RNNR Committee Report

There can be no doubt that Canada’s forest products industry today is in the midst of a significant adjustment period. But the challenges facing the industry are not insurmountable. This is an industry with a long and successful history which continues to have tremendous potential for sustainable growth.

Witnesses who appeared before the Committee were emphatic: Canada’s forest products industry is not a sunset industry. It will bounce back from this severe downturn.

This is, after all, a cyclical industry. Over the medium to long term, a host of new opportunities will present themselves. It is up to the industry, in concert with governments, forest communities and other stakeholders, to position itself to be able to seize these opportunities.

Opportunities will exist in both new and traditional markets. While the U.S. economy is currently in the throes of an economic downturn, most analysts agree that it will bounce back, and with it demand for new residential construction. Though this most important market for Canada’s wood products is currently weak, it is unlikely that this weakness will persist for many more years.

On the pulp and paper side, the Committee received evidence that global demand for paper, led by emerging Asian economies, each year is growing by an amount equal to all of Canada’s production. Canada can and indeed must take the necessary steps to further tap into that global market.

Besides the traditional wood and pulp and paper markets, there now exist entirely new markets for wood fibre. Global concerns about the environment, and concerns about climate change in particular, are expected to further stimulate demand for wood fibre (and other renewable resources) that can be used as a low-carbon energy source and fossil fuel substitute.

While global demand for wood fibre is growing, it is also the case that throughout the world, particularly in industrializing countries, land to grow such fibre is increasingly being diverted to other uses, namely food and biofuel crops.

The price of food and biofuel feedstocks, such as corn and soybeans, has risen considerably in recent years in response to surging food and biofuel demand in emerging economies, the U.S. and the EU. The Committee received evidence from Don Roberts of CIBC World Markets that Asian and Latin America countries may not be able to continue to increase their production of wood and paper products as forest plantations increasingly compete with the agricultural and biofuel sectors for scarce land and water.[15]

According to Mr. Roberts, the amount of land available globally to grow wood fibre will in fact shrink as land in Asia and Latin America is used instead to grow crops for food and fuel. At the same time, Russia, which has huge forest resources and supplies roughly 40% of the world’s harvest of logs, is expected to impose a substantial tax on log exports. Mr. Roberts testified that this move could affect the global supply of forest products as Russia does not at present have the capacity to process those logs domestically.[16]

These developments are advantageous to Canada. Canada has the land, the water and the energy to be a global leader in the forest products business. The emerging opportunities that stem from what Mr. Roberts calls the “convergence of the markets for fuel, food and fibre” will raise the value of Canada’s forests and help Canadian producers become more competitive globally. After well over a decade of eroding competitiveness, the pendulum may in fact be shifting back from the southern hemisphere to the northern hemisphere.

The fact that markets are increasingly looking for sustainable forest products is also to Canada’s advantage. Indeed, both the U.S. and the EU have taken some steps to reduce the import of illegally produced forest products into their markets. Illegal logging is widespread, notably in tropical countries such as Indonesia, and is having a major impact on the sustainability of these wood products. As markets come to demand sustainably harvested forest products, Canada will be able to take advantage of its environmental leadership position and capitalize on these opportunities.

Canada, with its vast forests, technological expertise and recognized leadership in the area of sustainable forest management, is well positioned to capitalize on any increased demand for wood fibre. Moreover, technological innovation in the area of composite materials and bio-products offers many new exciting potential market opportunities. Canada can and must build on its strengths. As one witness told the Committee, Canada’s primary advantage is that “we have the best fibre in the world. No one can take that away from us.”[17]

It is up to the industry to restructure itself in order to be able to seize these emerging opportunities. As the Forest Products Association of Canada noted in its submission to the Committee, Canada is uniquely positioned to capitalize on these opportunities:

There are few places on Earth with a land base similar to Canada’s that can meet the world’s growing needs for wood fibre. There are even fewer, possibly none, that also have the knowledge and network of institutions required to make sure that this fibre is produced and processed in a socially and environmentally responsible fashion. If Canada fails to realize the opportunity that its forest resource base offers in the 21^st century, it will be because of either a lack of will or imagination. It will not be due to a lack of opportunity.[18]

Governments, including the Government of Canada, have an important enabling role to play by creating and implementing a supportive policy framework. The rest of this report will therefore offer some recommendations for how the federal government, along with the provinces, the territories and the industry, can help the forest sector capitalize on these opportunities and in the process provide long-term benefits to forest workers and forest communities, including First Nations communities.

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