February 2007 - The
Logging and Sawmilling Journal
THE LAST WORD
Canada should just say “no” to
technology exchange with Russia
By Tony Kryzanowski
Canada Mortgage and Housing Corporation (CMHC) signed a Memorandum of Understanding (MOU) with its counterpart in Russia this past November that, according to the CMHC president, will result in “new commercial opportunities for the Canadian housing
industry and set the stage for collaboration in areas such as housing finance, urban planning, and technology exchange.”
Technology exchange related to residential building systems with one of our major softwood lumber competitors? Call me naïve, but isn’t this a bit like the Canadian diamond industry voluntarily sharing mining technology with the South Africans? From a strategic marketing standpoint, this MOU is very bad news for Canada’s primary forest products industry and should be revisited immediately.
Russia has one-fifth of the world’s forested area and one quarter of its timber stock, predominately boreal forest. Coniferous trees account for 58 billion cubic metres, or 80 per cent of its timber stock.
An old adage says that those who refuse to learn from history are destined to repeat it. For example, the Canadian furniture manufacturing industry has already suffered through the loss of significant market share to Chinese competitors in its bread and butter US market. In less than a decade, China replaced Canada as the major exporter of furniture to the United States.
Where does Russia ship the majority of its softwood logs? A total of 44 per cent of its softwood logs were shipped to China and 29 per cent to the European Union, predominantly Finland.
How long will it take before raw logs from Russia, shipped to China, are mass produced into complete, readyto-assembly housing packages based on Canadian building designs, to provide residential housing in the United States? How much market share are we prepared to lose in our bread and butter US housing market before we realize it was a mistake to teach the Russians and Chinese how to build houses based on Canadian specifications? Still think this MOU is a good idea?
When it comes to competing with Russian forestry competitors, Canadians must realize that it is not a level playing field. Canada and Russia have markedly different approaches to forest management, and business in general. According to the Russian Agency for Forestry, in an unclassified document prepared by the United States Department of Agriculture Foreign Agricultural Service in February 2005, “the losses caused by illegal activities areestimated at 5.5 billion rubles ($180 million) per year. Note: The World Wildlife Fund reports that losses due to illegal activity are $1 billion.”
No doubt that illegal logging is carried out in Canada—but nothing approaching the staggering figure of $1 billion.
While Canadian housing export sales facilitated by CMHC to Russia may have increased by 200 per cent between 2003 to 2005, this is definitely a situation of short-term gain for long term pain.
It is not my intention to criticize CMHC for signing this MOU, but more of an indictment of the lack of a cohesive national solid wood marketing strategy for Canada, involving stakeholders right from the forest through to the customer’s door. Organizations like CMHC and the Canadian International Development Agency (CIDA) need to be directly involved. The solid wood manufacturing, building design, and construction industries need to do a much better job of working together to identify those countries with whom we would prefer not to share trade secrets and to develop a strategy of where we should direct our marketing efforts.
There is a growing awareness among Canadian lumber manufacturers that when it comes to building strength, we have a very strong marketing package to sell by combining both the strength of our solid wood products and building systems. We need to package it into a marketing message, not to countries like Russia, but to non-traditional markets where building with wood is not the cultural norm.
Canada needs to protect its building systems technology and share it sparingly and judiciously. For example, we helped the Chinese rewrite their building code based on North American platform frame building standards. We did not teach them how to replicate our housing industry, and building with wood is not a traditional practice in China. However, we must be cautious not to provide the blueprints to our housing industry to a country that is a major log and lumber export competitor.
We also need to sell the idea of building with wood as a more environmentally friendly approach to building with concrete and steel and we need to market our superior forest management practices in concert with the World Wildlife Fund and Forest Stewardship Council.
Finally, let’s not be so willing to give away building systems technology that Canadian taxpayers have significantly funded over the years through research and development. The fact is when it comes to “technology exchange,” there is very little the Russians can teach us about building safe and durable homes in a northern climate or in areas prone to earthquakes. When it comes to give and take, it is obvious to me who will be doing most of the giving and who will be doing most of the taking under the terms of this MOU.