The export of logs is a very small percentage of what happens in Canada, and it's tied up with the rules of the softwood agreement, so it's pretty hard to deal with in itself.
The bottom line comes out pretty simply: we need a better business climate so that people will want to process in Canada. What will make people want to invest in the mill on Vancouver Island? The first answer is what the return on the investment is going to be. If the province prevents mergers and rationalization, people aren't going to be very interested in going there because you can't structure your business for success. If the tax on investment is lower--I go back to the CCA five-year window and the refundability on SR&ED--and you get a break on tax and investment, it makes you want to invest in northern Vancouver Island.
I've been in government policy for 30 years now, and my experience has been very consistent: when the government tries to force the marketplace to behave in the way it wants--even when it does it for the best motives, with the best intelligence, and with all due diligence--it almost never succeeds, because the market moves quickly. What made sense two years ago all of a sudden doesn't make sense, and government can't change its policies that quickly because of the exigencies of democracy and due process. Even when the government makes the right decision in trying to over-regulate or direct investment, that decision becomes wrong three years later, when the marketplace has moved and the government decision can't be changed that quickly. The only way to get the jobs to stay is to create a climate that draws the investment in; once the investment's in, business is going to want to stay and assist.
You asked me about provincial policy. One of the areas of provincial policy coming under increasing scrutiny is land tenure. If you want someone to invest billions of dollars--because a pulp-and-paper plant costs a billion dollars--in an area, they have to know there's going to be a fibre supply that's not subject to the whims of the political moment.
In Quebec, the expression of that is that this tree goes to this town and that tree goes to the other town. Well, that's fine social fantasy, but in economic reality and market reality it really means that all the investment goes to Georgia or Uruguay.
People will only invest if they think there's a chance of a successful business, and if you have three small plants forced to stay open by pertinency policies in the province, the opportunity to invest in one big world-class plant disappears. That's part of what we're suffering from now. It's right for governments to try to extract maximum employment from every piece of fibre by putting into regulations what basically becomes a chicken in every pot, but it just doesn't work. It just simply fails, and the people who suffer from it are the workers. You've got three plants that are not world-class struggling along because the province forces us to keep them open. The world-class plant that could have employed people for the next 50 years never gets built, and then the market hits and two out of three plants close. It's too late to get that investment, and the people who suffer are the workers in the towns. I would love to say we can micromanage this and keep the industry strong, but it just doesn't work.
We basically have two old-fashioned philosophies. One is if government just spends enough or regulates enough, we could fight globalization. That's not true. The other old-fashioned philosophy is if government does nothing, the marketplace will save us. That's also not true.
The middle ground, the true ground, which you'll see in Finland, Sweden, China, Singapore, France, is if government partners with industry by creating the right business climate, we'll get lots of jobs.
What does that partnership look like? It's a tax regime that draws investments into research and technology, which are public goods; market development with the Canada brand on it; stuff that accelerates the switch to eco-energy; and those sorts of things.
That type of partnership actually creates jobs. It's not subsidies, it's not bailouts, it's not micro-management, it's not regulation, but it's also not laissez-faire. Laissez-faire is just as naive as subsidies. In the end, if you look around the world, for those countries and economies that are expanding--look at Finland, with the high quality of life, very high social values, and a very successful economy--it's not because of laissez-faire and it's not because of 1960s-style intervention. It's because they have an industry-government concept of success and a partner for success by creating business climate, investment in research, and investment in market development.
Finally, you asked if the federal government should take it over. I don't think so.