Evaluation of Securing Forest Products Markets Sub-Activity (PAA 1.1.2) Market Development Programs

Table of Contents


EXECUTIVE SUMMARY

Overview

This report presents the findings of an evaluation of NRCan’s Market Development programs, part of the Securing Forest Products Markets sub-activity. The evaluation covered program activities from 2006-07 to 2009-10Footnote 1 consisting of total expenditures of $54.5 million.

More specifically, the evaluation covered the following three programs:

  • Canada Wood Export Program (CWEP): Operating since 2002, this program is intended to expand offshore markets for Canadian wood products through increased Canadian presence in targeted foreign markets, branding of Canadian wood products, and improved regulatory acceptance of wood products. Total expenditures from 2006-07 to 2009-10 were $28.0 million.
  • North America Wood First (NAWF): Operating since 2007, this program is intended to promote increased wood use in North American non-residential applications (e.g., hospitals, shopping centres, schools) through educating and informing architects and builders on the benefits of greater wood use by contributing funding to the U.S. WoodWorks and Canadian WoodWorks initiatives, and Cecobois in Quebec. Total expenditures from 2007-08 to 2009-10 were $12.4 million.
  • Value to Wood (VW): Operating since 1998, this program is intended to enhance productivity of the value-added wood products industry through a national research and technology transfer program. Total expenditures from 2006-07 to 2009-10 were $14.0 million.

This executive summary focuses mainly on the higher level analysis, drawing on specific examples to help illustrate key findings for each program. Detailed information on the evidence used for each finding is provided in the body of the report.

Evaluation Methodology

The evaluation examined the relevance and performance (effectiveness, efficiency and economy) of the Market Development Component of the sub-activity using a multiple lines of evidence approach. This included document, project and administrative data reviews; 6 case studies (2 for each program); 83 interviews; surveys of wood products industry association members and VW technology transfer clients; and an economic analysis of target markets.

While the overall methodology is strong, there are some limitations that should be considered when interpreting the findings. First, the scope of activities in the sub-activity includes two programs and funding through Canada’s Economic Action Plan not covered by this evaluation,Footnote 2 making attribution difficult to sort out for some outcomes. Second, the evaluation looks at a four-year period, but impacts from Market Development activities tend to be cumulative over several years, so attribution solely to activities undertaken during this period is not clear. Third, NAWF has only been operating since 2007-08 and does not have much program history to evaluate. Fourth, Strategic Evaluation Division asked the Canadian Forest Service (CFS) to identify contacts from which to draw a sample of interviewees for this study, thus introducing a possible selection bias. Finally, the survey of industry association members had a low response rate and was answered only by respondents in British Columbia and Quebec, thus limiting its generalizability.

Relevance

The evaluation found Market Development programs (CWEP, NAWF, and VW) to address the needs of the wood products industry, to be well-aligned with federal and NRCan priorities, and to be appropriately delivered by NRCan.

  • Demonstrated Need: The evidence strongly confirms the need for all three Market Development programs. The sector continues to face significant challenges due to increased competition in export markets and a reliance on the U.S. market (accounting for 75% of Canadian wood product exports in 2009, down from 88% in 2005). The dramatic downturn in U.S. housing starts (from 2.1 million in 2005 to 554,000 in 2009), the strong Canadian dollar and the historical softwood lumber trade issues threaten the sector. Diversifying export markets and applications of wood (i.e., non-residential construction), and encouraging R&D and investment in new value-added products should logically increase the resiliency of the sector.
  • Federal Government and NRCan Priorities: Each of the three Market Development programs are clearly aligned with current federal government priorities as described in the 2009 and 2010 Budgets. The programs are also clearly aligned to current departmental strategic priorities, in particular NRCan’s first strategic objective focusing on economic competitiveness. The programs each focus on multiple aspects of developing new economic opportunities for the forest sector through technical research and removal of barriers to wood use in international and national markets.
  • Appropriate Federal Role: NRCan’s role in the delivery of all three programs was generally seen as appropriate by industry and government stakeholders. The role for a federal government presence is clear given the magnitude of the economic crises experienced by the sector. Market development also requires sustained intervention for developing a market presence and product and process innovation requires long term research investment. As well, support for codes and standards work is typically a government-to-government activity. NRCan is well-placed to provide these compared to others. However, a question remains on the extent that highly-engaged elements of the sector – both regionally (e.g., B.C.) and product wise (e.g., softwood lumber) – are directing CWEP and NAWF priorities.

Performance – Effectiveness

Overall Findings and Summary

Each of the Market Development programs appear to be on track to meeting immediate and intermediate outcomes, and have demonstrated significant progress in all intended outcome areas. At a strategic level, there have been significant outcomes in terms of increased cooperation and collaboration among industry associations, federal and provincial governments and research organizations in the development of new markets and improving competitiveness; the development of codes and standards to facilitate wood use in target markets; some examples of new technology adoption (both internationally, in terms of wood frame construction, and nationally through VW research on laminates and wood I-joists); increased ability for the industry to respond to changes in markets for wood products including the rising importance of green building and environmental performance; and removing technological restraints on trade and improving acceptance of wood in building codes and standards in target markets.

A wide range of external factors were found to affect the achievement of Market Development outcomes across the three component programs. CWEP has benefited from international market changes that have made Canadian wood products more attractive (e.g., Russian log tax and Chinese lumber imports), and has suffered from protectionist policies emerging in Japan’s wood products sector. NAWF has benefited from a growing gap in the price of wood compared to other materials, and the apparent lower susceptibility of non-residential construction markets to recessions compared to residential markets. VW’s effectiveness at engaging industry has been impacted by industry restructuring for the last few years which has lead to some companies suspending or curtailing production, laying off staff, and not being able to invest in new technology or Market Development activities.

