Forest industry needs help PDF
The Toronto Star
Mon 08 Aug 2005
Page: A17
Section: Opinion
Byline: Ian Urquhart
Column: At Queen's Park

Forest industry needs help
Flying under the radar screen here in southern Ontario is turmoil in the northern part of the province.
In northeastern Ontario, a cabinet minister has been burned in effigy. In the northwest, there is talk of secession from Ontario to join neighbouring Manitoba.

The specific source of these and other protests is the decline in the forest industry long a mainstay of the northern Ontario economy.
An industry report to the provincial government in June described the situation as a "crisis" and identified a dozen mills in danger of closing.
As if on cue, a month later Abitibi-Consolidated announced that it is closing its paper mill in Kenora.

The problem is that the industry is facing dramatically higher costs, particularly for electricity. Since the electricity market was opened three years ago, prices have climbed 30 per cent.  And they are being pushed ever higher this summer by the heavy use of air conditioners in southern Ontario.

This is bad news in the north, given that pulp and paper mills use a lot of electricity. It accounts for up to one-third of their costs of production.
The situation has been exacerbated by the rising Canadian dollar, which hurts exports, and by the softwood lumber duties imposed on Canadian products by the United States.

All these factors have combined to make the northern Ontario mills uncompetitive vis--vis their competition in the southern U.S.
The forest industry, while out of sight and out of mind in southern Ontario, is nonetheless significant. It has annual sales of $19 billion and provides direct employment for 85,000 people.

If the mill closings were happening in southern Ontario, there would be a media uproar demanding government action.
This point is not lost on NDP Leader Howard Hampton, who represents the northwestern Ontario riding of Kenora-Rainy River.
Hampton notes that the provincial government was quick to respond to calls for help from both the auto and film industries based in southern Ontario.

"It's time for the McGuinty government to finally show ... that it has a real commitment to Ontario's forest industry and the communities that depend on it," said Hampton after the Abitibi-Consolidated announcement.

Echoing Hampton this week was Conservative Leader John Tory, who took a swing through northwestern Ontario and issued this statement: "The biggest problem plaguing the forestry industry in Ontario is government inaction and incompetence on the part of the McGuinty Liberals."

This is somewhat unfair to Premier Dalton McGuinty and his Liberal government. To a large extent, they have inherited a problem caused by previous NDP and Conservative governments.

It was the NDP government of Bob Rae, for example, that downloaded the cost of building and maintaining lumber roads onto the industry.
And it was the Conservative government of Mike Harris and Ernie Eves that opened the electricity market and sent prices soaring.

But it is the Liberals' problem now. What are they going to do about it?

The forest industry is making four major demands:
Reverse the downloading of lumber roads. This would cost the government about $35 million a year.
Provide the industry with a fuel tax credit to offset the cost of hauling wood to the mills. Estimated annual cost: $15 million.
Provide the industry with some sort of break on electricity prices. No one was able to quantify this for me, but suffice it to say that the cost would be in the tens of millions of dollars.
Establish a "prosperity fund" in the neighbourhood of $500 million to help the industry modernize its mills. (A similar fund was created for the auto industry.)

To date, the government's only response has been to offer the industry $350 million in loan guarantees. The industry has dismissed this as woefully inadequate.

But the industry is not without friends in high places.

There is, for example, Natural Resources Minister David Ramsay, the man who was burned in effigy back in June. He is a committed northerner.

And there is Don Guy, McGuinty's chief of staff. He is from Thunder Bay.

McGuinty himself is expected to meet representatives of the forest industry and northern municipalities later this month.

"I fully accept that the industry is in a crisis," says Ramsay. "I'm working behind the scenes to address it... I want to have some results out in September."

So help may soon be on its way. Whether it is enough to stop the decline of the forest industry and the towns that depend on it is another question.

Ian Urquhart writes on provincial affairs. His column appears Monday, Wednesday and Saturday.