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Forest Industry is Lost in The Glare of High Tech 

During the late and unlamented federal election, Finance Minister Paul Martin voiced an impassioned vision for Canada as a high tech haven. "The aim is to make Canada a world leader in innovation, ecommerce, research and development and business initiative," he said. "This has got to become, in my opinion, the great national dream and it is going to occur out of a great national effort. It must not be a long-term thing. The coming together and the focusing on these things is something to be done in the short term." 

Specifically, he wants Canada to be one of the top three industrialized countries in venture capital spending per capita, in the top five in academic math and science testing scores, in control of five per cent of global ecommerce by 2003 and in fifth place (up from 15th) in research and development spending. To achieve all these goals "government is going to have to do its share, every segment in society and all levels of government have to do this." It's a vision that pays scant tribute to Old Economy resource industries like forestry. 

Nobody in forestry argues that Canada shouldn't do as much as it can to join the technological revolution. The industry just doesn't want to be left out of the vision, as it seems to be in any new strategy that Martin will have anything to do with. That benign neglect is surprising, given that forestry has been and still is by far the largest single contributor to Canada's balance of trade-so says Statistics Canada. In 1997, when the economy was sensing the early pulse of recovery, forestry had a net value (exports over imports) of $34.1 billion. Energy products were worth a net $18 billion, vehicles and parts $8.8 billion and agriculture and fish $7.8 billion. Chemicals and allied products had a net deficit of $2.8 billion, crude materials $8.5 billion and machinery and equipment a staggering $33.8 billion. In 1999, forestry was worth $35.4 billion to the trade balance. 

Not much has happened to change the placings of the other sectors substantially. The automobile industry is bigger in total north south trade, probably in the $100 billion range. Under the Auto Pact it has became less a national and more an international industry without borders. But its value to the balance of trade is not as significant as that of the forest industry. According to consulting firm PricewaterhouseCoopers, the national treasury has benefited hugely from the trees-over $700 million a year in corporate taxes and over $4 billion to all governments, to say nothing of nearly $5 billion in individual income tax, Canada Pension Plan and employment insurance payments. As the largest contributor to the trade balance, forestry should expect to pay at these levels. But the industry's constant complaint is that it doesn't get back a fair proportion of the money. 

To be sure, Ottawa is fighting for fairer treatment from the Americans in the softwood export deal, as described in the Spotlight story on page 5 of this issue. But forestry was excluded when the original Free Trade Agreement was negotiated and is still missing from the North American Free Trade Agreement. The industry has no doubt it would be better protected under NAFTA. There's no longer a federal forests ministry. The trees are provincial property constitutionally. But industry people say it's hard to get Ottawa's attention, even where its jurisdiction impinges on forestry-on fish habitat and endangered species management issues, for instance. And they're concerned about a transportation review in which the railways are proposing a capital maintenance charge on captive shippers like the forest industry, which they can't charge to customers with competitive options. 

They believe Ottawa has a bigger role to play domestically as it prepares for international disputes, inevitable as world trade changes. The deepest underlying concern is whether the industry's interests get as much focus as they should while the rules of international trade are being rewritten. During the election, the banks were warned not to think about mergers until after the voting. Air Canada got the eagle eye from Ottawa about complaints about service and alleged fare gouging. More education for the technological age was promised and Ottawa threatened sanctions against Brazil in an aircraft manufacturing subsidy fight between Canada's Bombardier and Brazil's Embraer. 

Forestry fears it is getting lost in the glare of high tech glamour. It's hard to vie for attention against an industry sector with 20 per cent growth annually and producing a new billionaire every other month or so. The technology stocks may be having some trouble at the moment. But the new age is here to stay. In this new age, forestry suffers from its context as a rural industry. There's a widening disconnect between the logging and mill communities and the big urban centres that make the most noise and to whom governments listen the most. As well, the fact that the provinces own the trees and control the harvesting licences dictates a certain diffidence in the industry's relations with government. 

That's a minefield Ottawa may wish to avoid as much as possible. Still, as globalization expands, governments are losing their authority to set their own rules at home. International treaty making and even agencies like the WTO are in danger of being left behind. Governments are searching for ways of at least influencing the process. This means the senior levels of government in Canada must sort out their divided authority. When international regulations are morphing into a new system, forestry's voice needs to be better heard, certainly more loudly than it was heard during the election. 

This also means the industry itself has to get its act together. Too often it speaks with two accents that sound more like argument than debate. Eastern and Western Canada are two different industries. But if they want Paul Martin to listen, he needs to be able to hear at least a coherent voice. Until then, forestry will simply continue to be the big contributor to trade balances-and the federal government will be content to let it be so. 


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