The challenges that are driving the closures of forest industry mills across Canada are largely beyond the control of governments, the head of a Halifax economic think thank says. Government bailouts can’t rescue the closing mills of the Miramichi for the long term, says Charles Cirtwill of the Atlantic Institute for Market Studies.
And Prime Minister Stephen Harper’s political lieutenant for New Brunswick, Veterans Affairs Minister Greg Thompson, said Thursday there’s only so much the government can do about the closures.
“It’ll be favourable market conditions that turn things around so we don’t want to give people unrealistic expectations about what government can do because there’s a limit,” said Thompson. “But we have to be there to listen and to help, and we’re more than willing to do that.”
Miramichi is reeling in the wake of an announcement this week that its largest employer, Finnish forestry giant UPM, will close two mills for nine months to a year beginning in August – and possibly permanently if market conditions don’t improve. The Weyerhauser mill will also close for good. More than 700 people – about eight per cent of the local workforce – will lose their jobs.
The sharply rising Canadian dollar – up 42 per cent against the U.S. dollar in the last five years – and soft demand for coated paper were behind the UPM closures, the company said.
Thompson said he was quite willing to meet with Miramichi council, local Liberal MP Charlie Hubbard and provincial officials over the mill closures. Council passed a motion to that effect Wednesday night.
“I know they’re going through a troubling period,” Thompson said Thursday. “Many of the industries in that sector across the country are. But this is a huge blow for the Miramichi and for New Brunswick.”
Canada’s forest industry has shed 32,000 jobs since 2002 – or about one in 10, says the Forest Products Association of Canada. More than 300 communities in Canada depend almost entirely on forestry, says the association.
The provincial cabinet was considering recommendations from the forestry task force Thursday. Details won’t be public until next week. UPM got $5 million from the Bernard Lord Conservative government last year to keep the paper mill open. Cirtwill said short-term subsidies like that tend to only help companies limp along. Instead, he said he supports the measures the forest industry has called on federal and provincial governments to implement.
A national industry task force issued a report this spring that argued for lower taxes on capital investment, the elimination of sales taxes on capital inputs, credits for research and development, and an extension of the March federal budget’s capital cost allowance. That allows companies to write off in two years, rather than seven or eight, their spending on machinery and equipment.
Cirtwill said it would make sense for government to aggressively adopt those kinds of measures as the rising dollar exacerbates other challenges the industry faces.
“Those would be far better solutions to pursue than to magically find a pot of cash,” he said. But even if governments acted quickly, he warned, the international competitive factors would stay beyond the reach of Canadian governments.
“Not every Canadian mill will be saved,” he said. When mills can’t be saved, “government should look instead at transition assistance,” for workers and companies, he said, “with the objective of creating sustainable jobs rather than trying to prop up unsustainable jobs.”
ACOA and the provincial government began funding a $731,000 project in January to help Miramichi diversify. The initiative helps companies hit by the closure of UPM’s kraft mill to develop new products and export markets. ACOA contributed $480,000 to the project, the province $112,000 and the private sector $137,000.
Cirtwill said that amid the understandable anxiety among workers and others in Miramichi, there are some positive factors – including how skilled the workforce is and how strong the economy is, with jobs in some sectors going begging.
“Many of these workers will find their skills readily transferable to other industries in New Brunswick,” he said. “If these plants were closing in 1980 (during a severe recession), this would be a very different conversation.”