The federal government needs to offer money, training and incentives to ensure a technological revolution in the forestry industry creates well-paid jobs at home rather than abroad.
That's the main finding of a new study Natural Resources Canada commissioned to find ways to support Canada's billion-dollar forestry-equipment sector.
Canada's traditional forestry products — softwood lumber and pulp-and-paper — have struggled in recent years, as American housing construction fell sharply after the 2008 global meltdown and as more consumers get their information digitally rather than on paper.
The bio-fuels and biomaterials industries, which provide new uses for wood fibre, offer fresh opportunities for Canadian producers to make up for the losses — but the high-tech equipment to produce them is increasingly coming from abroad.
A report by Groupe DDM says Ottawa and the provinces should start offering incentives for mills to buy Canadian technology rather than looking to foreign manufacturers.
The federal government also needs to provide more worker training, and to finance marketing campaigns to help sell these new high-tech Canadian products to more customers.
"Canadian wood transformers ... heavily rely on foreign-made equipment, even in those fields where Canada seems to have equivalent equipment," says the study from March.
"Canadian forest equipment manufacturers are competing against world giants in spite of their relatively smaller size. High-tech, well-paid jobs in innovation and development are provided to other countries, especially Sweden, Finland, Germany, Austria and the United States."
A copy of the $76,000 study was obtained by The Canadian Press under the Access to Information Act.
There are an estimated 365 Canadian firms in the forestry-equipment manufacturing sector, employing more than 57,000 people and worth about a billion dollars annually.
Canada's traditional expertise is in sawmill-equipment manufacturing, but many firms have struggled in the wake of the American housing downturn.
Even with recent improvements in housing construction south of the border, and rising demand from China, South Korea, India and elsewhere, the sector remains battered, says the 38-page report.
"One of the Canadian anchor forest industries, the sawmill equipment manufacturers, finds itself in a dire situation, as their traditional customers, saw mills, do not seem capable of investing and upgrading their assets," says the document.
"One of the reasons comes from the fact that lenders have been recently hurt by the sector and commercial credit has become hard to obtain."
The authors suggest Ottawa should help these struggling manufacturers get better access to bank credit.
A spokesman for the department says officials are still reviewing the findings.
"To date, none of the report's recommendations have been implemented," Michelle Viau said in an email.
The entire forest sector in Canada saw net operational losses in 2008 and 2009, and still has not recovered to pre-recession levels. Quebec alone has seen the loss of some 30,000 jobs since 2008.
A softwood-lumber deal with the United States, which reduces duties on exports, expires in October next year. Quebec says it has been treated unfairly by the deal and wants better terms for itself in the next extension to the agreement.
The 2014 federal budget earmarked $90 million over four years to help forestry companies become more efficient and environmentally responsible, and to develop new products.