Thank you, Mr. Chair, for the opportunity to address this committee.
I'd like to do three things today with my time: briefly introduce myself and the company I represent so that I can put my comments into context for you; explain why we support this agreement; and lastly, look forward to how the government can help us establish principles to break this circle and create a North American lumber industry.
My career with the lumber industry spans over 40 years, the majority of that spent in wood product sales and marketing. The last 24 years have to one degree or another been involved with the Canada-U.S. lumber dispute, and that was from the perspective of a Canadian producer selling into the U.S. market, but a Canadian producer that is owned by a U.S. parent that does not support the coalition.
Weyerhaeuser is the largest lumber company in North America, with production in all three of the primary lumber-producing regions of the continent--the Pacific northwest, which is Washington and Oregon, primarily; the southern U.S.; and Canada. Within Canada we have had a presence since 1965. We have lumber operations in B.C., Alberta, Saskatchewan, and Ontario.
Because of the structure and the position of the company, we have always had a rather unique perspective on this dispute. We have tried to use our involvement on both sides of the border to search for a realistic, long-term solution to this issue.
There are a number of key principles that have been fundamental to our position. We believe that litigation will never be able to resolve this issue. We believe that the root cause of the dispute arises from the differences between the drivers of a predominantly public land supply chain in Canada and a predominantly private land supply chain in the U.S.
In saying this, I want to be absolutely clear that this does not mean we are saying the Canadian producers are subsidized by a public land system. We are simply saying that there are significant differences in the value chain of a system that increasingly relies on plantation timber versus one that relies on extensive natural forests.
In fact, our analysis would indicate that if you could find comparable sawmills across any of these three regions, through a business cycle the return on investment would be relatively similar. We believe that the symptoms of these differences are really evident in low-demand markets, when Canadian timber supply remains more constant and adjusts more quickly to lower lumber prices than U.S. private timberlands.
We believe that lumber is an international commodity and the increase in cost competitiveness of European production needs to be recognized. We believe in free trade, but for lumber in North America we have accepted that managed trade is the only way to avoid endless litigation, given U.S. trade laws and the right and determination of the coalition to use these laws to protect their market position.
With these beliefs, why do we support this particular deal? First, we believe that the two governments ultimately needed the direct leadership of the President and the Prime Minister to drive a deal. Left on its own, neither the Canadian industry nor the U.S. industry could agree on compromises, as evidenced by what has happened since the last agreement expired in 2001.
We believe that it was very important that when the opportunity presented itself, senior political leadership on both sides of the border had the responsibility to do everything in their power to focus everyone's attention on a negotiated solution. Canada and the U.S. brought their very best negotiators to the table to strike a balanced agreement, keeping in mind that both have challenging and diverse constituencies to satisfy.
Secondly, we believe that the fundamentals of this agreement meet key objectives that we had for any deal. It is a longer-term deal--seven years, with the potential of nine. Some say it's shorter because of the termination clause. We do not accept this logic. We believe that unless extraordinary or unforeseen events occur, neither government will want to terminate this agreement.
It is essentially a bottom-of-the-market restriction that will not penalize our customers with higher costs when the markets are good. It recognizes the concern about growth of third company imports and establishes this as a principle. It sets up structures for the two industries and the governments to work together over the course of the agreement to improve understanding and trust and work side by side on issues of importance to the North American forest products industry.
Thirdly, if you look back two years at the deal we were then considering, you'll see it's clear that the current agreement is a substantial improvement in a number of key areas. Some key examples of improvement include a definition of what constitutes the bottom of the market, the market share entitlement for Canada, the deposit allocation, the management of the agreement, and dispute resolution.
We believe these improvements are the direct result of the ability of the Canadian negotiators to leverage Canada's legal victories. So in our view, Canada effectively used the legal process to drive a better outcome at the negotiating table.
We know there are some who will say that if we'd only waited longer for more legal victories this deal could have been even better. In many ways, your acceptance or rejection of this deal hinges on what you see as the alternative. The alternative for us is continued litigation during what will be a down market, with an eventual negotiated deal probably under changed political conditions in the U.S., which could play into the coalition's political strengths and result in an agreement much less favourable to Canada.
The transition to Lumber V could be very quick if this deal is rejected. Repeating the litigation cycle of the last four years with initial high deposit rates and supported by a weak market, the ability of the U.S. to show injury would be much greater than it was during Lumber IV. For us, it's a pragmatic and relatively easy choice. There's an old saying: perfection is the enemy of the good. We have the best deal that could be achieved through tough negotiations in front of us, and now is the time to move ahead with implementation.
In this regard, and optimistically looking forward to implementation, I would like to ask this committee to help the government to work toward making this a stepping stone to developing a truly functional North American market for lumber. We believe that the committee structure that is proposed can work to help break this cycle of controversy and distrust. Governments need to continue to work together to ensure that the operating principles and structure for the working committees are designed to be constructive and focus on satisfying our mutual customers, the lumber users.
I believe the lumber industry truly should be a part of a sustainable solution for a vibrant North American economy, and working together from both sides of the border, we can achieve this goal. We don't have to fight over dividing the pie. We can in fact make the pie bigger.
Thank you for listening.