Key Findings by Program

CWEP has contributed to expanded export opportunities for Canadian wood products in traditional and emerging overseas markets, and continues to make good progress. Noteworthy achievements attributable to CWEP activities include:

  • Canadian firms are demonstrating awareness of target markets through their attendance at international trade events such as the Global Buyers Missions in B.C., the Japan Home Show and the WoodMac Exhibition in China, and the fact that mills – primarily in B.C. – that were previously only being used for North American markets are now geared towards shipping to offshore markets, in particular China.
  • Enhanced awareness of Canadian wood products and their attributes such as strength, durability, and environmental performance through trade shows, coverage in trade journals, and presence in regulatory decisions related to wood frame construction. The Canada Wood Group’s (CWG) activities and sustained in-market presence have been integral to this outcome.
  • Coordination among Canadian industry associations through the CWG and coordination with the province of B.C. through B.C. Forestry Innovation Investment (BC-FII) has minimized duplication of Market Development activities across associations and programs. Efficiencies have also been achieved in coordinating federal and provincial in-market efforts and facilitating greater coverage of target markets where industry associations already have a presence.
  • Increased capacity among builders and architects to use wood through establishing formal university programs for wood design (e.g., the expansion of the Canada Wood College in China) and informational activities including technical literature on wood specifications and design. Due in part to these activities, a rise in wood specification in South Korea and China has been observed.
  • Increased ability of Canadian industry to take advantage of changes in target markets. For example, CWG’s identification of residential market demand changes and promoting wood frame construction to meet these needs in Japan, South Korea, and China.
  • Influenced changes to codes and standards that have facilitated the use of Canadian wood products and styles of wood frame construction in target markets. For example, CWEP funded research that helped shape the 2009 Shanghai Local Code provisions for wood frame construction, approval of the Conformité European marking for Canadian lumber (also in 2009), and securing accreditations for construction with wood in the 2008 Korean Building Code.
  • Increased receptiveness to Canadian products among the building communities in target markets. CWEP contributions include research to assuage fears about structural integrity of mountain pine beetle-killed lumber, the presence of demonstration projects and missions to Canada showing real-world applications of Canadian building products, and a growing importance of environmental reputation.
  • Increased Canadian wood product use and exports to target markets. Due to the many external factors impacting international trade (e.g., demand, other suppliers, currency fluctuations, etc.), it is not possible to determine the level of impact the CWEP has had. However, the evidence suggests that CWEP activities have likely contributed to increased market share for Canadian wood products in China (up from 1.8% in 2006 to 5.6% in 2009), and South Korea (up from 5% in 2006 to 5.9% in 2009), while possibly preventing erosion of market share in Japan (approximately 45%). Exports of wood products to China and South Korea have also increased substantially over the course of the Program from $59 million in 2002 to $381 million in 2009 in China and from $61 million in 2002 to $98 million in 2009 in South Korea. While shipment volumes continue to be dominated by lower-grade lumber, there is evidence that demand for higher grade wood products is increasing or has the potential to increase.

The evaluation also identified some challenges for CWEP programming to consider:

  • Concerns were raised, especially regarding China, about overburdening of in-market quality assurance activities given the rise in wood frame construction among a building community that is still inexperienced with such construction.
  • The coordination between BC-FII and CFS for market development in China has meant that the proportion of industry funding for these activities has remained small. Industry continues to make minimal investments in market development activities in this market despite the considerable growth it is experiencing.
  • Some interviewees noted that while the entire industry has experienced significant downturns, larger companies – through their membership in the Council of Forest Industries, Forest Product Association of Canada, and Western Red Cedar Export Association – are able to take greater advantage of offshore Market Development programs, such as CWEP, because of their size.

NAWF appears to be on track in supporting increased use of wood in non-residential construction in Canada and the United States. Although the initiatives it funds are at early stages, the evaluation found indications of progress. Noteworthy progress includes:

  • Increased awareness among target market regulatory and standards bodies of the attributes of wood products (not necessarily Canadian wood products) in non-residential construction through education and outreach activities. For example, U.S. WoodWorks has participated in 38 American Institute of Architects-accredited seminars drawing over 1,500 participants, and there is evidence that building code officials in Canada and the U.S. are changing their beliefs about wood for non-residential construction.
  • Facilitated greater wood sector coordination by presenting, for the first time in North America, a single wood marketing approach (i.e., no single product or species is promoted) through WoodWorks and Cecobois to compete with similar strategies that have existed for some time for competitor construction materials of steel and concrete.
  • Increased capacity of builders, architects, and engineers to use wood in non-residential construction through training (e.g., wood solution fairs, courses, and workshops) and technical support on wood projects (e.g., facilitating production of wood design software, case studies, and answering technical questions) delivered by all three NAWF-funded initiatives.
  • Facilitated changes in target markets for non-residential construction. For example, WoodWorks’ efforts at promoting sustainability and capability of wood leading up to the Wood First legislation (i.e., requiring the use of wood in public buildings where feasible) in B.C. is seen by Canadian builders as an important opportunity for the use of wood in non-residential construction.
  • Removing technical constraints on wood use in non-residential construction. Recent successes include, NAWF-funded efforts facilitating changes to the B.C. and Arkansas local codes, and promotional activities making specifiers more aware of what the building codes actually permit in terms of wood construction.
  • Increased intent to use wood among target audience groups and, to a lesser extent, actual wood use. NAWF-funded initiatives have laid the groundwork for increased wood use in non-residential construction. Although major market shifts take many years to occur, interviewees perceived a change emerging in the North American market, and attribute this in part to WoodWorks, Cecobois, and U.S. WoodWorks. Furthermore, project tracking reports, particularly for U.S. WoodWorks, suggest that the programs have influenced conversion of construction projects to include wood in non-residential buildings. For example, a total of 280 projects worth approximately $174 million in wood are thought to have been directly influenced by NAWF-funded program activities to date.

