Federal and provincial governments must commit now to working with the Canadian forest products industry to create a world-class business culture in which the sector can thrive and ensure prosperity for the 300,000 people it employs and 300 communities it supports, said Avrim Lazar, President and Chief Executive of the Forest Products Association of Canada, in Montreal Thursday as part of an executive panel discussion about the sector’s future.
“Policy makers have shown a remarkable degree of complacency about the state of our economy in this country,” Lazar said. “Although the government has taken a number of positive steps in terms of tax relief and the like, there are many more things governments can and should be doing, not just to help struggling communities and industries now but also to strengthen our productivity and competitiveness over time.”
Of all the challenges facing the industry, the unprecedented surge in the Canadian currency stands out as the most significant. Yet as the dollar soared toward parity with the U.S. and beyond last year, policy makers did little to constrain its rise or address the fallout from the resulting economic shock.
Lazar said he hopes the pending federal budget will represent the first step toward creating favourable market conditions that can boost the forestry sector’s fortunes. But he also called on provincial governments to refrain from micromanaging the industry and allow the sector to restructure and consolidate. While bailouts may be tempting, they will not work in this new global economic era and are detrimental, Lazar warned.
“There is little doubt that the long-term fundamentals driving global demand for forest and paper products are strong. The only real question is whether Canada can position itself to serve the growing global market,” Lazar said. “The answer depends on us — industry, governments, labour and other stakeholders — working together.”
The forestry industry represents 3% of Canada’s GDP, directly employs over 300,000 Canadians and is the economic backbone of rural Canada. For the better part of almost two years, the sector has struggled in the face of myriad challenges, such as the rise in the Canadian dollar; persistent weakness in the U.S. housing market; structural changes in key product markets; and growing competition from emerging markets that do not impose the same regulatory requirements as Canada does. These factors forced forest product companies to shut down operations at over 100 mills and shed 12,000 workers in 2007.
Public policy initiatives that could help the industry emerge from this economic restructuring include: an extended accelerated capital cost allowance for investment in machinery and equipment, from two years as outlined in the last budget to five years; making tax credits linked to R&D refundable for companies, regardless if they are posting a profit; harmonization of the GST and provincial sales taxes, which would reduce taxes on business inputs; rapid elimination of provincial capital taxes; and investments in market leadership and development, and transformative R&D.
FPAC is the voice of Canada’s wood, pulp and paper producers nationally and internationally in government, trade and environmental affairs. Canada’s forest industry is an $80-billion dollar a year industry that represents 3% of Canada’s GDP. The industry is one of Canada’s largest employers, operating in over 300 Canadian communities and providing nearly 900,000 direct and indirect jobs across the country.
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For more information, contact:
Director of Communications
Forest Products Association of Canada
(613) 563-1441 ext: 323