Ailing forestry sector: a way out of the woods

Prime Minister Stephen Harper announced last week a Community Development Trust with a budget of $1 billion. The backgrounder describing the trust does not mention once the words “forest” or “manufacturing.”

Understandably, the government wants to avoid supplying ammunition to the U.S. lumber lobby, always keen on finding “proof” to the effect that Canada or the provinces indirectly subsidize their industry. Rather, the Trust aims at helping laid-off workers in single-industry towns hit by the downturn in the forest products and manufacturing sectors transition toward other types of jobs. That’s better than trying to maintain mills, plants and towns alive on taxpayer-funded life-support.

Harper’s is the better approach in contrast with the one taken by Quebec’s natural resources minister, Claude Béchard. In his Bill 39, passed just before Christmas, Béchard has reduced the length of time following which he can reallocate to another company cutting rights connected to a wood processing plant that has closed. The period has come down from 18 months to nine months (six months plus a three-month grace period).

Béchard’s bill is consistent with traditional government policy under which wood taken from a given area of land must be processed at a mill located in or near the same area. Like his predecessors, Béchard must hope that, if a company has been unable to run its operations in a given area at a profit, another company might succeed.

The much-needed consolidation of the forest industry, already under way, means that some mills – the least profitable among them – must unfortunately close. This is the price of survival for the industry in Quebec.

The pain is all the greater when a shutdown occurs in a town or village built expressly to exploit the forest, as with Lebel-sur-Quévillon. This costs the town its economic raison d’être.

Does a single-industry town have a sort of right to survive forever, at taxpayer or industry expense? I don’t believe so. History offers numerous examples of communities born due to new economic activities that disappear when these activities no longer pay.

Opponents of this normal phenomenon sometimes point to the need to occupy as much of Quebec’s territory as much as possible. Several public policies contribute to this goal, such as the obligation to process wood near where it is cut.

Territorial occupation has been elevated in Quebec to the rank of a sacred cow – wrongly, in my view. We should recall that this is primarily a geostrategic concept aimed at deterring foreign invasion. But who is threatening to overrun Quebec’s forest areas? Do First Nations peoples truly pose a threat to our territorial integrity?

Rather than try to keep every single-industry, forest-based community alive, our forestry system should aim at maximizing the value of our public forests. How?

By breaking the traditional link between land and mill, allowing for creation of a true Quebec-wide market for wood. With this other model, part of the public woodlands could come under a new type of contract, not linked to any specific mill. Holders of such contracts would be authorized to sell wood on a competitive market in exchange for an annual rent and compliance with conditions aimed at sustainable development of wood and wildlife resources.

This new type of contract would lead to development of a forest management industry separate from the woodcutting companies, for which this activity is just a cost to be held down.

This approach would put market forces to work in helping resolve the age-old conflict between wood cutters, hunters, fishermen, campers, vacationers and any other forest users. In attempting to maximize their income, companies holding management contracts would have an interest in meeting economic demand from each user group.

With the closings already announced, a market for millions of cubic metres of wood could be created, accessible to any mill in Quebec able to pay the market price.

The most profitable mills are those that would be most likely to put their hands on this supply.

Paul Daniel Muller is President of the Montreal Economic Institute.