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<title>MR. PETTIGREW - ADDRESS TO THE QUEBEC FOREST INDUSTRY COUNCIL - QUEBEC CITY, QUEBEC</title>
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<p><font size="+1"><strong></strong></font><font size="+1"><strong><u>CHECK AGAINST DELIVERY</u></strong></font></p>
<p align="CENTER"><font size="+1"><strong>NOTES FOR AN ADDRESS BY</strong></font></p>
<p align="CENTER"><font size="+1"><strong>THE HONOURABLE PIERRE PETTIGREW,</strong></font></p>
<p align="CENTER"><font size="+1"><strong>MINISTER FOR INTERNATIONAL TRADE,</strong></font></p>
<p align="CENTER"><font size="+1"><strong>TO THE QUEBEC FOREST INDUSTRY COUNCIL</strong></font></p>
<p><font size="+1"><strong>QUEBEC CITY, Quebec</strong></font></p>
<p><font size="+1"><strong>May 9, 2003</strong></font></p>
<p>I am very pleased to be here with you today on this historic occasion--the first annual convention of the Quebec Forest
Industry Council since its formation on January 1, 2003.</p>
<p>Creation of this new organization is extremely important for the various regions of Quebec, and for the great majority of
Quebec forest industry businesses. I am certain that, with this joining of forces, all stakeholders will shortly see the benefits
of speaking with a single voice.</p>
<p>This will be particularly true in the context of the softwood lumber dispute between Canada and the United States. But
before I tell you about the latest developments in that regard, I would like to give you a picture of Canada's state of trade on
a global scale and then talk about our trade relations with our neighbours to the south.</p>
<p><strong>The Economy</strong></p>
<p>Turning first to the state of trade and of the economy more generally, economic growth in most countries has been weaker
than it has been in a decade or more. There are greatly reduced investment flows, exchange rates have moved dramatically,
business confidence has been dented--not least because of the highly publicized instances of corporate malfeasance over
the past two years--geopolitical tensions have become part of our everyday lives, and last, but not least, there have been
new restrictions or extra costs attributed to international trade transactions to reduce risks from terrorism. All this had taken
place before the SARS [severe acute respiratory syndrome] outbreak of the past several months, which has put downward
pressure on the two parts of the world that have been economically outperforming the rest of the world--this country and
what I might term non-Japan Asia.</p>
<p>As the current uncertainty due to geopolitical tensions and SARS dissipates, and assuming no further bad news, we expect
that the world economy will get back on track, and international trade and investment with it. Key sources of our trade
strength, underpinned by our sound fiscal policy and our aggressive, innovative Canadian traders, will likely continue to be
our traditional resource sectors such as chemicals, ores and metals, energy (supported by higher prices), agri-food,
consumer goods and industrial equipment, as well as your sector, forestry.</p>
<p>Against this backdrop, the performance of this country--as my Fourth Annual State of Trade document, which I tabled
yesterday in the House of Commons, sets out--has been stellar, and I expect more of the same this year. Canada has now
enjoyed 12 consecutive years of economic growth; employment in this country increased last year more than in all our G7
partners (extraordinary when you remember that we are the smallest of the G7); and we have been enjoying both a
merchandise and a current account surplus. These days we are one of the few countries in the entire global economy with
such a record.</p>
<p>Our resource-based exports continue to be strong, as are our exports of commercial services--consulting, engineering,
environmental expertise, accounting, etc.--that is, our knowledge-intensive, higher human skills sectors. We know that our
country's trade success over the past year in a very difficult economic environment is due to our active and successful trade
policy initiatives over the years, which continue worldwide, regionally and bilaterally.</p>
<p><strong>Managing Our Relations with the United States: Canada's Top Priority</strong></p>
<p>That being said, the issue that is certainly getting the most attention these days is the situation with relations between
Canada and the United States.</p>
<p>You all know the real picture of trade between the two countries. Thanks to the Canada-U.S. Free Trade Agreement and the
North American Free Trade Agreement, which replaced it, between 1989 and 2002 our trade with the United States more
than doubled. Trade with the United States now amounts to almost $2 billion a day. We are the greatest supplier of energy
to the United States. Our economic relationship with our neighbours to the south supports millions of jobs in both countries
and has a direct impact on the lives of most Canadians and many Americans.</p>
<p>But relations on this scale are not without challenges.</p>
<p>At the economic level, although the great majority of goods traded cross the border unhindered, Canada is seriously
concerned about the various trade disputes we are facing, in particular over softwood lumber, dairy products and wheat. I
can assure you that we continue very spiritedly to defend our interests in these matters, through both the WTO [World
Trade Organization] and NAFTA, as well as through our intensified efforts to raise awareness and our representations to
the United States.</p>
