The New Brunswick minister responsible for trade policy is defending the Gallant government's decision to use taxpayer money to hire another expert to look at the forestry market in its ongoing fight against U.S. duties on softwood lumber exports.

Although the industry had called for such a review to refute the "inaccurate and unfounded conclusions" of the auditor general's 2015 report, which the U.S. Commerce Department used to argue the province was providing unfair subsidies to local companies, Roger Melanson denies the review is itself a form of subsidy.

"We have 22,000 jobs in New Brunswick depending on this industry. It's a major, very important sector," particularly in rural areas, he said.

"So there's a lot at stake here."

The review has to be independent and objective, not paid for by industry, he said.

U.S. President Donald Trump's administration is imposing duties of 20.83 per cent on New Brunswick producers, although the province's largest forestry company J.D. Irving Limited, which hired a lawyer to argue its case, fared better with a duty of 9.92 per cent.

The province maintains the tariffs are "unfair trade actions" against the New Brunswick softwood lumber industry and announced last week a series of measures aimed at protecting and promoting the forestry sector. Those measures include hiring an expert firm to conduct a review.

Not to 'question' AG's report

Melanson declined to comment on whether he believes the auditor general's report hurt New Brunswick's case for exemption.

But he said the review "is not to … question the auditor general's report."

It's to assess whether any changes are warranted, and if so, make recommendations.

"And if there's not, it will clear the fact that we are not subsidizing the industry here in New Brunswick," he said.

"We believe that we have a free, open market, and it's a level playing field, but we'll see what the outcome will [be.]"

The cost of the review and terms of reference have not been determined yet, Melanson has said.

'Special envoy' paid $40K US per month

David Wilkins

David Wilkins is providing taxpayers good value for his one-year, $658,000 contract as New Brunswick's special envoy in the softwood tariff dispute, said Roger Melanson. (CBC)

In May, the province hired former U.S. ambassador to Canada David Wilkins for $40,000 US a month to act as New Brunswick's special envoy on trade and softwood lumber.

Melanson contends taxpayers are "absolutely" getting good value for their nearly $658,000 in Canadian dollars for that one-year contract.

Wilkins has "done a great job," he said. "We have done a very solid advocacy and educational exercise to the United States government."

Premier Brian Gallant has met twice with the secretary of commerce and with many federal legislators, senators, congress people and  governors, said Melanson.

Wilkins continues to work for the government to identify investment opportunities in the province, he added.

Proportion of Crown wood at issue

Kim MacPherson, auditor general

Auditor General Kim MacPherson's 2015 report found the Department of Natural Resources had 'an apparent bias' toward economic development and industry in managing Crown wood. (Government of New Brunswick)

New Brunswick has previously been exempt from U.S. softwood duties, but U.S. companies argued wood from Crown land now represents a larger share of the market — 51 per cent in 2013, up from 41 per cent in 2004 — and had reached a level where mills should be considered unfairly subsidized.

U.S. lumber lobbyists relied in part on Auditor General Kim MacPherson's 2015 audit, which found the province had not been properly tracking the proportion of Crown wood versus private wood sold to sawmills since 2002.

Under the province's Crown Lands and Forests Act, the Department of Natural Resources is supposed to ensure the amount of wood taken from private land is proportionate to the timber cut on Crown land.

MacPherson said the provincial government has failed to adhere to that legislative requirement and found "an apparent department bias" toward economic development and industry in managing the Crown forest.

Lumber producers sought expedited review

Last month, New Brunswick Lumber Producers (NBPL) called on the province to "act immediately to secure an expedited review for New Brunswick's softwood sawmills."

The NBPL, which has 10 member sawmills representing 95 per cent of of softwood lumber production in the province, was "united in calling on the province of New Brunswick to immediately do everything it can to resolve this matter," it said in a statement.

A 2008 report by former auditor general Michael Ferguson found "the fact that mills directly or indirectly control so much of the timber supply in New Brunswick means that the market is not truly an open market.

"In such a situation it is not possible to be confident that the prices paid in the market are in fact fair market value."

Another measure announced by the province last week to help the industry is working to improve and develop strategic corridors to improve transportation efficiency.

But that doesn't mean taxpayers are going to be paying to build roads for the forestry industry, said Melanson.

"We have strategic corridors for all economic sectors" that move their goods within the province and out of province, he stressed.

"We have an infrastructure program that we invest in our roads and bridges and we will keep doing that in a more strategic way moving forward so all industries, including softwood, will be able to benefit."

Other measures include:

  • Working to find new export markets to reduce a reliance on trade with the United States.
  • Working to enhance innovation in the forestry industry through increased research
  • Expanding opportunities such as biomass and biofuels, and by promoting the markets that exist for value-added wood products from New Brunswick.
  • Increasing efforts to monitor and combat the threat of the spruce budworm through continued partnerships with industry and the federal government.

The province also supports the federal government's plan to fight the U.S. duties through litigation, which has proven successful in the past, but could be a lengthy process.

The expert's report will be made public once the review is complete, Melanson has said. No timeline has been set.

With files from Information Morning Fredericton