WPAC Update Pellet Protectionism Ontario must open its borders to pellets from the rest of Canada and elsewhere. By Gordon Murray ntario depends on exports. In fact, exports are so important to the province that it has a government agency, On-tario Exports, dedicated to “Selling Ontario to the World”. According to Ontario Exports, the province exported $126-billion worth of manufactured goods in 2009. Without ex-ports, Ontario wouldn’t have an economy. That is why it is so difficult to understand its protectionist policy banning wood pellet imports for use by Ontario Power Generation (OPG), a provincial Crown corporation. OPG is planning to re-power its Atikokan Generating Station by replacing coal with biomass and has chosen wood pellets as the preferred fuel. In early 2009, OPG issued a re-quest for indicative prices for 90,000 tonnes/ year of dry wood pellets. But there was a catch. The pellets must be Ontario sourced and processed. No pellets are allowed from other Canadian provinces or foreign suppliers. Many people are unaware that Canada has had an Internal Trade Agreement (ITA) since 1995. The ITA was signed by all provinces and is intended to promote an open, efficient, and stable domestic market for long-term job creation, economic growth, and stability. All provincial governments and Crown corpora-tions are bound by the ITA. According to Industry Canada (www. ic.gc.ca), some key provisions of the ITA state that governments: • Must ensure their policies and practices do not create obstacles to trade; • Are not permitted to discriminate against suppliers of another province through means such as local price pref-erences, biasing technical specification or importing, unfair registration re-quirement, or unreasonable time con-straints; • Are prohibited from using policies that favour local suppliers of goods, services, and construction; • Cannot restrict bids to in-province firms O or direct contracts to local suppliers; • Are restricted from using local content, purchasing, and sourcing requirements; • Are prohibited from introducing new trade barriers relating to the processing of forestry (e.g., wood pellets), fisheries, and mineral resources. Evidence is showing that Ontario is failing to meet its ITA commitments. In May 2009, the province adopted a new Green Energy Act to reduce greenhouse gas emissions in the electricity sector and create jobs in emerg-ing technologies. Under the Green Energy Act, developers must buy goods and services from local suppliers to qualify for feed-in tar-iffs. The provincial government says this will create manufactur-ing jobs in Ontario, but it is a clear ex-ample of protec-tionist trade policy. C o n s e q u e n t l y, Japan, the United States, and the Eu-ropean Union have joined in a com-plaint to the World Trade Organization (WTO), saying that On-tario’s Green Energy Act and its local procure-ment requirements are a prohibited subsidy and violate international trade agreements. Under WTO rules, the complaint could lead to trade sanctions against Canada. Currently, Canada and the EU are negoti-ating a comprehensive trade agreement. This type of protectionist policy weakens Canada’s bargaining position. How will Canada justify Ontario’s trade barriers while simultaneously arguing for improved access for Canadian products into Europe? It is not inconceivable that in retaliation, the EU, which is Canada’s largest market for wood pellet exports, could impose restrictions on imports of Canadian wood pellets and thereby devastate the na-tion’s wood pellet industry. Remember the “Buy American” policy of 2009 in which U.S. Congress insisted that only Americans were eligible to bid on proj-ects under the American Stimulus Plan? An outraged Ontario Premier Dalton McGuinty called on Ontario municipal governments to fight this U.S. protectionism alongside the federal government. Now, a year later, McGuinty has implemented the very type of policy he was protesting. One of the reasons for Canadian Con-federation in 1867 was cancellation by the United States of the Canadian-American Reciprocity Treaty, which allowed products into the United States free of taxes or tariffs. Canada’s founders intended for Confed-“How will Canada justify Ontario’s trade barriers while simultaneously arguing for improved access for Canadian products into Europe?” eration to open unrestricted markets within Canada. A national railway was built to fa-cilitate this unrestricted trade. Now, Ontario has re-implemented the protectionism that Canada was supposed to have overcome a century and a half ago. Protectionism leads to inefficiency because suppliers do not have to face competition. This results in higher costs to consumers. Ontario’s green energy industry, including its wood pellet industry, will never be competi-tive if it is not required to face open competi-tion. It is time for Ontario to end its export hypocrisy and harmful protectionism.• Gordon Murray is executive director of the Wood Pellet Association of Canada (www.pellet.org) and can be reached at 250-837-8821 or [email protected]. Canadian BIOMASS 21
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