The evaluation also identified some challenges to consider for NAWF programming:

  • There is evidence that attitudes about sustainability and technical suitability of wood among specifiers in target markets for non-residential construction are changing due to U.S. Woodworks and WoodWorks initiatives. However, the evaluation was unable to conclude on the ability of the Canadian industry to take advantage of these changes, particularly in the U.S. market. However, it should also be acknowledged that the Program, especially in the U.S., was never intended to promote Canadian wood products over other supplying regions (i.e., the activities target greater use of wood in all applications for the benefit of all producers).
  • The three initiatives funded by NAWF use different criteria for assessing the success of their activities at influencing the use of wood in non-residential construction projects, which makes it difficult to be certain of the level of impact NAWF activities are having. The project tracking system used for the U.S. WoodWorks program appears to be the most rigorous of these in terms of assessing influence.

VW has made progress on improving the productivity and competitiveness of the value-added wood products industry in Canada through its technology development and technology transfer components. Noteworthy achievements of VW include:

  • Facilitated collaboration in the sector across industry, academia and government. For example, industry has committed equipment and materials to VW research projects proposed by the universities and FPInnovations, and the Industry Advisor Network is a collaborative effort between NRCan and the provinces.
  • Realized production efficiencies for Canadian value-added producers – widely seen as the most significant impact of VW – were developed primarily through implementing leaner manufacturing processes after consultation with industry advisors. Documented cases of industry advisor-introduced lean manufacturing processes report productivity gains of 8-20% for value-added producers.
  • Reduced vulnerability to changes in the market for wood products through technology transfer from industry advisors and application of VW-funded research. For example, research on strength properties of wood I-joists has given the value-added industry the potential to take advantage of changes in the market for non-residential construction, and industry advisors have provided guidance to firms on accessing the green building market.
  • Some examples of improved quality and diversity of products and processes were found to have occurred directly from VW research and technology transfer. For example, firms have modified I-joist production processes, and implemented new adhesive processes for appearance wood products. However, industry stakeholders believe that there is still much more potential for VW to provide tangible benefits of this sort.

The evaluation also identified some challenges for future VW programming related to engaging industry on future research priorities:

  • The evidence indicates that VW has considerable potential to improve value-added products and processes, and have, to some extent, realized these improvements. However, technology transfer recipients are divided relatively evenly between those who reported actual impacts of and those who expect impact eventually from their program interactions.
  • The research component has shown a number of tangible benefits to firms in terms of new processes and products implemented. However, interviewees suggest that there is much more potential than what has so far been accomplished.

Performance – Efficiency and Economy

The Market Development programs are being delivered in an efficient and economic way. The strong focus on cooperation and collaboration among all key stakeholders and cooperation with complementary programs has increased capacity and avoided any significant duplication. Under CWEP, the CWG offices have been an efficient means for building and maintaining relationships in offshore markets and coordinating industry efforts. Similarly, NAWF has worked closely with key forest sector stakeholders, including industry associations and provincial governments, to take advantage of complementary programming. VW has successfully leveraged funding from federal and provincial government partners, mainly for its technology transfer activities through the Industry Advisor Network, taking advantage of complementary programs to effectively support its activities.

The evaluation also identified some areas where efficiency and economy could be improved. CWEP and NAWF would benefit from improved provincial leveraging outside of B.C. and Quebec. As well, industry’s share of funding in China market development, which is experiencing considerable growth, has remained relatively low. There is also evidence that VW could benefit from increased industry engagement to improve delivery on its research component. Some interviewees also suggested that communication of research results to industry could be improved.

Recommendations, Management Response and Action Plan

Recommendations Management Response and Action Plan Responsible Official/Sector (Target Date)
1. For the Value to Wood Program, CFS should implement mechanisms to better engage industry to ensure that future research will meet industry needs.

Accepted.

Context

CFS recognizes that increased engagement of industry will ensure that research projects are more industry-focused. During the past two years when economic conditions precluded face-to-face meetings of the VW Industry Advisory Committee, initiatives to involve industry in the proposing of research ideas met with limited success.

Action

Should the Value to Wood Program be renewed:

  • annual face to face meetings with the Research Advisory Committee (RAC) will be reinstated to discuss value-added industry opportunities and challenges and the subsequent research needed to address these; and
  • eligibility criteria will be modified to ensure that only projects that address needs identified by the RAC and/or that clearly have a strong commitment by an industry partner will be approved for funding.

ADM CFS

March 2012

2. CFS should ensure more equitable opportunities for wood products industry associations in all provinces and a broader mix of wood products industry sectors to participate in the Canada Wood Export and North America Wood First Programs.

Accepted.

Context

CFS recognizes that while the relationships with the B.C. and Quebec forest products industries and the associations of primary producers have been valuable in delivering the Canada Wood Export and the North America Wood First Programs, other regions and sectors have been less well-represented by the programs. There is a need to find ways to incorporate greater participation from associations in other forestry regions where provincial funding is not present, and associations representing other sectors, including smaller value-added producers.

Action

Should the Canada Wood Export and the North America Wood First Programs be renewed, modifications to program parameters will be proposed to allow for a greater level of support to proponents who are currently not well-represented in market diversification programs. This will be based on the principles of broadening the regional distribution and product mix (including appearance grade and value-added products) of associations participating in the programs.

ADM CFS

March 2012

3. CFS should implement a performance measurement approach for its North America Wood First-funded initiatives similar to that implemented by the Wood Products Council for U.S. Woodworks.

Accepted.

Context

While performance measures have been implemented and monitored for all components of the NAWF Program, it is acknowledged that common performance measures and methodologies need to be adapted by all NAWF proponents.

Action

Should the NAWF Program be renewed, the Wood Products Council methodology with respect to performance measures (i.e., tracking of conversion projects and its impact on value of wood sales) will be adopted. This will ensure that all proponents use the same performance measurement methodologies which will facilitate improved roll-up of the program impact.

ADM CFS

March 2012

4. CFS should consider how best to encourage greater industry investment to maintain market development efforts in rapidly growing markets such as China and others.

