Trou­ble in the for­est

The Prince George Citizen - - Opinion -

Bat­tered and bleed­ing, the B.C. lum­ber in­dus­try has seen bet­ter days. To­day, it is grap­pling with tough mar­ket con­di­tions, a di­min­ished do­mes­tic tim­ber sup­ply (along with ris­ing fi­bre costs), U.S. soft­wood im­port tar­iffs and a lack of pro­vin­cial government in­ter­est in do­ing much to im­prove the com­pet­i­tive en­vi­ron­ment.

That is wor­ri­some. Forestry – of which lum­ber pro­duc­tion is the largest com­po­nent – is a high-wage in­dus­try that re­mains the main­stay of re­gional economies across the prov­ince, par­tic­u­larly out­side of the Lower Main­land and Greater Vic­to­ria.

The ac­tiv­i­ties across all seg­ments of forestry com­bined ac­count for bil­lions of dol­lars of B.C.’s eco­nomic out­put (GDP), pro­vide di­rect em­ploy­ment for more than 50,000 Bri­tish Columbians, and pay $4 bil­lion a year in taxes, roy­al­ties and fees to var­i­ous lev­els of government. Tens of thou­sands of ad­di­tional B.C. jobs also de­pend on forestry be­cause of the in­dus­try’s ex­ten­sive link­ages with other sec­tors of the econ­omy.

Then there is forestry’s out­sized role in B.C.’s ex­ports.

Bri­tish Columbia is a small ju­ris­dic­tion that must trade to en­sure its eco­nomic well-be­ing. Ex­ports of goods and ser­vices amount to about one-third of the prov­ince’s GDP.

These ex­ports fur­nish the eco­nomic

means that en­able house­holds and busi­nesses to pay for im­ports of a wide ar­ray of goods and ser­vices – ev­ery­thing from ve­hi­cles, med­i­cal de­vices, phar­ma­ceu­ti­cal prod­ucts and IT equip­ment to con­sumer elec­tron­ics, cloth­ing and many food­stuffs.

As a small econ­omy, B.C. needs to pay close at­ten­tion to the health of its “traded in­dus­try clus­ters,” the in­dus­tries that pro­duce goods and ser­vices for sale out­side of the prov­ince.

To­day, de­spite its man­i­fold chal­lenges, forestry ranks as B.C.’s big­gest traded in­dus­try, and by a sig­nif­i­cant mar­gin.

While B.C. boasts an in­creas­ingly di­ver­si­fied econ­omy, forestry con­tin­ues to gen­er­ate 30 per cent to 35 per cent of the earn­ings that B.C. gar­ners from sell­ing goods abroad.

The soft­wood lum­ber busi­ness alone cranks out ex­ports of $6 bil­lion every year – at least 10 times the value of ex­ports from the “clean tech” in­dus­try that fas­ci­nates so many of our politi­cians.

Forestry’s con­tri­bu­tion to B.C.’s ex­ports hasn’t fallen, even though other in­dus­tries – e.g., en­ergy, agri­cul­ture and high tech­nol­ogy – have gained a higher pro­file over time. In­deed, if any­thing, forestry’s place in B.C.’s mer­chan­dise ex­port mix ex­panded slightly over the 2009-17 pe­riod.

How is pub­lic pol­icy in­flu­enc­ing the com­pet­i­tive land­scape for forestry? As the owner of most of the land in the prov­ince, the government must jug­gle many balls. And it has lit­tle con­trol over global or North American lum­ber de­mand, trade pol­icy, the ex­change rate or other key ex­oge­nous vari­ables. But in re­cent years, B.C. pol­i­cy­mak­ers have done pre­cious lit­tle to make this prov­ince an at­trac­tive place to de­ploy cap­i­tal in for­est-re­lated busi­nesses.

Be­gin­ning with tax pol­icy, the re­turn of the pro­vin­cial sales tax in 2013, the new em­ployer health tax and B.C.’s es­ca­lat­ing carbon tax to­gether have added hun­dreds of mil­lions of dol­lars of extra, profit-in­sen­si­tive tax costs for for­est com­pa­nies. And the move to a higher cor­po­rate tax rate has made B.C. even less com­pet­i­tive for firms that earn prof­its.

Turn­ing to other ar­eas of leg­is­la­tion and reg­u­la­tion, the new “pro­fes­sional re­liance” regime for nat­u­ral re­source in­dus­tries has cre­ated a greater com­pli­ance bur­den for for­est com­pa­nies. B.C.’s still-under-de­vel­op­ment cari­bou habi­tat pro­tec­tion plans, once in place, will fur­ther re­strict ac­cess to tim­ber in some north­ern re­gions.

New pro­vin­cial en­vi­ron­men­tal as­sess­ment leg­is­la­tion, along with on­go­ing work to de­velop a pro­vin­cial “species at risk” law, could have far-reach­ing ef­fects on all land­based in­dus­tries. Forth­com­ing changes to WorkSafeBC poli­cies are likely to boost pay­roll costs for most B.C. busi­nesses, in­clud­ing in the for­est in­dus­try.

Under Bill 22, the B.C. NDP government in­tends to con­trol transfers of ten­ure within the for­est sec­tor to pro­tect the “pub­lic in­ter­est,” a term not de­fined in the leg­is­la­tion.

As the in­dus­try ad­justs to a de­clin­ing fi­bre sup­ply caused in part by the pine bee­tle in­fes­ta­tion, this leg­is­la­tion may be used to im­pede nec­es­sary ra­tio­nal­iza­tion and un­der­mine the value and se­cu­rity of the Crown-is­sued tenures to har­vest tim­ber that for­est com­pa­nies have long re­lied on.

Government re­stric­tions on log ex­ports from pri­vate land also mean tim­ber re­sources are un­der­val­ued, cre­at­ing com­pli­ca­tions with key trad­ing part­ners and adding to the coastal in­dus­try’s pain.

Fi­nally, B.C.’s adop­tion of the United Na­tions Dec­la­ra­tion on the Rights of In­dige­nous Peo­ples, ab­sent any clear idea of how its im­ple­men­ta­tion will af­fect government laws and reg­u­la­tory pro­cesses that per­tain to the land base, prom­ises to make it even harder for forestry and other re­source in­dus­tries to do busi­ness in the prov­ince.

Add it all up, and it is no mys­tery why so many B.C. for­est com­pa­nies are cur­tail­ing pro­duc­tion and in­vest­ing in other prov­inces and U.S. states, rather than at home.

— Jock Fin­layson is the Busi­ness Coun­cil

of Bri­tish Columbia’s ex­ec­u­tive vice-pres­i­dent and chief pol­icy of­fi­cer; Ken

Pea­cock is the coun­cil’s chief econ­o­mist.

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