AMBASSADOR'S MEETING WITH PREMIER CHAREST: QUEBEC

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
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.

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WILKINS