Accepted.

Context

Over the past number of years, particularly in periods of economic recession, the federal and provincial governments have provided the majority of funding to help the forest industry develop new and emerging markets for Canadian wood products. As these markets mature and activities become more focussed in addressing industry specific needs, it is acknowledged that the industry must also be more active in all aspects of the delivery and funding of these initiatives.

Action

Should the markets programs be renewed, to increase its share of the overall cost of off shore and North American market development efforts, a minimum industry requirement will be implemented and subsequently increased over time. This will ensure more active industry participation in these initiatives as markets become more mature.

ADM CFS

March 2012

1.0 Introduction

1.1 Overview of the Sub-Activity

This report presents the findings of an evaluation of the NRCan-CFS Market Development Component programs of the Securing Forest Products Markets sub-activity. This component consists of three programs: the Canada Wood Export Program (CWEP), North America Wood First (NAWF), and Value to Wood (VW). The evaluation covered program activities from 2006-07 to 2009-10Footnote 3 consisting of total expenditures of $54.5 million as follows:

  • CWEP – $28.0 million;
  • NAWF – $12.5 million; and
  • VW – $14.0 million.

The objectives of this evaluation are to assess the relevance and performance (effectiveness, efficiency and economy) of the key elements of the three programs in meeting their objectives as well as their contribution to the Securing Forest Products Markets sub-activity.

The Department’s Program Activity Architecture illustrates how the three Market Development programs – CWEP, NAWF and VW – are expected to contribute to forest product sector market development. As shown in Exhibit 1, the programs support the achievement of NRCan’s Strategic Outcome 1: Economic Competitiveness, and form part of Program Activity (PA) 1.1 – Economic Opportunities for Natural Resources. The PA’s expected results are: competitive national and international markets, stable economic opportunities for the sector, and investment in natural resources. The sub-activity’s expected result is that the global (both U.S. and offshore) and domestic markets for Canadian forest products are secured.

Exhibit 1: Securing Forest Product Markets Sub-Activity in the context of NRCan's PAA

Exhibit 1: Securing Forest Product Markets Sub-Activity in the context of NRCan's PAA

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Text version - Exhibit 1

Exhibit 1: Securing Forest Product Markets Sub-Activity in the context of NRCan's PAA

Strategic Outcome: Economic Competitiveness
Expected Result: Natural resource sectors are internationally competitive, economically productive, and contribute to the social well-being of Canadians.

Program Activity: Economic Opportunities for Natural Resources
Expected Result: Competitive national and international markets, stable economic
opportunity and investment in natural resources

Program Sub-Activity: Securing Forest Products Markets (PAA 1.1.2)
Expected results: Secured global markets for Canadian forest products

2010-11 evaluation covers:
Market Development Component:

  • Canada Wood Export Program (CWEP)
  • North America Wood First (NAWF)
  • Value to Wood (VW)
  • Economic Action Plan Demonstration Projects (EAP-Demos)

2011-12 evaluation will cover:
Market Access Component:

  • International Forest Partnerships Program (IFPP)
  • Leadership in Environmental Advantage for Forestry (LEAF)

Note that the Economic Action Plan (EAP) Demonstration Projects Initiative is part of the Market Development Component. These consisted of approximately $10 million of contributions funding delivered on the CWEP and NAWF platforms in 2009-10 and 2010-11. Given that these projects had not been completed during the period covered by the current evaluation, they will be assessed as part of the 2011-12 evaluation of the Market Access Component.

Exhibit 2 provides an overview of the Market Development and Market Access components in the Securing Forest Products Markets sub-activity for the period covered by the current evaluation.

Exhibit 2: Overview of the Securing Forest Products Markets Sub-Activity
Programs Market Development Market Access
CWEP NAWF VW IFPP LEAF
Overall Objectives Expand export opportunities for Canadian wood products in traditional and emerging overseas markets. Support increased use of wood in non-residential construction in Canada and the United States. Improve the productivity and competitiveness of the value-added wood products sector in Canada. Promote Canadian sustainable forest management policies and practices internationally, maintaining market access for Canadian forest products abroad. Improve environmental acceptance for Canadian forest products in international markets.
Primary Activitie CFS administers contribution agreements with wood products associations and the Canada Wood Group to provide infrastructure (e.g., the 7 Canada Wood Group offices) and international representation, market development and branding activities, and technical support to address trade barriers. CFS administers contribution agreements with the Wood Products Council, Canada Wood Council and Quebec Wood Export Bureau to educate North American designers, specifiers, and architects on opportunities to use wood. CFS and the provinces fund technology transfer activities delivered by FPInnovations. CFS also administers contribution agreements with FPInnovations and Canadian universities to conduct research to develop value-added wood products and improve manufacturing processes. CFS salaries in support to administer Canadian Council of Forest Ministers funds and to gather/share information, develop communication tools, and conduct outreach with target audiences. CFS administers contributions to Forest Products Association of Canada in support of information development and analysis, market outreach, and monitoring and reporting on market perception trends.
Scope International North America Canada International International
Years Active 2002-03 to 2010-11 2007-08 to 2010-11 1998-99 to 2010-11 1993-94 to 2010-11 2008-09 to 2010-11
Program Expenditures 2006-07 to 2009-10 ($M) 28.0 12.5 14.0 1.4 8.1
Total Expenditures 2006-07 to 2009-10 ($M) 54.5 9.4

Source: Canadian Forest Service
Note: The Economic Action Plan Budget (2009) added $10 million to CWEP and NAWF for demonstration projects, which will be evaluated in 2011-12.

In addition to the CFS Market Development programs, there are a number of other significant initiatives and programs that impact this evaluation by complementing these programs.

The Market Access activities of LEAF, for example, are specifically designed to complement existing CFS efforts including Market Development activities. In fact, the current evaluation found that the Canada Wood Group (funded by CWEP) frequently acts to support LEAF activities in markets in which it has an established presence.

