Forest Industry: New Strategy Promotes Strength and Sustainability for Canadian Industry

OTTAWA , November 24, 2005 — The Government of Canada announced today a new strategy worth almost $1.5 billion designed to help Canada's forest industry remain strong and sustainable in the face of increasing challenges. The Forest Industry Competitiveness Strategy invests in the longer-term innovation and productivity needs of the forest industry to sustain its competitiveness. It also provides new funding over five years to address the current challenges facing workers, industry and communities.

Led by Natural Resources Canada, the Strategy is supported by Industry Canada, Human Resources and Skills Development Canada and regional development agencies, such as the Federal Economic Development Initiative for Northern Ontario (FedNor).

"Canada's forest sector is a major contributor to the Canadian economy and is one of our most essential natural resources," said the Honourable John McCallum, Minister of National Revenue and Minister of Natural Resources. "In launching this strategy to aid in the modernization and transformation of the forest industry, the Government of Canada is demonstrating its commitment to the industry and to those communities, particularly in rural Canada, that benefit from it, whether directly or indirectly."

"Through the Forest Industry Competitiveness Strategy, the Government of Canada is helping to ensure that Canadian companies benefit from breakthrough technologies," said the Honourable David L. Emerson, Minister of Industry. "These technologies have the potential to transform the forest industry's products and production processes, and to lessen its environmental footprint."

"The Forest Industry Competitiveness Strategy contains numerous measures to strengthen the forest industry and forest-dependent communities in northern Ontario," said the Honourable Andy Mitchell, Minister of Agriculture and Agri-Food and Minister of State (FedNor). "Today's announcement builds on the Government of Canada's investments, both through FedNor and initiatives such as the Softwood Industry and Community Economic Adjustment Initiative, to reinforce this pillar of the Canadian economy and provide peace of mind to communities affected by the softwood lumber dispute."

"We have many challenges to face together," said the Honourable Jacques Saada, Minister of Canada Economic Development Agency for the Regions of Quebec and Minister responsible for the Francophonie. "If we wish to succeed, we must rely on one essential element — our ability to create a partnership among all stakeholders, governments, businesses, workers and communities."

The five-year initiative addresses a wide range of issues and opportunities currently facing the Canadian forest industry. This includes diversifying the economies of forest-dependent communities, enhancing skills of forestry workers, investigating new markets for wood products, developing innovative technologies and supporting the domestic industry in the face of the continuing softwood lumber dispute.

The strategy provides $581 million to support forest-dependent communities, market diversification and incentives for innovation in the forest industry, including incentives for bioenergy production. In addition, the Government of Canada's 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. The Strategy also sets aside funds to facilitate up to $800 million in loan insurance and provides $100 million for a repayable contribution program for firms affected by the unique circumstances of the softwood lumber dispute.

The Forest Industry Competitiveness Strategy also complements the programs and initiatives that the provinces have implemented to support the forest industry across Canada, including support for the pulp and paper industry and for rural communities that are dependent on the forest industry. Although it will be implemented across Canada, each region will have access to a mix of national and regional programs, working closely with regional agencies to ensure that the needs of the forest industry in all parts of Canada are supported through this initiative.

This initiative enhances the quality of life of Canadians by supporting our natural resources sectors, which are a vital part of Canada's economy and society. It also supports the Government of Canada's commitment to building on the strength of our country and our people. Funding for this initiative will be provided from the remaining planning surplus in the Economic and Fiscal Update of November 2005, with the exception of Renewable Power Production Incentive (RPPI) and the tax change for bioenergy, the costs of which were included in the Fall Update.

---

For Broadcast Use:

The Government of Canada has announced its Forest Industry Competitiveness Strategy, a multi-faceted approach to ensure that the Canadian forest industry remains strong and sustainable in the face of increasing challenges. The strategy includes support for forest-dependent communities, as well as initiatives to enhance the skills of forestry workers, to develop new markets for wood products and to develop innovative technologies.

For more information, media may contact:

Ghyslain Charron
Media Relations
Natural Resources Canada
Ottawa
613-992-4447

Tom Ormsby
Director of Communications
Office of the Minister
Natural Resources Canada
Ottawa
613-996-2007

Media Relations
Industry Canada
613-943-2502

Christiane Fox
Office of the Honourable David L. Emerson
Minister of Industry
613-995-9001

François Bélisle
Communications
Canada Economic Development
for the Quebec Regions
819-825-5260 extension 235
francois.belisle@dec-ced.gc.ca

Daniel Dezainde
Director of Communications
and Parliamentary Affairs
Office of the Honourable Jacques Saada
Canada Economic Development
for the Quebec Regions
514-496-1282

---

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.

---

Backgrounder
Summary of Program Measures

	Total (Millions)	Department
Supporting Workers and Communities
National Forest Community Adjustment Fund	$150.0	Regional Development Agencies
Transformative Technology Program
Advanced Forest Technologies Initiative	$215.0	Industry Canada
Forest Innovation and Value-Added Products
Restructuring the National Innovation System	$15.0	Natural Resources Canada
Forest Innovation Fund	$45.0	Natural Resources Canada
National Forest Pest Strategy	$10.0	Natural Resources Canada
Value to Wood	$20.0	Natural Resources Canada
Growing Wood Markets
Growing North American Markets	$20.0	Natural Resources Canada
Canada Wood Export Program	$40.0	Natural Resources Canada
Enhanced Trade Commissioner Service and SWL Advocacy	$6.3	International Trade Canada
Raising Skill Levels
Forest Products Human Resource Sector Council	$10.0	Human Resources and Skills Development Canada
Support for Bioenergy
RPPI: Thermal Cogeneration Incentive	$50.0	Natural Resources Canada
Total	$581.3
Loan Insurance Program	$800.0 (maximum)	Industry Canada
Support for Industry	$100.0	regional development agencies
Grand Total	1.48 billion

* In addition, the Government of Canada's 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.