Canada exports more goods than it imports, resulting in a surplus trade balance, and forest products play a major role in this surplus. Second only in revenue to energy products, forest products contributed $34.5 billion to the Canadian trade balance in 2004. Despite the increase in the Canadian dollar against the American dollar in 2004, a trend that reduces export revenues in Canadian dollars and encourages increased imports, the trade balance in forest products increased by $4.8 billion, or 16%, between 2003 and 2004. This increase is indicative of the strength of the forest sector. Driven by an increase in world oil prices, the energy sector also contributed more to the Canadian trade balance in 2004; it experienced one-year growth of $11.2 billion. The total trade balance was $56.1 billion, an increase of 25% over 2003; this puts an end to two consecutive decreases since the record year of 2001, when the Canadian trade balance reached $61 billion.

Except for newsprint, Canadian exports of forest products increased in 2004 to $44.6 billion. This was an increase of $5 billion, or 12.6%, over 2003. The export value of softwood lumber rose by $2.5 billion, or 30.2%, over 2003. However, this was a correction with respect to abnormally low exports in 2003; the value of softwood lumber exports in 2004 was not exceptional compared to the level achieved in the previous decade. The increase in the export value of structural panels, which rose by $1.3 billion between 2003 and 2004, is more a reflection of long-term changes. For a decade, the annual growth rate of the value of structural panel exports (plywood, veneer, oriented strandboard, waferboard and fibreboard) averaged 11.6%, tripling in 10 years. This brought it, in 2004, above the value of newsprint for the first time. Seen as the flagship of the Canadian forest industry, newsprint has been losing ground for a decade in North America, especially in Canada. Over the past decade, the value of exports has fallen by $3 billion, because of a decrease in the amount exported and lower prices, for an average annual loss of 4.4%.

Softwood lumber production is unquestionably the main use of roundwood harvested from Canadian forests. Other roundwood users, such as wood panelling producers, have less need for raw material, and pulp and paper producers use primarily residue from sawmilling operations and recycled paper as a fibre source. Thus, in Canada, roundwood harvesting and softwood lumber production are closely linked. In 2004, British Columbia faced a mountain pine beetle epidemic and took emergency measures to recover the wood attacked by these insects before it was completely lost. Consequently, the forest industry in this province, which accounts for half of Canada's softwood lumber capacity, increased its softwood lumber production, for an unprecedented Canadian total of 81.7 million cubic metres in 2004. This was an increase of 2.5 million cubic metres, or 3.1%, over 2003. The lumber was first sold on foreign markets, and therefore softwood lumber exports increased to 55.2 million cubic metres in 2004, an increase of 8.5% over the previous year. Owing to a slowdown in residential construction, Canadian consumption fell for a second consecutive year. The 2004 total was 27.4 million cubic metres, a decline of 5.3%.

Canada is the world's second-largest producer of wood pulp (the United States is the largest) and sells more abroad than any other country, accounting for 30% of world exports. In 2004, quantities produced, exported and consumed in Canada matched those of 2003, the only difference being that, when converted to Canadian dollars, prices were up by approximately 5% relative to that year.

The Canadian newsprint industry has slowed down for the last several years. Consumption of newsprint in North America is declining, a situation that began with the partial replacement of newsprint by a higher-quality paper suitable for use in printing colour photos for advertising inserts. Canadian newsprint producers adapted to this change by converting their machinery to produce the higher-quality paper, but when old equipment can no longer be converted, paper machines must be scrapped and mills closed. The list of recent mill closures seems endless: 640 jobs lost in Port-Alfred, Quebec; production stoppage and three Kruger machines temporarily shut down in various mills in Saint John, New Brunswick; mill closure in Port Alberni, British Columbia. Even the plant in Sheldon, Texas, has been closed, with the loss of 400 jobs. Nevertheless, production capacity is still too high relative to the declining consumption of newsprint in North America, and more plant closures can be expected in the near future.

New investments and repairs in the forest industries rose by $1.2 billion to $7.4 billion in 2003, representing a 19.3% increase over 2002. But that year is not a good point of reference because it was 2002 that saw the lowest capital and repair expenditures of the last decade. The level of spending in 2003 is more in line with the average for the past 10 years. Given that the favourable exchange rate for the Canadian dollar made it possible for this country's businesses to buy machinery and equipment more cheaply abroad, it is surprising that these expenditures were not higher. In 2003, new capital spending of $3.7 billion equalled repair expenditures. As usual, the sector with the highest spending was paper, with $4.3 billion in total expenditures.

