While most of us are hoping for a significant stimulus package in the coming federal budget, it must be acknowledged that big spending by government is at best a blunt instrument with limited impact on our export-dependent economy. At worst, it can support the status quo, delay needed adaptation and make our economy weaker.
Canada's forest products industry employs 300,000 Canadians, more than the combined work force of all three auto makers and all five major banks. It is recommending government take a more visionary and productive approach: make competitive business conditions the central focus of the next federal budget.
The forest industry believes an emphasis on bold economic policy and focused spending is a model that would benefit most sectors of the Canadian economy and keep jobs in Canada.
And it's an approach based on hard-won experience and careful analysis. A major slump in the U.S. housing market, tightening credit markets, a slowdown in global demand and volatile energy and currency costs have created a perfect storm of challenging conditions for Canada's forestry companies. The forest industry's response to this storm, which struck long before the current recession hit the whole economy, has given it a good understanding of what is required to pull out of the current economic tailspin.
Canada is the global leader in exporting wood, pulp and paper products around the world. This success is based not only on natural resources, but on ingenuity, hard work, entrepreneurship and a global outlook.
The forest sector is science-based, using new technology and earning high marks for its environmental performance. Canadian companies harvest legally, regenerate promptly, reduce greenhouse gas emissions (10 times Kyoto targets), cut waste and welcome independent scrutiny. In fact, Canada has more acres of third-party certified forests than anywhere else on the planet.
The forest industry has not waited around for government to fix its problems. Its response to bad economic conditions has been to improve productivity and outperform the American industry and other Canadian industrial sectors. It is rapidly diversifying markets and products, becoming a leading Canadian exporter to growing markets such as China, India and South Korea.
In addition, forest products manufacturers have invested more than $4-billion annually over the past decade on capital renewal and more than half a billion per year on research and development.
But while targeted and necessary, this action by industry is clearly not enough. How can the industry do better?
Some experts have identified Scandinavia's government-industry partnership, with its focus on creating world-class competitiveness conditions, as the model Canada should emulate.
Finland is also an excellent case study of industry having a vision and government investing heavily to turn that vision into reality.
In Canada, the forest industry has had such a plan for years; unfortunately it has taken a global economic crisis to get government's attention.
Bottom line: Canada simply cannot win in tomorrow's marketplace with yesterday's economic policies. Government must keep pace and do its part.
Regulatory reform, tax modernization, infrastructure and transportation improvements have all long been on the government agenda, but change has been painfully slow, costing tens of thousands of jobs and risking many more.
With the federal budget just around the corner, the government must move aggressively. It must ensure credit is available, use the tax system to encourage investment in new capital and research and invest in new technologies and applications in the emerging bio-economy. It needs to adjust its employment insurance work-sharing program to help families get through this difficult time and allow companies to hold onto skilled workers for when the markets return.
This is not a shopping list for big spending, but rather a call for smart, affordable policy. Global economies will rebound and Canada needs to be ready for when they do. Our competitors will be challenged with issues as diverse as deforestation, competing pressure for agricultural land use and rising production costs. The market for Canada's proven sustainable forest products will grow enormously.
So the choice government faces in preparing for the next budget should not be between bailouts or inaction. It should be about what we need to do as a nation to set the winning conditions for our collective prosperity.
Canada's future in forest products is bright, but not assured. A bailout is not the solution. Bold economic policy shifts and focused spending will set us on the right path for future growth.
Avrim Lazar is president and chief executive officer of the Forest Products Association of Canada