Countervailing Duty Could Destroy Value-Added Manufacturing in Northern BC

1. Countervailing Duty Could Destroy Value-Added Manufacturing in Northern BC …….and so too could our outdated, unworkable forest policies, our lack of support services and our poor investment climate.

2. Dialogue • We encourage dialogue between the industry and local governments. We need to ensure: • Local governments understand the dynamics of the industry, its drivers and its deficiencies. • An effective exchange of information so that local government is kept aware of developing issues. • That local government understands the need for reliability, consistency and supportive policy towards industry.

3. A Leadership Role • Prince George should take a lead role in developing a new industrial strategy for further manufacturing in the longer term. • Develop a resolution through the resolutions committee to embrace a new industrial strategy • Move the concept along with the North Central Municipal Association to ensure wider acceptance • Involve the PG Development Corp. in the strategy

4. Crisis • The value-added industry in Prince George is in a near state of collapse. Some firms have failed.   • The primary industry is in dire straits. Prices have slumped; uncertainty exists over the SLA; mountain pine beetle epidemic could be devastating. • The harvest sector is in a desperate position being entirely dependent on the rest of the industry. • Silviculture, engineering, forestry consulting and many suppliers to the industry are hurting.

5. Why the Trouble? • The past year has seen a number of companies in trouble. Some reasons, that apply to both primary and secondary sectors, are: • High costs - materials, labour, energy • Uncertainty - market access, land claims, tenures • Weak public policy - poor decisions • Government interference - FRBC, JPC, resulting in handouts and bailouts

6. Structural Problems • Industrial Strategy: The economic strategy for northern BC is badly outdated and has been driven mainly by resource exploitation from the south. • Tenure Reform: There is an urgent need to review the tenure arrangements under which the industry operates. • Forest Legal Framework: The laws and regulation surrounding the forest and related acts are complex, convoluted, out dated and badly in need of reform.

7. Structural Problems • Stumpage: Although an integral component of forest policy, stumpage is the key to fundamental change. It is not a target revenue provider for the provincial general revenue coffers. • Market Access: Two critical issues threaten market access for B.C.forest products to international markets. These are the Canada-US Softwood Lumber Agreement (or its successor) and environmental certification of our forests.

8. Market Access • The Softwood Lumber Agreement has provided some stability to trade with the US BUT it has been the single biggest negative impact on growth to this economy. • It affects both primary and secondary industries • As a result of it, strategic partnerships and supply agreements have blossomed between primary and secondary manufacturers • It has forced further manufacturing in BC but if conditions change, this could be forced south of the border

9. CVD …. Inevitable • The US based Coalition for Free Lumber Imports fully expects to file a case of injury on April 2nd seeking countervailing duties against Canadian exports of lumber when the SLA expires. • Rate expected to be 20% to 40% • Directly penalizes further manufacturing in northern BC. • It is now minutes to mid-night and we are no closer to a solution and there is still no cohesive strategy

10. US Protectionist Trade Law • The US has an extensive body of protectionist trade law. Besides a CVD, there are 3 other “tools” they can use. All are devastating to all levels of industry. • Safeguards -Trade Act 1974: Temporary duties, quotas, or other import restrictions, to give domestic industry the opportunity to recover its competitiveness. • Anti-Dumping Duties – Tariff Act: Determines whether imports are sold at unfairly low prices. • Section 310 – Trade Act: Foreign trade practices are found to be illegal, unreasonable, or discriminatory, and burdensome to US interests.

11. Value-Added Position • The Value-Added Industry is trying to achieve exemption from a CVD on the basis that: • It pays full market value for all inputs • It does not hold timber licences that may be construed as being “subsidized” • It has never received any grants, subsidies or incentives from any level of government. • It competes freely with other manufacturers in North America, or the rest of the world for that matter, to purchase finished, kiln dried lumber at whatever market forces determine the price to be.

12. What might happen? • While Canada has > 30% market share, no matter what we do, including allowing log exports, the US will continue its action. • Recall 1986 - CVD all round including those found to be below de minimus (insignificant) level of 0.5%. Brink Forest Products was one of those. • This time the claim will be for all products from every province including those formerly excluded. Everything in; Everyone in.

13. What to do about it? • Prince George has a lot at stake Collectively we must take some short-term action: • Become vocal about the issues affecting the region • Support the position of exemption and insist on free trade • Reduce our reliance on the US and commodity markets by adopting an industrial strategy geared at further manufacturing • Build the support services to meet the needs of a new strategy

14. Industrial Strategy • In the longer term a comprehensive industrial strategy for the forest industry must be devised and implemented. • Attention must be paid to the growth of the whole sector • Forest policies, regulatory procedures and economic incentives must be developed to provide increased business stability and entrepreneurial opportunities to logging and trucking contractors, value-added operators and primary manufacturers • Such policies and opportunities will strengthen local and regional economies. • It will require RADICAL change

15. Leadership Required • Prince George must play the role of leader • There is no place on earth that has better fibre • There is no better infrastructure, transportation system and quality of life than we find here • Nowhere else is located as strategically we are to the markets of the Far East, Europe and the largest consumer market of them all, the USA

16. What Should the City Do? • PG can support a new industrial strategy by: • Supporting the development of services that underpin successful world class manufacturing excellence. e.g. wood technology education and training; value-added incubator services. • Creating an attractive investment climate; no surprises (e.g. OCP); minimal bureaucracy • Provision of first class services – roads, utilities, and infrastructure

17. PG Development Corporation • Now that the PG Development Corporation falls under the city’s wing: • Have it work with industry on a new industrial strategy • Help build the entrepreneurship that is required to stimulate new private sector investment and innovative ideas • Have it help develop the support infrastructure needed like the Wood Technology Centre, the Value-Added Incubator and others

18. We Can Do It!! • Lets build a dialogue between the industry and local government and understand the basic drivers of success • Lets take the leadership role and spread it out to other northern communities • Lets use the economic development resources that we have, like the PG Development Corp. and put them to work on a new industrial strategy

19. Lets Do It!! • Lets insist on northern solutions for northern problems • Lets insist that the implementation of policies by government ministries, agencies and crown corporations that are located in the North actually function for the North

20. To Action!! • Lets implement an industrial strategy that encourages and fosters the establishment and diversification of environmentally responsible and sustainable industry which will provide a sound economic foundation for the North, jobs for its people, and a secure future for its communities.