According to Statistics Canada's labour force census, there were 361 100 jobs in forest industries in 2004, representing a decrease of 9 500 jobs compared with the record year of 2003. A sharp decline was also seen in logging and in paper manufacturing sectors, each of which saw a loss of 4 600 jobs. In the wood product manufacturing and forestry services sectors, employment levels remained largely unchanged from the previous year. These annual results are consistent with the trend observed in the last 10 years. For example, 18 100 jobs were lost in the paper manufacturing sector between 1995 and 2004 and 19 700 jobs were lost in logging operations, while, over the same period, the wood product manufacturing sector grew by 53 600 to a total of 185 800 jobs in 2004.

The forest industry produces a number of economic spin-offs. Intermediate goods are needed in order to operate in the forest industry: wood, of course, but also chemicals, packing materials, energy, etc. When such goods are purchased, jobs are created outside the forestry industry. Based on Statistics Canada's input-output model, the forest industry generated 200 000 such jobs in 1999. The forest industry also invests in machinery and equipment, as well as the construction of mills and roads. In 1999, close to 36 000 jobs were created as a result of such investments. In addition, transporting finished forest products to domestic or foreign markets generated another 26 000 jobs. In total, nearly 262 000 jobs outside the forest industry were generated as a result of the procurement of intermediate goods, investments of various kinds, and the transport of finished forest products. Because such jobs are associated with forest activity, but created outside the industry, they are known as indirect jobs.

In 1999, forestry workers and those employed in related forest activity earned $24.9 billion, much of which they spent on consumer goods. Another 280 000 jobs were needed to manufacture those consumer goods. These jobs, generated by workers' spending, are known as induced jobs. Thus there were nearly 542 000 indirect and induced jobs related to the forestry industry in 1999.

According to Statistics Canada's Labour Force Survey, there was a 2.5% increase in the number of jobs in the forest industry between 1999 and 2004. Assuming a proportional increase in indirect and induced jobs, an estimated 555 100 indirect and induced jobs were associated with the forestry industry in 2004, or an estimated total of 916 200 direct, indirect and induced jobs.

On provincial public lands, harvest levels are a legislated requirement associated with the licensing of forest management activities. The level is usually specified in terms of an Allowable Annual Cut (AAC) associated with the specific forest estate. The AAC represents the level of harvest to be achieved annually over a specified number of years.

The method of determining AACs is complex and varies significantly across Canada. The calculations are based on the estimated extent of the forest land base; the growth rate of trees; losses due to fire, insects and disease; accessibility; economic conditions; environmental considerations; silvicultural investment; degree of protection; and management objectives. AACs are revised every 5 to 10 years to reflect changing conditions and improvements in data and knowledge.

While harvest levels on provincial land are regulated, on private and federal land they are not. The managers of these lands may have commitments to specific harvest targets, but there are no legislated accountability mechanisms. Since the estimates presented in this graph account for private and federal lands as well as provincial Crown lands, they are referred to as "potential harvest" rather than AACs.

Canada's potential harvest has remained relatively stable since 1992. The 2002 potential harvest was almost the same as the previous year, with 35% of Canada's potential harvest in British Columbia, 37% in Quebec and Ontario, about 19% in the Prairie provinces, and 9% in the Atlantic region. The hardwood harvest has been steadily increasing over time, and has doubled over the last decade. Softwood harvests, while variable, have remained relatively constant since peaking in 1987; they have averaged 160 million cubic metres over the past 10 years.

Planting refers to establishing a forest by setting out seedlings (young saplings grown from seed), transplants or cuttings in an area. Direct seeding entails the sowing of seeds by hand or machinery directly into the ground.

Planting and seeding increased significantly throughout the 1980s as a result of federal/provincial/territorial agreements. Most of the efforts were concentrated in areas that had been disturbed in the past by fire, insects, disease or harvesting, and had not regenerated. The intention was to reforest the backlog of disturbed areas and restore the commercial forests. Most jurisdictions at that time were increasingly relying on natural regeneration. In 1992, about 463 million hectares were planted or seeded. Although the area harvested each year through the 1990s tended to be greater than the area harvested in the 1980s, the area of planting and seeding has not needed to increase proportionately, because harvest methods have been modified to enhance or protect natural regeneration.

Today, Canadian forestry relies on advance regeneration and appropriate harvesting techniques to ensure that the majority of harvested areas will regenerate naturally. The remaining sites are regenerated by planting or seeding.

The areas in the accompanying graph include regeneration of areas disturbed by harvesting and natural disturbances. They also include a small area of afforestation (i.e., conversion of land that has not been forested for a significant period of time to forested land).

In 2002, British Columbia planted 192 million seedlings and Ontario planted 132 million. Of the 609 million seedlings planted in Canada, 89.3% were on provincial Crown land.

The forest tree species planted most often are spruces, followed by pines and other softwood (coniferous) species.

