Branching Out: How Canada’s Forestry Products Sector is Reshaping its Future

36 Pages Posted: 3 Jun 2019

See all articles by Eric Miller

Eric Miller

Rideau Potomac Strategy Group

Date Written: May 14, 2019

Abstract

The external forces buffeting Canada’s forest sector – price swings, US trade protectionism, and shifting market demand for its core products – have challenged the sector to become an innovation leader. As a natural resource-based sector, it also has had the come to terms with the challenges of sustainability and associated changes in the regulatory environment. Today, Canada’s forest sector shows potential as a leader in innovation, environmental sustainability and international trade. Among key exporters of forest products, Canada has been more exposed to the dwindling demand for newsprint than many of its key competitors, who have been able to expand more rapidly their exports of other types of paper and related products. More generally, investments in new capacity have languished in Canada, while expansion (including by Canadian companies seeking to diversify and jump over protectionist barriers) has proceeded in the United States, Europe and elsewhere. However, wood products are now being used as the base materials for tall buildings, such as condo towers, and as an important component to the nation’s fuel supply. Meanwhile, bioplastics made from wood are being turned into everything from airplanes to product packaging. While many of these applications are in a somewhat nascent phase of development, they are fast evolving and show significant potential. Even though the forest sector is already a leader in many parts of the emerging bio-economy and accounts for 12 percent of Canada’s manufacturing sector GDP, it has the potential to do even better. Given the rapid growth in applications for wood products, supporting the forest sector directly reinforces Canada’s desire to provide world-leading opportunities to its citizens in STEM professions. Moreover, sound forest management practices lead to better environmental and economic outcomes, including greater levels of carbon sequestration and increased biodiversity. Key recommendations include:

• Scale up the government contributions to FPInnovations, a non-profit innovation hub for the forestry industry, and other vehicles with a successful track record of commercialization.

• Consolidate the early product and process innovations supported by the federal government in partnership with the industry to make Canada a global leader in the emerging “tall wooden building space.”

• Endeavour to ensure “regulatory neutrality” for the use of emerging wood and wood-based products.

• Create a window supported by carbon tax revenues to drive innovative local solutions to forest management, adaption and utilization; and

• Develop a sectoral arrangement on trade in forest products with China, focused on the construction sector.

Keywords: Energy and Natural Resources; Business Investment; Efficiency and Productivity; International Competitiveness; North American Integration; Regulatory Burden; Trade and Investment Disputes

JEL Classification: F13; L73; L5

Suggested Citation

Miller, Eric, Branching Out: How Canada’s Forestry Products Sector is Reshaping its Future (May 14, 2019). C.D. Howe Institute Commentary 542 (2019), Available at SSRN: https://ssrn.com/abstract=3388053 or http://dx.doi.org/10.2139/ssrn.3388053

Eric Miller (Contact Author)

Rideau Potomac Strategy Group ( email )

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