In addition, the province of B.C. (through B.C. – Forest Innovation and Investment) has its own offshore market development office and program in China and a number of other support programs for the forest industry (e.g., the Business Innovation Partnerships Program). These are significant investments in market development as they co-fund many CWEP and NAWF initiatives. For example, NRCan and BC-FII have a joint online application system for project proponents and a joint evaluation committee to assess proposed projects.

Budget 2009 also provided funding for the EAP and a suite of measures to provide economic stimulus and promote the competitiveness of the forest sector. The Budget provided NRCan with $10 million over 2009-10 and 2010-11 to support large-scale demonstrations of Canadian-style uses of wood for construction (e.g., wood frame construction) in targeted offshore markets and non-traditional uses of wood in domestic markets. These were delivered through the CWEP and NAWF platforms.

1.2 Market Development Composite Logic Model

Exhibit 3 shows the Market Development Program logic model which sets out the immediate, intermediate, and ultimate outcomes for this group of programs. This logic model was developed in close consultation with CFS program officials.Footnote 4

Exhibit 3: Market Development Programs Composite Logic Model

Exhibit 3: Market Development Programs Composite Logic Model

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Text version - Exhibit 3

Exhibit 3: Market Development Programs Composite Logic Model

Exhibit 3 shows a composite logic model containing the activities, outputs, immediate, intermediate, and final logic model outcomes for each of the three evaluated Forest Products Market Development programs (i.e., CWEP, NAWF, and VW). Each activity, Output and Outcome is in a box.

Under CWEP, activities include market development (e.g., trade missions, fairs, market research), international market presence (e.g., establishing foreign offices), and technology support (e.g., testing against foreign codes and standards, technical barriers, and training). CWEP market development outputs include missions, demonstration buildings studies, promotional events. International market presence outputs include offices staffed by experts. Technology support outputs include test results, reports, and building code revision recommendations.

Under NAWF, activities include testing, technology transfer (e.g., demonstrations, skills training seminars, and onsite QA), market research (e.g., benchmarking studies, strategy development), addressing technical barriers (e.g., standards, missions, tours, co-ordination), and marketing communication (e.g., participation in international events, curriculum, and training). NAWF testing outputs include the testing results. Technology transfer outputs include process demonstrations, and technical guidance materials. Market research outputs include market studies, strategies, and opportunities. Addressing technical barriers outputs include meeting minutes, reports, and tours. Marketing communication outputs include promotional materials, articles, ads, databases, and awards.

Under VW, activities include research (e.g., technology development) and technology transfer. VW research outputs include new and improved manufacturing products, processes, and market research. Technology transfer outputs include technical workshops, publications, mill visits, and training.

The immediate outcomes associated with CWEP, NAWF and VW are 1) Increased awareness of target markets by Canadian industry for residential and non-residential construction, or value-added manufacturing; and 2) Increased cooperation, collaboration and efficiencies among Canadian suppliers/ stakeholders. The immediate outcomes associated only with CWEP and NAWF are 3) Increased awareness in target markets about Canadian wood products (i.e., branding); 4) Increased awareness of Canadian wood attributes by construction regulation or standards bodies; and 5) Increased capacity by builders, architects etc.  to use wood products. The immediate outcomes associated only with VW are 6) Production efficiencies for Canadian producers; and 7) New product and process development.

The intermediate outcomes associated with CWEP, NAWF and VW are 8) Increased pursuit of new markets, export profile or readiness by Canadian suppliers; and 9) Increased ability to respond to changes in target markets for wood products (construction and/or value-added). The intermediate outcomes associated only with CWEP and NAWF are 10) Removal of technological restraints on trade in target markets and acceptance of Canadian products and building systems in codes and standards; and 11) Increased receptiveness of target markets to Canadian products.

The ultimate outcome associated with CWEP and NAWF is 12) Increased Canadian wood product use/ exports in target markets. The ultimate outcome associated only with NAWF is 13) increased use of wood in North American non-residential construction (shopping centers, schools, hospitals). The ultimate outcome associated only with VW 14) is improved quality and diversity of value-added wood products and processes available.

2.0 Profile of Market Development Component Programs

2.1 Canada Wood Export Program (CWEP)

The following section presents an overview of CWEP. The overall objective of this program is to expand export opportunities for Canadian wood products in traditional and emerging overseas markets. NRCan-CFS expenditures for CWEP from 2006-07 to 2009-10 totaled $28.1 million of the $54.5 million covered by this evaluation.

2.1.1 Context and Rationale for CWEP

CWEP was first announced in May 2002 as a national, five-year $35 million initiative to expand offshore export opportunities for Canadian wood products. Primary markets of focus were (and continue to be) China, Japan, South Korea and Europe. Program development was based on an industry proposal from the Forest Sector Advisory CouncilFootnote 5 and concern over the sector’s strong dependence on the U.S. market which in 2002 accounted for 88% of Canada’s wood products exports ($19.8 billion of $22.5 billion total) (Statistics Canada).

Market research studies conducted for CWEP suggest that China, South Korea, and Japan show significant growth potential for Canadian wood products. China’s rapid economic growth, burgeoning middle class, and massive internal migration is driving demand growth for housing and thus has strong potential for wood products.Footnote 6 Korea’s strong GDP growth, its call for massive urban de-centralization and revisions to fire code regulations to allow wood frame construction in multi-story low rise residential housing makes it one of the most important emerging markets for Canadian wood products.Footnote 7 Japanese culture is undergoing a number of shifts that make it more attractive as a market for Canadian wood products. An aging population is increasing the demand for more mid-rise residential buildings and elderly care facilities, and changing ideas in the building community are leading to opportunities for greater wood use, particularly potential for wood frame construction.Footnote 8

However, there are barriers to wood exports in these markets, which CWEP has been working to address. These include codes and standards that are not favourable to wood use in construction; lack of education and training of professionals on wood use in construction; and a need to increase the demand for North American-style wood frame construction in markets that have not traditionally built using these techniques.

