Getting our economic mojo back—with a new softwood lumber deal

By Tony Kryzanowski

There are questions being raised globally about whether Canada has lost its economic mojo, as StatsCan recently reported that economic growth in this country is plodding along at its slowest pace in 60 years. Between 2014 and 2016, Gross Domestic Product (GDP) grew by only 1.2 percent, and while that may be a bit of an anomaly, GDP still seems stuck in the two percent per year range.

Enter the federal government’s new five-year $950 million Innovation Superclusters Initiative (ISI), which will provide matching funds to five approved innovation superclusters in the areas of advanced manufacturing, agri-food, clean technology, digital technology, health and bio-sciences, clean resources, and infrastructure and transportation.

It’s the federal government’s attempt to help industry reclaim our mojo with the development of new intellectual properties that demonstrate Canada’s leadership and ability to drive global innovation—but one is left wondering if the same couldn’t be accomplished with more effort instead on negotiating a new softwood lumber agreement and construction of a couple of pipelines.

There are a growing number of new commercial products being developed from novel, wood-based, raw materials through investments made in research, development and innovation over the past decade. Fundamentally, as far as the forest industry is concerned, past research and development programs have worked, with development of new, more efficient ways to extract highly-refined lignin, cellulose nanocrystals and forest-based fuel alternatives from wood fibre. And some very important lessons have been learned along the way, the most important being the benefit of ‘drop-in’ technology, where companies can pursue production of these novel products without disrupting their conventional production methods.

So, perhaps there is the potential for a bid from the forest industry for funding from the ISI program through its forest research institute, FPInnovations, to at least prepare a Letter of Intent to file a formal application under the ISI program by the July deadline.

With the program’s focus on promoting cross pollination across various industrial sectors and development of industrial superclusters, this could be an opportunity to step beyond the current focus on improving manufacturing processes—and begin to seriously investigate large-scale industrial and commercial applications of these novel raw materials into bio-based panel board resins; renewable jet fuel; iridescent and magnetic films; pigments, paints, and cosmetics; improved construction products; innovative coatings; paper fillers; and innovative bioplastics.

But there is a time for greater investment in innovation, and from a forest industry perspective, the ISI program seems like a distraction, and the wrong prescription for what currently ails the Canadian economy.

At a time when our biggest trading partner is talking trade protection and massive softwood lumber tariffs, now is not the time to distract our forest sector with new innovation programs. Innovation requires a significant investment in both time and money—neither of which are in great supply within the forestry industry at the present time as companies build reserves to survive a protracted softwood lumber trade dispute.

The ISI program is complicated, built upon advanced economic concepts like industry clusters and superclusters, requiring the attention of human resources that should be working on the trade file instead of trying to decipher bureaucratic jargon to create a grant application that may or may not succeed. Also, the $950 million will only match what industry and its partners contribute to its supercluster. Third, each supercluster must have at least one university partner and must have an industry sponsor.

So, based on the fine print alone, it seems quite obvious that the federal government already has a fairly good idea where it is going to spend its money with this program, and suffice to say, it will be in locations where well-established industrial clusters already exist.

Investment in innovation has its place, but the reality is that right now, the forest industry has to keep its eye on the bigger, more immediate prize, which is some sort of new agreement on softwood lumber exports to the United States. The only reason why the industry has managed to survive the tariff by the Americans on Canadian softwood lumber without a major collapse thus far is the current high price being paid for our lumber by the American building industry. But as one industry veteran recently pointed out, this market won’t last forever. Watch out if demand and prices drop.

Thousands of forestry jobs—often in remote communities in one-resource towns—are at stake, representing the middle class that our Prime Minister assures us is among his biggest priorities. Or is it?

Time will tell if softwood lumber will be forced to take a back seat for months or years as Canada attempts to negotiate a new North American Free Trade Agreement (NAFTA) with the U.S. and Mexico. The comment has already been heard several times from our federal leaders that the government is loathe to make waves over an industry that exports $2 billion per year to the U.S., when NAFTA allows for trade with our American counterparts to the tune of $2 billion per day.