both governments to reach an agreement that they could live with. That is the best answer I can give.

The Chairman: Thank you very much. Do any other honourable senators have a question, or have we worn our visitors out?

I want to thank you for giving us the extra time and for accompanying the minister. It is most helpful to have the senior officials from the department at these hearings.

The trade issue has always been a major topic, but there is a lot more going on across the country, certainly in my province, where glaciers are disappearing, and that also affects the forestry industry. We will probably want to have you back at some point, but for the moment, thank you so much for giving us your time.

The committee adjourned.