Following a 2006 evaluation,Footnote 9 CWEP was renewed in February 2007 for $20 million in funding over two years (2007-08 and 2008-09). In January 2009, the Program was renewed again under Canada’s Economic Action Plan, with a further $20 million over two years (2009-10 and 2010-11).

2.1.2 CWEP Governance and Delivery Structure

CWEP is delivered by NRCan with cooperation from the Department of Foreign Affairs and International Trade (DFAIT), Industry Canada (IC), and the Canada Mortgage and Housing Corporation (CMHC), provinces (primarily B.C. and Quebec) and industry partners (i.e., associations). CWEP is delivered through wood products associations and the Canada Wood Group (CWG), a coalition of wood products associations. CWEP provides a maximum of 50% of total project funds, with the balance from industry and the provinces. CWEP is administered by CFS using the governance structure described below. Note that the same structure is used to provide management to the North America Wood First Program.

The CWEP and NAWF governance structure consist of the following groups:

Management Committee

The mandate of the Management Committee is to provide strategic advice and guidance on the management of CWEP and NAWF to NRCan. The Management Committee is comprised of senior representatives of DFAIT, IC, CMHC and NRCan. Meetings of the Committee are chaired by the Director General, Policy, Economics and Industry Branch, CFS, NRCan.

Joint FII-NRCan Senior Industry Advisory Committee

Formed in collaboration with B.C.’s Forestry Innovation Investment (BC-FII) – a provincial Crown corporation whose mandate is the development and diversification of markets for B.C. wood products – this committee’s members include senior industry executives from across Canada as well as representatives from NRCan and BC-FII. It draws on the expertise of senior forest industry leaders to provide strategic input on program design and direction from an industry perspective.

Program Advisory Committee

The Advisory Committee offers advice to the Management Committee on program strategy, the development of project selection criteria, and on program outcomes and priorities. This committee meets to review the proposals by eligible proponents requesting funding from NRCan (and BC-FII in the case of B.C. associations) and makes recommendation on projects and work plan. Members include representatives from the federal government (NRCan, DFAIT, IC and CMHC), provinces and industry.

Wood Markets Secretariat

CFS’ Wood Markets Secretariat serves the Management Committee, the Joint FII-NRCan Senior Industry Advisory Committee and the Program Advisory Committee. It works closely with DFAIT, IC and CMHC, provincial governments and industry associations. The Secretariat is responsible for the administration of the Canada Wood and Wood First programs, initial screening and selection of projects, the development of annual work plans, verification and payment of claims, recipient audits, and reporting on achievements and outcomes.

Exhibit 4 illustrates the functional relationships between the program governance structure and the program target groups.

Exhibit 4: CWEP Program Structure

Exhibit 4: CWEP Program Structure

[Larger image - Exhibit 4]

Text version - Exhibit 4

Exhibit 4: CWEP Program Structure

Exhibit 4 shows a diagram of the program structure for CWEP. Each group identified in the structure is in a box with arrows indicating the linkages between groups. The Wood Markets Management Committee provides strategic direction and guidance on the management of CWEP to the CFS-Wood Markets Secretariat. The Secretariat administers the program and monitors the contribution agreements with Wood Products Associations and the Canada Wood Group, who propose projects for the contribution agreement funding and undertake program activities in target markets. The association members are companies in the Canadian wood products industry, who provide guidance to their associations and are able to sell wood products in the target international markets where activities have influence. Influence occurs among builders, architects, buyers, and standards bodies in target markets. The CFS-Wood Markets Secretariat also receives industry advice on program design and delivery from the Joint FII-NRCan Senior Industry Advisory Committee. A Program Advisory Committee evaluates and makes recommendations on proposals for projects once they have been screened in by the Wood Markets Secretariat. Provincial government partners with their own programs also provide funds to support projects proposed for CWEP funding by the associations.   

2.1.3 CWEP Funding Recipients

Since its inception, CWEP has funded eligible projects through contributions to eighteen not-for-profit primary or secondary wood products associations, and not-for-profit organizations engaged in forest product research. Contribution recipients include:

  • B.C. Shake and Shingle Association;
  • B.C. Wood Specialties Group (B.C. Wood);
  • Canada Wood Group (CWG);
  • Canadian Lumber Standards Accreditation Board (CLSAB);
  • Canadian Wood Council (CWC);
  • Canadian Wood Pallet and Container Association
  • Coast Forest Products Association (CFPA);
  • Council of Forest Industries (COFI);
  • Forest Products Association of Canada (FPAC);
  • Manufactured Housing Institute of Canada;
  • Ontario Wood Products Export Association (OWPEA);
  • Quebec Wood Export Bureau (QWEB);
  • University of British Columbia (UBC);
  • Forest Industry Suppliers and Logging Association;
  • Structural Board Association (SBA);
  • Spruce Pine Fur (SPF) Group (affiliated with COFI) – the SPF Group comprises 19 companies from B.C. (16 are members of COFI) and the Alberta Forest Products Association;
  • APA–The Engineered Wood Products Association; and
  • Western Red Cedar Export Association (WRCEA).

In addition to the contributions awarded to the above-mentioned wood products associations and research organizations, CWEP provides contributions to the Canada Wood Group. Formed in 2004, the CWG is a coalition of Canadian forest industry associations. It is managed by a general manager and a board that comprises representatives from its nine member associations (B.C. Wood, CFPA, COFI, FPAC, QWEB, Certiwood, APA, WRCEA and OWPEA). The CWG represents Canada’s forest sector in offshore markets and receives funding from CWEP, BC-FII and industry association members to provide infrastructure (i.e., offices), market development and market access services on behalf of its member associations. Seven Canada Wood Group offshore offices, representing a coalition of industry associations, provide in-market offices and staff and support market development and market access projects. These CWGs are located in London, Toulouse, Seoul, Tokyo, Shanghai, Beijing, and Chengdu.

