The report reviews the evidence of decline in the forest sector of Newfoundland and Labrador. It discusses the causes of the decline and the policy dilemmas it gives rise to in terms of reconciling short-term goals for the industry with long-term goals for the forest sector as a whole. Our concern is that these goals may not be optimally aligned. We present this case, and include a set of recommendations.
The forest sector has been facing unprecedented challenges during the past decade, and is still in long-term decline globally. Reduced demand for paper and wood products, environmental concerns, high energy costs, unstable input supply, and in the case of Canadian firms, an appreciating exchange rate, have led to reduction in both output and production capacity for most major manufacturers.
In Newfoundland and Labrador, the forest sector has traditionally been a cornerstone in the province's natural resource-based economy. The core elements have been the paper mills and sawmills, supported by a network of harvesters scattered around the Province. Over the past decade, all forest industries in the Province show substantial decline in output, employment, the number of establishments, and exports. At the same time, the level of expenditure on forestry and the subsidization of commercial forestry have continued to increase.
Part of the increased public expenditure has been devoted to a more recent initiative to diversify the forest sector and find new export markets. Indications are strong that the Government has been slow to embrace in practice the adoption of such guidelines, and also to recognize that non-timber uses and industries based around recreation, tourism, the role of forests as carbon sinks, habitat preservation for endangered species to name a few, represent an economic and social potential that is largely unexploited. Despite the adoption of comprehensive forest policy objectives, there is little evidence of implementation especially where conflicts with established timber interests are concerned. A step in the right direction is the allocation of funding for a five-year scientific and management strategy to address the declining population of woodland caribou (Rangifer tarandus caribou).
Previous studies have noted that the Province lacks a framework for resolving land use conflicts. The present study echoes the call to establish such a framework. Major land-use issues have arisen recently leaving the Government facing criticism from the business community as well as from NGOs. The Governments ongoing dispute with Abitibi-Bowater and the manner in which the Province set about expropriating assets is harder to reconcile with the public interest, than with the perception that the Province might not be friendly to business. The Province's lifeline to Corner Brook Pulp and Paper Limited, owned by Montreal-based Kruger Inc, has attracted criticism from NGOs that see it more as a pipeline, draining taxpayers' money from alternate forestland uses. What we are calling for in this report, among other things, is a thorough review of the entire structure of taxpayer-funded support for the forest sector as a whole, including that for CBPP. The purpose of such a review is to ensure that the short-term and long-term objectives of forest policy are aligned to place the entire forest sector on a sustainable and competitive footing as soon as possible. We question whether these objectives are in fact so aligned now. If we are correct, then subsidies as they are currently structured may do more harm than good. We also stress the need for valuation of non-timber uses of the forest, and an analytical framework for resolution of land-use conflicts.