US embassy cable - 05OTTAWA3127

C O N F I D E N T I A L OTTAWA 003127 
 
SIPDIS 
 
STATE PASS USTR FOR SCHANDLER, JMELLE, JMENDENHALL 
 
E.O. 12958: DECL: 10/19/2015 
TAGS: ETRD, CA, Softwood lumber 
SUBJECT: AMBASSADOR'S MEETING WITH PREMIER CHAREST: QUEBEC 
READY TO TALK ON SOFTWOOD 
 
Classified By: WMOORE 
 
 1.  (C) Summary:  Quebec Premier Charest has told us that 
Quebec, Ontario and BC are trying to develop a common 
negotiating position and, if the U.S. makes the "right 
decision" on October 28, will push PM Martin to go back to 
the table.  The provinces are looking at a combination 
domestic tax/tariff proposal. End Summary. 
 
 
2.  (C) In a meeting with the Ambassador on Tuesday, Oct. 18, 
Premier Charest said that the Premiers of Ontario, Quebec and 
BC had met last Friday at B.C. Premier Campbell's request to 
try to develop common positions on the softwood issue. 
According to Charest, Ontario and Quebec have similar 
positions on softwood, while B.C.,s approach is slightly 
different because of the beetle infestation issue; however, 
all want to get Canada back to the negotiating table with the 
U.S.  The three Provinces plan to propose a &hybrid 
approach8 to solve the softwood issue: a combination of a 
domestic tax and a tariff. 
 
3.  (C) However, they see the U.S. response to the latest 
NAFTA panel remand, due October 28, as a key indication of 
U.S. seriousness; if our response is satisfactory they will 
take that as a signal that it is time to return to the table. 
 Charest observed that PM Martin has indicated that the GOC's 
position is that they will not return to the table until the 
deposits are returned.  The three provinces have a slightly 
more flexible take on the deposit issue; they are willing to 
start negotiations, but with the deposit issue as the first 
agenda item to be solved.  The other key agenda issue, in 
their view, will be how to avoid "Lumber V". 
 
4.  (C) The Ambassador asked whether PM Martin would seek a 
resolution of the softwood dispute before the election (still 
forecast for the March-April 2006 timeframe).  Charest 
responded that one of the questions Quebec asks itself is how 
serious Ottawa is about resolving the issue.  Charest seemed 
somewhat hopeful that the three provinces would be able to 
get PM Martin to the table.  &Quebec has no leverage, 
because Martin knows he can,t get more Liberal votes in 
Quebec for the election.  But British Columbia does have 
leverage as Campbell is in a position to deliver more seats 
for the Liberal party in the next election.8 
 
5.  (C) Charest also said that he is prepared to tell PM 
Martin that if Martin wants to continue taking a hard line 
against negotiations, the federal government also needs to be 
prepared to start financially supporting our 
softwood companies, as some are close to going under.   If 
Ottawa continues to refuse to negotiate, the provinces expect 
to ratchet up the pressure on Martin.  (Comment: one Quebec 
industry official has publicly floated the idea of Federal 
loan guarantees for companies using the accumulated deposits 
as collateral; additional subsidies, no matter how marginal, 
to help Canadian firms survive CVD action strike us as a 
further complication of the issues. End comment) 
 
6.  (U) In public remarks in the Quebec National Assembly, 
Charest said that Quebec is going to work through the federal 
government, and that BC, Ontario and Quebec are discussing 
the matter now.  Charest has appointed former PQ Premier 
Pierre Marc Johnson to be Quebec,s negotiator with the other 
two provinces; Johnson is currently in Vancouver discussing 
the matter with his counterparts.  Charest publicly said at a 
joint press conference with Ambassador Wilkins that we needed 
to get back to the negotiating table. 
 
7.  (C) Comment: Pressure is clearly building here to move 
forward from the current impasse.  Industry is not disposed 
to await the outcome of the current round of litigation; 
industry contacts have told us that possibly 80% of industry 
wants to come back to the table now.  The challenge will be 
to get provincial industries with diverse structures and 
interests behind a common negotiating position if we are to 
avoid a repeat of last summer's talks.  End comment. 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
WILKINS