<p>At the political level, we are making Americans aware of how solid a partner we are in helping to provide security on our
continent, particularly through NORAD, and the tremendous progress made in the framework of the Smart Border Process;
and globally through being actively involved in combatting terrorism. We have also confirmed our firm intention to play an
active role in the reconstruction of Iraq, and announced in March that $100 million will be allocated to humanitarian aid in
that country.</p>
<p>A new challenge in Canada-U.S. relations is the SARS crisis. We are concerned that the American public may overreact to
this situation, which has to be put in perspective. Our offices in the United States are working hard to make sure Americans
know there is no reason not to travel to Toronto or elsewhere in Canada.</p>
<p>Despite these difficulties, I am confident about the future of our relations with the United States, and our ability to
overcome the challenges and resolve our trade disputes. I believe that Canada has two great advantages in this relationship:
our excellent personal connections with Americans, at all levels and in all sectors, and the fact that we share a common
vision of the security and prosperity of North America. I intend to persevere with my efforts to continue to develop our
economic relations with the United States.</p>
<p>Last October, I set myself six objectives aimed at advancing Canada's North American economic program. These goals are
to:</p>
<p>• increase Canada's share of the American market;</p>
<p>• expand reciprocal investments, on which trade, prosperity and innovation in our economies increasingly depend;</p>
<p>• promote a program for intelligent regulation;</p>
<p>• make a serious effort to ensure that practice in the field of trade remedies better suits the growing integration of our
common economic space in North America;</p>
<p>• work to see that the border is no longer an obstacle to trade, investment or business development; and</p>
<p>• extend our activities for raising Americans' awareness and our representations to the United States.</p>
<p>I am very proud that my government has decided to go ahead with an ambitious plan to increase our representation in the
United States. The additional resources announced in the February budget will allow us to be even more active in our
efforts to raise awareness and will ensure that the campaign to promote and publicize the Canadian lumber industry in the
United States can continue. The fact that scarcely 12 percent of Americans are aware that Canada is the U.S.'s primary
trading partner makes us more vulnerable when certain decisions are made. We absolutely must continue to make it clear to
Americans that when they take measures that are detrimental to our interests, they harm themselves, because, after all, we
buy a quarter of all their exports.</p>
<p><strong>Lumber Dispute</strong></p>
<p>The best illustration of this is still undoubtedly the 27.2-percent tariff imposed by the United States on Canadian lumber
exports. Everyone loses in this situation. This is why, as Minister for International Trade, finding a permanent solution to
this dispute, which has been going on for 20 years, has been and remains without question my number one priority.</p>
<p>To achieve this, the Government of Canada, the provincial governments and the industry have adopted a two-pronged
strategy toward the United States. On the one hand is the legal route, which I will come back to in a few minutes. On the
other is bilateral discussions with the United States.</p>
<p>Last February, senior people in the Department held a series of discussions on this issue with their colleagues in
Washington. A number of representatives from the provinces and the industry were also present.</p>
<p>The discussions mainly dealt with the long-term reform of the provinces' policies. Substantial progress has nevertheless
been made up to now regarding the interpretation bulletin that the Department of Commerce has to issue. It will state how
that department would proceed with reviews based on a change in circumstances once the provinces make the desired
reforms to their policies.</p>
<p>Following discussions with each province, the Department of Commerce prepared a draft interpretation bulletin that
contained examples adapted to each province and outlined the kind of reform that would allow the department to determine
that there is, in its opinion, no subsidy. This is our position. Clearly, these practices do not constitute a subsidy and have
never been subject to one. I would like to emphasize here the fact that each province will be responsible for either moving
ahead with such reforms or not. </p>
<p>The best way for Canada to obtain a firm, permanent guarantee of access to the American market would still be for the
Department of Commerce to determine that provincial forestry practices do not constitute a subsidy. Canadian producers
should not be forced to fight this battle every five years in order to sell their lumber to American consumers.</p>
<p>[The Government of Quebec is satisfied up to now with the progress made with the Department of Commerce. We are
expecting this bulletin to be published shortly. </p>
<p><strong>Other Canadian-American Discussion Topics</strong></p>
<p>In addition to the focus on the interpretation bulletin, the meetings in Washington last February also allowed for discussions
on the possibility of a shorter-term, temporary agreement. In such a case, countervailing duties would give way to an export
duty collected by Canada, as an interim measure, until the provinces had adopted the changes in their policies.
