John Rafferty – An update on the forestry industry in Canada and Ontario

John Rafferty MPTHUNDER BAY – Leaders Ledger – This week I would like to offer up an update on the forestry industry in Canada and Ontario. Unfortunately, new data shows that in 2011 employment in the forestry sector in both jurisdictions declined for the sixth consecutive year under the “leadership” of the Harper government.

According to Natural Resources Canada, the number of people employed in the forestry sector in Canada has declined each year from 2005 to 2011. In 2005, 339,600 Canadians were directly employed in the forestry sector, but last year the number was just 233,900, which was down 5000 positions from 2010. In Ontario, the number of people directly employed in the forestry sector was 84,500 in 2005, but just 53,500 in 2011 which is 3,500 fewer than in 2010. The worst part is that these losses have occurred almost exclusively in the small 200 forestry dependent communities scattered through northern and rural Canada, and the figures only account for ‘direct’ job losses in the sector (ie: mill workers), excluding ‘secondary’ employment (ie: shippers, suppliers) and ‘tertiary’ spin-off jobs (ie: local restaurants).

So what is causing all these job losses? Some say it is because the ushering in of the digital age has meant a decline for pulp and paper products such as fine paper and newsprint. A decline in the housing market in the United States has also been cited by some as a potential reason for the decrease in demand for wood products that are used as building components (ie: studs, OSB, fibreboard). These could best be described as ‘organic’ or ‘natural’ risks unique to the forestry sector and certainly contribute to the problem, but are there other types of challenges? The answer is ‘yes.’

The other challenges to faced by the forestry sector are either entirely preventable or can be dealt with by a government that chooses to support the forestry sector as it does for others such as the oil and gas and banking industries. The two biggest and well documented ‘artificial’ problems faced by the Canadian forestry sector are unfair subsidies being dished out in foreign markets, and a soaring Canadian dollar fuelled by currency traders and an oil and gas boom. I call them artificial because they are essentially ‘man-made’ problems and not what one would call part of the natural economic cycle.

On the first artificial problem, that of foreign subsidies to competing interests, the most infamous was the Black Liquor subsidy in the United States. By the end of that program in 2009, the US government under George W. Bush had given more than $9 billion in cash directly to pulp and paper producers who then used this added “flexibility” to undercut Canadian producers on the open market by nearly 25 percent.

On the second artificial problem, the high Canadian dollar, the problem has been identified by economists as the ‘Dutch Disease,’ which is a rapid appreciation of a national currency (our Dollar) due to intensive oil and gas production, which makes it more difficult to sell products abroad and results in a decline in other export sectors (manufacturing and forestry in this case). A slew of studies, including a massive $250,000 report commissioned by Industry Canada, has found that the Canadian Dollar is overvalued by as much 25 percent because of this phenomenon which has directly resulted in tens of thousands job losses in the manufacturing and forestry sectors over the past six years. Even Avrim Lazar, the head of the pro-business Forestry Products Association of Canada (FPAC), has said; “the obvious signs of Dutch disease have been in place in Canada for some time.”

What does all this mean? Well, when one combines the effect of the US subsidies and inflated dollar it can be argued that Canadian pulp and paper producers have potentially been operating at a 50 percent price disadvantage to their US competitors over the last six years – and during a time of sagging demand for their products to boot. Other forestry product companies are operating at just a 25 percent disadvantage, but how can anyone sell a product that is 25-50 percent more expensive than the identical product being sold next door? They can’t obviously.

With 106,000 forestry job losses across Canada and 31,000 in Ontario since the Harper Government came to power it is clear that a new approach is needed. Unfortunately, the Harper Government is proving itself to be a ‘do-nothing’ government that has been a disaster for many parts of the economy, but forestry is right at the top. Hopefully in 2015 my New Democrat colleagues and I will be able to implement a real federal forestry plan, one that addresses both natural and artificial threats, in order to save and create jobs in forestry dependent communities throughout Canada.

John Rafferty MP
Thunder Bay Rainy River