Exhibit 5 presents a breakdown of NRCan CWEP funding recipients from 2006-07 to 2009-10. The Canada Wood Group has received the largest proportion of CWEP funding at 64.0%, primarily for its in-market infrastructure component.

Exhibit 5: NRCan CWEP Contribution Recipients (2006-07 to 2009-10) ($000)
Recipient 2006-07 2007-08 2008-09 2009-10 Total %
Canada Wood Group - Infrastructure 2,290 2,353 2,803 3,892 11,339 40.4
Canada Wood Group - Market Access 1,499 1,746 1,971 1,394 6,609 23.6
Council of Forest Industries 475 540 642 684 2,340 8.3
Coast Forest Products Association 546 524 489 305 1,863 6.6
Quebec Wood Export Association 427 495 412 402 1,737 6.2
B.C. Wood Specialties Group 465 402 441 240 1,547 5.5
Western Red Cedar Export Association 350 436 401 296 1,483 5.3
Forest Products Association of Canada 58 246 0 0 305 1.1
APA-The Engineered Wood Association 33 33 77 82 226 0.8
University of British Columbia 0 200 0 0 200 0.7
Canadian Wood Council 49 37 52 47 185 0.7
Structural Board Association 18 0 0 0 18 0.1
Ontario Wood Products Export Association 0 0 15 96 112 0.4
B.C. Shake and Shingle Association 10 10 28 12 59 0.2
Forest Industry Suppliers and Logging Association 0 13 0 0 13 0.0
Canadian Wood Pallet & Container Association 0 0 5 2 6 0.0
Total 6,219 7,035 7,335 7,451 28,040 100.0

2.1.4 CWEP Activities and Outputs

The primary goal of CWEP is to expand export opportunities for Canadian wood products in traditional and emerging overseas markets. To achieve this goal, the Program provides funding for activities that support its three core activity focus areas:

  • Infrastructure/International Representation – Support for the network of seven Canada Wood Group offices in Japan, China, South Korea and Europe to expand Canadian industry presence.
  • Market Development/Branding – Support for tradeshows, missions, brochures, product directories and market studies to increase the wood product knowledge of architects, builders and consumers.
  • Market Access/Technical Support – Support to address technical barriers to trade and market access issues (e.g., phytosanitary issues, codes and standards, training, product testing and performance assessments) to improve market access for Canadian wood products.

The CWG coordinates a single workplan for each target market to reinforce a Canadian approach, as opposed to individual associations. Market development/branding projects are proposed by individual associations to meet their members’ targeted market development and promotion needs, which, depending on the activity, are delivered in cooperation with the CWG offices in those target markets. Market access/technical support is provided by funding research (e.g., market research, fire, seismic, and strength properties of wood, etc.), codes and standards committee work, training and technical support for builders and designers conducted by CWG and the associations.

Program Activities by Market and Activity Focus Area

NRCan CWEP spending by geographic market and program element is summarized in Exhibit 6.

Exhibit 6: NRCan’s CWEP Expenditures by Geographic Market and Activity Focus Area (2006-07 to 2009-10) ($000)
Market Infrastructure/ International Representation Market Development / Branding Market Access/Technical Support Total %
Japan 4,668 3,611 1,451 9,730 34.7
China 3,896 1,719 2,726 8,341 29.7
Europe 1,843 2,612 356 4,811 17.2
South Korea 1,001 895 1,016 2,912 10.4
All other markets 128 519 934 1,581 5.6
Australia/New Zealand 0 485 69 554 2.0
Middle East 2 109 0 111 0.4
Total 11,538 (41.1%) 9,950 (35.5%) 6,552 (23.4%) 28,040 100.0

Source: Canadian Forest Service

Although not shown in Exhibit 6, the market development/branding element’s share of CWEP program expenditures has declined over the years, from 42% in 2006-07 to 28.4% in 2009-10. In 2009-10, the infrastructure/international representation component became the largest element, accounting for 52% of annual spending ($3.9 million), a result of rising operating costs, some new hires, exchange rates, and increased quality assurance activities.

In the past, Japan received the largest share of CWEP funding. In 2010-11, the NRCan CWEP investment in China increased due to a refocusing of the program and now accounts for one-third of total spending, which matches CWEP investment in Japan. Exhibit 7 shows the breakdown of CWEP expenditures by target market from 2006-07 to 2009-10. Note that investments in Asian market development have accounted for over 75% of total program spending over the evaluation period.

Exhibit 7: CWEP Expenditures by Target Market (2006-07 to 2009-10)

Australia/New Zealand 2.0%; China 29.7%; Europe 17.2%; Japan 34.7%; Middle East 0.4%; South Korea 10.4%; All/Other Markets 5.6%; Total = $28.0 million

[]

Text version - Exhibit 7

Exhibit 7: CWEP Expenditures by Target Market (2006-07 to 2009-10)

Exhibit 7 shows a pie chart with the allocation of NRCan CWEP funding to each target market from 2006-07 to 2009-10.  The total NRCan CWEP funding for all markets was $28 million from 2006-07 to 2009-10. Funding for Japan was 34.7%. Funding for China was 29.7%. Funding for Europe was 17.2%. Funding for South Korea was 10.04%. Funding for Australia and New Zealand was 2.0%. Funding for the Middle East was 0.4%. Funding for all other markets was 5.6%.

2.1.5 CWEP Resources

CWEP provides a maximum of 50% of total project funds, with most of the balance coming from industry associations and the provinces. Exhibit 8 provides a breakdown of total program project funding expended by each funding source for the four years covered by this evaluation.