Insect populations were relatively stable in 2003, except for the mountain pine beetle epidemic in interior British Columbia, the large aspen tortrix in western Canada, and the forest tent caterpillar in central Canada. The mountain pine beetle epidemic, the largest ever recorded in British Columbia, continued to expand in lodgepole pine forest, causing high tree mortality. Defoliation by some insects was also significant. The large aspen tortrix increased significantly, mainly in Alberta, while the forest tent caterpillar decreased significantly, mainly in Ontario. In 2003, the spruce budworm defoliated a large amount of spruce-fir forest in western Canada, and the western spruce budworm defoliation of Douglas fir forests increased in British Columbia. Infestation of the gypsy moth, an invasive alien insect, had increased significantly in 2002 but has decreased in 2003.

Outbreaks of the balsam fir sawfly, a native defoliator, usually last three to four years, with a varying number of years between outbreaks. The main host is the balsam fir, but the sawfly has also been found on white spruce, black spruce and red spruce. High sawfly populations have occurred in Newfoundland and Labrador, Nova Scotia, Quebec and Ontario. Infestations usually begin in commercial thinnings of balsam fir stands before spreading to unthinned stands. In Newfoundland and Labrador, small outbreaks occurred between 1990 and 1995, expanded in 1996 and 1997, and have remained at about the same level to 2003; tree mortality and growth losses are occurring.

Invasive alien species attacking our trees have received much media attention recently. One of these is the emerald ash borer, Agrilus planipennis, which has become established in southern Ontario. A native of Asia, this insect was likely transported to North America in solid wood packing material or shipping containers. In July 2002, ash trees infested by the emerald ash borer were detected within the city limits of Windsor and in Essex County in Ontario. All native ash species are susceptible to attack and defoliation. Ash trees are an important part of our urban and forest environment, and Canada is working with the United States on strategies to combat the spread of the emerald ash borer.

Forest fires in Canada vary considerably in number and in size of forest area burned. There is a great fluctuation in fire activity both among provinces and territories in a given year and within a given province or territory over the years. For example, British Columbia went from a low of 1 876 hectares burned in 1997 to a record high of 266 412 hectares burned in 2003.

At the end of the 2004 fire season, the total number of fires was slightly below average (88%) and the total area burned was above average (132%). Since 1994 a decreasing overall trend in the total number of fires has resulted in an average annual number of fires for this 10-year period of 7 496. The average annual area burned each year has remained relatively constant at 2.5 million hectares per year.

A majority of the area burned in 2004 (55%) was in the Yukon, where 282 fires burned 1.8 million hectares. This was the worst fire season on record for the Yukon, when twice as much area burned as in 1958, the previous record. Fire suppression costs exceeded $21 million. Of these fires, 247, or 88%, were caused by lightning. Normally lightning ignites only 50% of the fires while the remainder are caused by humans.

In Canada, lightning causes 45% of forest fires while accounting for 81% of the area burned (based on statistics from 1990 to 2002). The disparity in these values arises from the nature of lightning-caused fires, in that thunderstorms can ignite dozens of fires at a time, often in remote areas. Both these factors tend to cause longer reaction times for suppression resources, which allow the fires to grow unabated longer, thus increasing their chance to escape initial attack.

Exports of maple products, expressed in syrup equivalents, were up in 2004, reaching 23.6 million litres. However, at 26.9 million litres, Canadian production was down by 3.6% from 2003. Production fell short of domestic and foreign consumption for the fourth consecutive year, making it possible to reduce inventories, which have been too high since the exceptional harvest of 2000. Quebec is easily the province with the largest production, at 24.8 million litres (in syrup equivalents) in 2004. The province of Ontario is the second-largest producer, with one million litres, closely followed by New Brunswick, with a production of 0.8 million litres. The gross value of Canadian production in 2004 is estimated at $151.9 million, a decrease of $6 million from 2003.

It is difficult to obtain a precise estimate of Christmas tree production in Canada. The best attempt relies on the National Forestry Database, and involves correcting Quebec production figures to allow for domestic deliveries. Thus approximately 4.1 million trees were produced in 2003, at an estimated value of $64.1 million. This represents decreases of 160 000 trees and $5 million from the 2002 figures. The drop in production can be entirely explained by a decrease in exports, probably in response to the rise in the Canadian dollar relative to the U.S. dollar. In 2003, three provinces were almost entirely responsible for exports of 2.6 million Christmas trees, valued at $38 million. In 2003, Quebec exported 1.3 million, Nova Scotia 0.8 million, and New Brunswick 0.4 million. Every year, some 1.7 million Christmas trees are purchased in Canada, 250 000 of which are imported.

The year 2002 was one of the worst years of the decade in terms of the harvest of wildlife pelts. Although a harvest of over one million pelts is the rule, the total for 2002 was only 0.9 million. Fortunately, the increase in prices provided trappers with revenues that were approximately equivalent to those of the previous year, i.e., $23.4 million in comparison to $24 million in 2001. Farm pelt production was roughly the same as in 2001, at 1.1 million pelts, valued at $49.9 million.