2005/90 (a)

BACKGROUNDER

Forest Industry Competitiveness Strategy

The Forest Industry Competitiveness Strategy is Government of Canada initiative worth almost $1.5 billion to ensure the continued competitiveness of the Canadian forest industry in the global marketplace, while also supporting the economic sustainability of forest-dependent communities.

As of 2004, Canada's forest industry supported more than 900,000 jobs from coast to coast, with 361,000 people directly employed by the forest industry. Forest products also contributed almost $36 billion to Canada's gross domestic product.

In this five-year plan, the Government of Canada provides $581 million to support forest-dependent communities and incentives for innovation in the forest industry, including incentives for bioenergy production. In addition, the November 2005 Economic and Fiscal Update proposes to accelerate the capital cost allowance for forest bioenergy. This would mean the industry would realize up to $110 million in tax savings.

This strategy also sets aside funds for up to $800 million in loans and provides $100 million for a repayable contribution program thereby providing immediate short-term relief to firms, pending the resolution of the Canada-United States softwood lumber dispute

This funding will help improve competitiveness in the Canadian forest industry. To implement it, the Government will work with Canadian forest industry stakeholders and with communities that rely upon Canada's forests for their economic livelihood. In addition, the Government will seek the advice of industry leaders on the strategic opportunities and challenges to the industry's long-term competitiveness and on actions required by both industry and government to continue to strengthen the industry's potential to contribute to Canada's economic future.

Advanced Forest Technologies Initiative

This five-year, $215-million initiative, managed by Industry Canada, will increase the competitiveness of the Canadian forest industry by providing the momentum and financial incentives required for commercial-scale development and application of transformative technologies. This will allow the Canadian forest industry, especially pulp and paper industry, to enhance its competitive position, improve its environmental performance and take advantage of the growing bio-economy.

Support for Bioenergy

As announced in the November 2005 Economic and Fiscal Update, Natural Resources Canada (NRCan) will provide an additional $50 million for expanding the existing Renewable Power Production Incentive (RPPI) to include a thermal cogeneration incentive for electricity production. This initiative will encourage bioenergy investment in the pulp and paper industry, and provide the forest industry with added opportunities to reduce energy costs and lower greenhouse gas emissions. In addition, the Update proposes to accelerate the capital cost allowance for forest bioenergy. This would mean the industry would realize up to $110 million in tax savings.

Forest Innovation and Value-Added Wood Products

NRCan will provide $90 million over five years in funding and assistance to respond to innovation opportunities and strategic objectives for the forest sector. This initiative aims to improve the overall performance of the national forest innovation system and will focus on precompetitive research in such emerging technologies as biotechnology, nanotechnology, innovative building systems, bioenergy and fibre-based products. In addition, the initiative will enhance the productivity and competitiveness of the value-added wood industry by expanding the Value to Wood Program and will facilitate the development of a national forest pest strategy.

Growing Wood Products Markets

NRCan will help the Canadian forest industry develop new markets for Canadian wood products. This five-year initiative will provide $66.3 million over five years to continue Canada's expansion into developing markets such as China, through extending the successful Canada Wood Export Program. Encouraging the use of wood in non-residential construction such as schools, hospitals, restaurants and other commercial buildings in North America is also a part of this initiative, as well as adding wood product experts to the Canadian Trade Commissioner Service in key emerging wood-products markets.

Human Resources Sector Council

Human Resources and Skills Development Canada will work with key stakeholders to create the Human Resources Sector Council in Primary Forest Industry, which will address long-term skills issues within the forest sector. This five-year, $10-million initiative will allow stakeholders in the Canadian forest sector to work together to improve the competitiveness of the workforce through identifying existing skills gaps within the Canadian forest industry, promoting development and upgrading of workplace skills, and recruiting youth and underrepresented groups to the forest sector.

National Forest Community Adjustment Fund

The Regional Development Agencies and the Federal Economic Development Initiative for Northern Ontario (FedNor) will offer support for forest-dependent communities across Canada. A five-year, $150-million National Forest Community Adjustment Fund will support economic diversification and capacity-building in communities affected by recent job losses in the forest industry to ensure a smoother transition for both forest industry workers and forest-dependent communities. Regional agencies will also work with rural communities to diversify and deepen their economic base.

Loan Insurance Program

The Government of Canada will set aside funding to insure loans through third-party financial institutions to firms affected by the unique circumstances of the softwood lumber dispute. This will help facilitate up to $800 million in loans and thereby provide immediate, short-term relief to firms, pending the resolution of the Canada-United States softwood lumber dispute. This will further enhance the creditworthiness of companies seeking loans. Government insurance will also give credibility to the assertion that the U.S. is required to return duties held on deposit to these companies. In accordance with the wishes of Atlantic Canada stakeholders, Atlantic Canada firms are exempt from this program.

Industry Support Program

The regional development agencies, such as FedNor, will offer support to firms to address short-term viability pressures. The agencies will provide $100 million in conditionally repayable contributions to smaller firms that are affected by the softwood lumber dispute but not eligible for the loan insurance. The Atlantic Canada Opportunities Agency will not participate in this program.

For more information, media may contact:

The following media backgrounder is also available:

1. Summary of Program Measures