Getting Government Right For The Forest Industry

As we travel through the grim economic landscape of this recession, many turn to government for solutions. The public’s expectation of the role of government is as much subject to changing fashions as other elements of our culture: sometimes we assume they can do no good in the economy and other times we expect them to save our jobs.

Economic distress combined with the energising self confidence of the Obama administration has brought the economic role of government back into favour. What used to be an ideological divide between the right and the left now seems more a matter of the politics of the moment.

With our jobs and well-being at stake maybe we should ask what governments can usefully do in a recessionary economy and refocus the issue on simple practicality.

The answers are relatively straightforward. Governments can provide a safety net that lessens the pain for displaced workers and prepares them for new jobs. They can also assist community adjustment. This is a role they are embracing and playing well and which was a large part of the last federal budget.

Governments can also stimulate the economy through spending and macroeconomic policies. While some think more is necessary, the truth is that in these uncharted economic times there are no clear prescriptions. Ultimately, judgement, open minds and good faith will take us further than the recipes of the past.

A third role for government is setting hosting conditions for business. The simple truth is that only competitive businesses will protect our jobs. Canada is an exporting nation selling into the global marketplace. If we are competitive, we maintain our standard of living. If we are not, we lose our jobs. There is not enough money in the governments’ collective treasuries or policy power in the ministries of finance to protect us from the need to be competitive.

There is no doubt that workers and industry itself must take the lead in being competitive. It is the imagination, entrepreneurial spirit and hard work of our forest industry workers and leaders that has made us competitive. Despite hard times, Canada’s forest industry is still the most successful global exporter with many of our competitors around the globe in worse shape.

But government hosting conditions play a central role in determining how competitive we can be. Our capacity to keep jobs is profoundly influenced by transportation policy, energy policy, tax systems, mergers policy and regulatory efficiency.

The agenda for change is clear: counter the U.S. black liquor tax subsidy; ensure industry has access to credit; bust the railway monopoly powers so we have competitive rates and proper service; change the tax structure to attract investment in innovation and modernisation; provide better support for the green transformation of the industry, and create more certainty in land tenure so capital will flow towards industry instead of away from it.

Some provinces have resisted change for social reasons resulting in less competitive mills and more social pain. The British Columbian approach to modernising policy and expanding markets has resulted in the most efficient mills in the country being located in this province. Much more still needs to be done but this is clearly the approach that needs to be followed.

Global markets will rebound, and a growing world population will increase demand for forest products. Canada must position itself now to benefit from this opportunity. But a necessary pre-condition to the forest sector’s recovery and to it becoming the world’s best next generation forest industry is world class hosting conditions in Canada now.

Avrim Lazar is the President and CEO of the Forest Products Association of Canada.