Forest Industry Head calls on Parliament to Undertake Forest Products Industry Study

Ottawa, Ontario, Canada 05 December 2007 -- Even though global demand for forest products is strong and Canada has the resources to meet this need, Canadians are losing out as mills shut down in the face of unprecedented competitive stresses for the forestry industry. As a result, the head of the Forest Products Association of Canada (FPAC) has called on MPs to follow the lead set by the House of Commons Standing Committee on Industry, Science and Technology and launch an intensive study that focuses on the unique opportunities and challenges facing the forest products industry, which is Canada’s largest exporter of goods.

“Complacency is not an option,” Avrim Lazar, FPAC president and chief executive, said Wednesday, prior to an appearance before the Industry Committee to discuss the impact of the robust Canadian dollar. Lazar said it is time for the federal government to develop a market-based action plan that would set the groundwork for a vibrant forestry industry, a sector that represents 3% of the national GDP. Work on such a plan is essential given the sharp appreciation in the Canadian dollar relative to the U.S. currency; persistent weakness in the U.S. economy, in particular the housing market; structural changes in key product markets, such as newsprint; and growing competition from emerging markets.

Lazar said MPs could use the Industry Committee’s ground-breaking analysis on manufacturing, delivered earlier this year with all-party endorsement, and FPAC’s recent report from its competitiveness task force -– Industry at a Crossroads: Choosing the Path to Renewal -– as the base from which it can build a long-term strategy. “We need a coherent action plan to re-establish our dominance in the global marketplace,” Lazar said.

The Industry Committee’s report had 22 recommendations aimed at improving the state of manufacturing. To date, only one of those recommendations, an accelerated capital cost write-off, has been adopted. But the dollar’s appreciation since the write-off’s introduction has in essence wiped out the advantage the initiative was meant to offer. That is why FPAC has called on the federal government to extend the write-off provision beyond the two-year timeframe as outlined in the last federal budget, as well as adopt the other 21 recommendations in the Industry Committee’s report, particularly the recommendation of making Scientific Research and Experimental Development (SR&ED) tax credits refundable.

The recent drop in the value of the Canadian currency from its recent USD 1.10 high and the Bank of Canada’s move to cut its overnight rate this week by 25 basis points, the first such cut to its benchmark lending rate in more than three years, is welcome news. Nevertheless, it will do little to mitigate the damage done by the dollar’s 60% rise in the past five years, especially in the wake of softness in the U.S. economy.

The dollar’s climb has placed enormous pressure on Canada’s forest products industry and Canada’s manufacturing sector more broadly. Since 2002, nearly 280,000 jobs have been lost in Canada’s manufacturing sector, including more than 30,000 jobs in the forest sector. Correspondingly, Canada’s overall business sector productivity growth has slowed markedly over the past nine to 12 months, as forest products mills and other high productivity sectors of the economy have been driven out of business. With only a month remaining this calendar year, Canadian mills have announced 60 instances of capacity reductions, resulting in the loss of over 8000 jobs.

FPAC is the voice of Canada’s wood, pulp and paper producers nationally and internationally in government, trade, and environmental affairs. Canada’s forest industry is a CAD 80 billion a year industry that represents 3% of Canada’s GDP. The industry is one of Canada’s largest employers, operating in over 320 Canadian communities and providing nearly 900,000 direct and indirect jobs across the country.