Missing the boat

01 Mar-Apr 2012 Wood IndustryThe world is becoming an increasingly complex place, and the Canadian secondary wood sector is being left behind. That’s what our annual investigation into trade has revealed, and it’s unlikely that the challenges facing our industry on the international stage will go away anytime soon.
Brenda Swick is an expert in international trade and investment for McCarthy Tetrault in Toronto, Ont. She has years of experience in Canada’s wood sector, including the secondary side. Swick is candid when asked about Canada’s voice in the industry. She says, “There really isn’t one. Right now, our federal government is engaged in all kinds of trade negotiations internationally, and no one is really speaking for the wood remanufacturers.”
What are some of the negotiations that our government is currently undertaking? The list is a long one. The European Union and the Pacific region countries are two areas where trade arrangements are currently being worked out. Canada has recently reached out to China. South Korea is on the horizon.
A Canada-U.S. border agreement has been reached between Stephen Harper and Barack Obama, and the details are being implemented at this very moment. An extension to the softwood lumber agreement with the States has also been agreed to. It would take the rest of this article to provide a complete list of trade issues that are on the table for Canada.

Where are we?
Yet where does the secondary wood sector stand in relation to all of this? Nowhere, really. And for experts like Swick, it’s a puzzling and unfortunate set of circumstances. She says, “The independent remanufacturers really need to be vigilant on a number of these fronts. If they aren’t, it’s going to be other sectors, including the primary guys, who will get their voices heard; not the secondary guys.”
A perfect example Swick points to involves negotiations for a Trans-Pacific Partnership (TPP), a multi-lateral free trade agreement involving countries in the Asia-Pacific region. The United States, under Barack Obama, has been pushing for increased participation in such an arrangement. Right now, Canada is on the outside looking in, but has been working hard to get involved more aggressively, too.
However, the problem for Swick is that the federal government wants to negotiate such arrangements on their terms, even if it means leaving certain Canadian sectors without a voice. As an example of this, Swick points to an announcement made by the government asking for anyone’s opinion on the TPP.  Yet they did this quietly, hoping that few would respond. As far as anyone knows, the Canadian secondary wood sector hasn’t replied, and that’s a shame.
How can such a situation be addressed for our sector? Swick says it doesn’t have to be difficult. According to her, “You know, it can be as simple as someone like you, Wood Industry magazine, monitoring the Canada Gazette [the federal government’s official newspaper] for notices of consultations on agreements like the TPP and everything else. Somebody should know when the government wants input and then perform the analysis determining what’s good for the sector, and what position is most beneficial.”

The need for a credible voice
Indeed, the suggestion that Wood Industry serve as an advocate and watchdog for the Canadian wood processing industry isn’t out of left field. As an organization that embodies professional standards for magazine journalism, and has advocated for professional standards in the value-added wood sector for years, no other industry body is better positioned right now to serve as a credible and authoritative voice. And, along with the support of you, the readers, we’ll be engaged in even more of these efforts moving forward.
The TPP negotiations are one example. However, as already mentioned, there are countless other trade negotiations currently being undertaken by the federal government. The secondary wood processing sector has to be involved. What’s at stake is not only access to other markets, but the protection of our own. According to Swick, “The last thing your industry needs is to have remanufactured wood products from other countries dumped into Canada. The Americans are really good at protecting their own markets. We have to be good at it, too.”
A good example of the Americans doing just that, protecting their own markets, happened recently when their regulatory agencies found China to be guilty of dumping wood flooring products into the American domestic market. Swick thinks Canada should be doing things like that, and there’s no shame in protecting home turf. She says, “Other countries can be very aggressive, and we have to know when to push back for our own sake, too.”
Swick says that maybe secondary wood processors, for example, should be pushing back against any attempts to lift log export restrictions to China currently in place in British Columbia. Such restrictions basically make it cheaper for Canadian remanufacturers to buy wood supply domestically. However, with the Canadian government currently reaching out to China, pressures might be brought in lifting the current restriction, thus making wood product more expensive in Canada.
And the China issue has become more dominant, given the recent American rejection of the Canadian Keystone XL Pipeline proposal, which would have shipped oil from the Alberta tar sands directly to the American South. It’s a move that was widely seen as a gesture to the environmental movement. It was also seen as a blow to relations to Canada. Given this decline in prospects south of the border, Canada is looking elsewhere. China is one big example.
Are there industries that have unified voices and that affect Canadian international trade policy? Absolutely. As alluded to earlier, the primary wood sector in Canada has traditionally had its voice heard at the higher levels of government. However, it would be a mistake to believe it’s as easy at the secondary level as it is at the primary level.
One big reason for the difference involves the number of players involved at each level. On the primary side, a few large companies own countless acres of land that produce most of the logs used for further processing in Canada and around the world. On the secondary side, which is you, there are thousands of small wood shops across the country, which means there are thousands of voices to be heard, and united. It’s obviously not an easy task.
In fact, Canada is not the only country experiencing this primary/secondary divide when it comes to influence. Tony Neilson is an Australian journalist who covers these issues internationally, and he believes the value-added sector has not advocated its position nearly as well as the primary sector has, or as other industries have — such as the global concrete and steel sectors. The European value-added sector has also lacked a voice on the international stage.
Nielson likens the situation to warfare, where divide-and-conquer strategies usually work. One the one side, you have the “haves,”, or the primary wood interests, that have successfully unified in the pursuit of their interests internationally. On the other side, you have the “have-nots,” or the secondary wood processing shops, which have been divided for a long time and don’t appear to be getting their acts together any time soon.

Who does it right?
Swick cites a few examples of industries that do it right in Canada; that have influential voices on national trade policy. The wine industry is one. The auto industry is another. Says Swick, “For example, the Canadian auto industry, despite representing only a few companies, I think has done a great job slowing down a free trade agreement between Canada and South Korea.  They know what their 
interests are and how to pursue them.” Another hot issue on the international file for Canada is the negotiation of a free trade agreement with the European Union, known as the Comprehensive Economic and Trade Agreement (CETA). When asked how these negotiations can affect the secondary wood sector, Swick replies, “Do your customers buy equipment from Germany? From Italy? Would they be interested in having access to those markets for selling their remanufactured products? I would think so.”
However, as much as negotiated free trade agreements involve asserting control over markets, not everything is as easily controlled in this world. Just ask China, which is experiencing some growing pains as it becomes a leading industrial power. In other words, the richer it gets, the more worries it has. Labour strife has popped up in recent months. As mentioned above, trade rulings have also gone against them.

Riding our reputation
Maybe — just maybe — things work out in the end no matter what extra efforts we make. The Canadian value-added wood sector has developed an international reputation for quality. That can’t be negotiated away with a free trade agreement. The people in our industry are hard working, produce value, and have endured a lot of challenges along the way. In other words, if we just keep being who we are, we should manage fine no matter what the rest of the world does or tries to do.
Nevertheless, it’s always wise to gain every advantage in business, which is why the Canadian secondary wood industry needs to be vigilant, needs to have a voice, needs to pursue its interests and needs to protect itself, too. In fact, it is time for Canada’s Wood Industry to roll up its sleeves. These things can’t happen by accident and we at Wood Industry will keep doing our best to keep you informed on these issues and to act as one credible voice for the industry, as well as one credible voice for you, our valued reader



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