Jan. 22, 2006. 01:00 AM | Toronto Star
Far from the bright lights of Toronto and the big urban centres of the Golden Horseshoe, a quiet devastation is taking place throughout Northern Ontario's forest industry, killing thousands of jobs and threatening to turn many single-industry communities into ghost towns.
As distant as the crisis might seem to city residents, the demise of the industry — the province's second largest after the automotive sector — threatens the prosperity of all Ontarians.
Last year, a government-commissioned task force determined that 12 forestry operations, such as paper mills, were at risk of shutting down. Five of them were deemed to be at high risk. If all 12 operations closed, there would be a loss of 7,500 direct and 17,500 indirect jobs in Northern Ontario.
But for suppliers and manufacturers in southern Ontario, it would see the demise of 13,000 indirect spin-off jobs. Not to mention government tax losses approaching $1 billion.
The task force report has proven prophetic.
Since its release last June, operations in Kenora, Thunder Bay, Cornwall and Ottawa have shut or are on the way. More closures are likely this year.
The Ontario government has responded with an aid package widely seen as insufficient.
A combination of circumstances at home and internationally have come together to create a near-perfect storm that threatens to turn a once profitable industry into one that could sink into irreversible decline.
Among the external factors are the rising value of the Canadian dollar against the U.S. dollar, making exports more expensive; the protracted and ongoing softwood lumber dispute with the U.S. that has forced Canadian manufacturers to pay out billions of dollars in tariffs; and international competition from new players such as China, Brazil and Russia.
Also, policies of provincial governments past and present have contributed to reducing the industry's competitiveness. A decade ago, the former Conservative government downloaded the cost of building and maintaining logging roads onto the forest industry. These are public access roads used by everyone.
And energy prices set by the province have risen for the industry by 30 per cent or more in recent years. They are set to go even higher this year.
In mill towns like Kenora, much closer to Winnipeg than Toronto, there is even some talk of separating from Ontario and joining Manitoba, where energy is plentiful and half the price.
The Ontario government's 2005 bailout package failed to quell criticism within the forestry industry that Queen's Park was not doing enough to help.
It provided a maximum of $28 million annually for logging roads — a fraction of the actual cost of maintaining the roads — and a three-year $150 million investment fund. That pales alongside the $500 million fund dedicated to the auto sector.
Clearly, the provincial government cannot single-handedly save the forest industry. But the task force report offered sensible ways to mitigate the damage, such as reducing government red tape and speeding up decision-making.
But energy is the key part of the solution. Energy makes up to 30 to 40 per cent of the total cost of getting wood from forest to mill. That's why it is essential for Queen's Park to consider ways to provide relief on hydro costs. Without such assistance, more companies risk closure.
The forestry crisis is real. Towns like Dryden risk losing half their tax base if the local mill closes. Places like Red Rock might become ghost towns.
Forestry is Northern Ontario's economic cornerstone.
It is time Queen's Park redoubled its efforts to bring this vital industry back from the brink.(*)