Implementing such an agreement would also involve eliminating anti-dumping duties imposed to date on our lumber
exports to the United States. </p>
<p>Discussions finally broke off, in particular following significant differences between the two parties on the question of the
export duty. We remain prepared to resume discussions with the United States on this issue. We also maintain regular
contact with the American government on this subject. </p>
<p><strong>Legal Challenges</strong></p>
<p>The other prong in Canada's strategy in the matter is legal challenges to American trade measures. Canada to this point has
initiated no fewer than six complaints to the authorities of the WTO and through NAFTA.</p>
<p>Working with the industry and the provinces, Canada initiated three challenges through the WTO to the Americans' final
determination of subsidy, dumping and threat of injury. The same was done through NAFTA. The first decisions in these
cases are expected this summer.</p>
<p>I am still convinced that decisions will be in our favour in our challenges and in the actions we have brought through the
WTO and NAFTA. As an illustration, on September 27, 2002, a WTO panel concluded that the United States' preliminary
determination of subsidy was not compatible with their obligations under WTO regulations. Lawyers on the Canadian side
are confident that this panel's decision will be upheld in the case of the Americans' final determination of subsidy.</p>
<p>The WTO panel established to hear this challenge should issue its interim confidential report in the next few weeks. This
should give us quite a good indication of the final report this group will issue next July.</p>
<p>We are obviously going to keep up these actions as long as the United States continues to impose these unfair tariffs on our
lumber exports.</p>
<p><strong>Assistance to the Industry</strong></p>
<p>While we wait for the United States to rescind its trade actions, I can assure you that the Government of Canada will
continue to defend, in every way possible, Canadian industry, Canadian workers and Canadian communities.</p>
<p>A few weeks ago, I had the opportunity to welcome Mr. Boudreault and other members of the Board of Directors of the
newly formed Quebec Forest Industry Council to my office. We discussed in particular the latest data on the impact of
American trade measures on the industry in Quebec.</p>
<p>To mitigate the various effects of this trade dispute on the entire industry and on workers who depend on the Canadian
lumber industry, the Government of Canada also announced in 2002 measures representing more than $350 million.
Among these are:</p>
<p>• $71 million for assistance to laid-off workers;</p>
<p>• $110 million for a national fund for industrial and community adjustment to foster economic development;</p>
<p>• $23.5 million to create a centre of excellence in the pulp and paper sector in Trois-Rivières;</p>
<p>• $2 million for a consortium for research on the boreal forest in Saguenay-Lac-Saint-Jean;</p>
<p>• $75 million to fund research and development in the lumber sector, as well as market expansion initiatives; and</p>
<p>• $15 million for softwood lumber industry associations. These funds are intended to help these associations continue their
normal activities despite the heavy burden imposed by the dispute over softwood lumber between Canada and the United
States.</p>
<p>The men and women who are affected by the softwood lumber dispute, including the great majority of members of your
organization, deserve the support of their fellow Canadians. The forest industry has made a great contribution to the
Canadian economy for more than a century, and we will not abandon it. Working with the provinces, and associations such
as yours, we will continue to assess the repercussions of tariff rates on the Canadian industry and on communities across the
country. </p>
<p>I cannot conclude without mentioning the close collaboration that has always characterized relations between the
Government of Canada, the Government of Quebec and associations such as yours. Such a united front can only strengthen
Canada's point of view and will continue to be of the greatest assistance in our discussions with our neighbours to the
south. </p>
<p>On that note, I will thank you again for your attention and wish you a pleasant finale to your convention.</p>
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