Exhibit 8: Sources of Expended Funding for CWEP Projects (2006-07 to 2009-10) ($000)
2006-07 2007-08 2008-09 2009-10 Total %
NRCan 6,219 7,035 7,335 7,451 28,040 48.7
Other federal (WED, CMHC) 101 103 0 149 353 0.6
BC-FII 3,832 4,153 4,841 5,809 18,635 32.4
Other provincial (Quebec, Ontario) 331 431 161 363 1,285 2.2
Industry 2,285 2,815 2,651 1,505 9,256 16.1
Total 12,767 14,538 14,988 15,281 57,569 100.0%

Source: Canadian Forest Service

As shown, NRCan funding accounted for $28.0 million (48.7%) of project expenditures over the four years. The next largest contributor was the province of B.C. which provided one-third of the expenditures (as compared to 2% from all other provinces combined). As shown, B.C.’s contribution has increased significantly over the past four years (from $3.8 million to $5.8 million) accounting for most of the growth in the overall program budget. Industry associations funded 16.1% of the overall program.

2.2 North American Wood First Program (NAWF)

The following section presents an overview of NAWF. The overall objective of this program is to support increased use of wood in non-residential construction in Canada and targeted regions of the United States by supporting the efforts of the Canadian Wood Council, Wood Products Council, Quebec Wood Export Bureau and the Western Red Cedar Lumber Association in their delivery of WoodWorks, U.S. WoodWorks, and Cecobois. NRCan NAWF expenditures from 2006-07 to 2009-10 totaled $12.5 million of the $54.5 million covered by this evaluation.

2.2.1 Context and Rationale for NAWF

The majority of wood used in North America is presently consumed in residential construction and related repair and remodelling uses. There is a largely untapped opportunity to expand wood demand in non-traditional uses such as multi-storey commercial buildings, hospitals and schools. Wood is currently not used in such applications due to: building code restrictions; limited design experience with these types of buildings; a lack of training for builders, architects and engineers; and an inaccurate perception of the benefits or applicability of wood use.

The objective of North American Wood First is to increase wood use in North America in non-residential construction (e.g., recreational, commercial and institutional applications) through an integrated program targeted at educating designers, specifiers and architects on opportunities for using wood in non-residential applications. The Program essentially comprises domestic and U.S. market applications of WoodWorks, a Canadian Wood Council initiative intended to increase the use of wood by building proficiency in using wood through training, networking and direct technical support. These applications are operated separately and under different names for each region:

  • WoodWorks in Canada (outside Quebec);
  • Cecobois in Quebec; and
  • U.S. WoodWorks in the United States.Footnote 10

WoodWorks has been in operation in some shape or form since it was initiated in 1998 in B.C. In Canada, the Canadian Wood Council delivers provincial and regional Woodworks programs in B.C., Alberta, Ontario, the Prairies and Maritimes, as well as a national overlay program. The 2007 evaluation commissioned by B.C.FII for WoodWorks B.C. suggested that WoodWorks was effective in its promotion of wood. The model is now used by the North American wood products industry and their associations to help grow the U.S. wood market share in non-residential construction. U.S. WoodWorks delivered by the Wood Products Council, and Cecobois delivered by the Quebec Wood Export Bureau in Quebec, were both initiated in 2007.

The NAWF initiative has been in existence since 2007 with an initial funding allocation of $12 million for two years. The Program was renewed for two years until March 2011, with $12 million in new funding.

2.2.2 NAWF Governance and Delivery Structure

NAWF is administered under essentially the same governance structure as CWEP. Exhibit 9 shows this structure, adapted to reflect NAWF, illustrating the functional relationships between the program governance and target delivery groups.

Exhibit 9: NAWF Program Structure

Exhibit 9: NAWF Program Structure

[Larger image - Exhibit 9]

Text version - Exhibit 9

Exhibit 9: NAWF Program Structure

Exhibit 9 shows a diagram of the program structure for NAWF. Each group identified in the structure is in a box with arrows indicating the linkages between groups. The Wood Markets Management Committee provides strategic direction and guidance on the management of NAWF to the CFS-Wood Markets Secretariat. The Secretariat administers the program and monitors the contribution agreements with Canadian Wood Products Associations and the Wood Products Council, who propose projects for the contribution agreement funding and undertake Wood Works program activities in target markets. The association members are companies in the Canadian wood products industry, who provide guidance to their associations and are able to sell wood products in the target Canadian and U.S. markets where activities have influence. Influence occurs among builders, architects, buyers, and standards bodies in target markets. The CFS-Wood Markets Secretariat also receives industry advice on program design and delivery from the Joint FII-NRCan Senior Industry Advisory Committee. A Program Advisory Committee evaluates and makes recommendations on proposals for projects once they have been screened in by the Wood Markets Secretariat. Provincial government partners with their own programs also provide funds to support projects proposed for NAWF funding by the associations.  

NAWF provides funding for WoodWorks projects through contribution agreements with industry associations in Canada and the U.S. in order to promote the use of wood by engaging all elements of the wood products sector (solid and engineered wood) together in a collective and collaborative delivery process. The idea is that the collective group will promote wood over alternatives such as concrete or steel (i.e., different wood products and wood product manufacturers through their membership in professional associations will collectively and collaboratively promote all wood solutions).

2.2.3 NAWF Funding Recipients

There are four main NAWF funding recipients who propose and receive funding for WoodWorks projects under NAWF:

  • the Canadian Wood Council directs funding to projects in Canada outside of Quebec;
  • the Quebec Wood Export Bureau directs funding to projects in Quebec;
  • the Wood Products Council directs funding to projects in the U.S.; and,
  • the Western Red Cedar Lumber Association directs funding to support WoodWorks efforts in the U.S.

The Canadian Wood Council (CWC) is a national association representing manufacturers of Canadian wood products used in construction. The Council’s goal is to expand market access and increase demand for Canadian wood products through its work in codes, standards, regulations and education. The CWC’s vision is a “wood first” culture in North America where wood products are recognized as the sustainable building material of choice for residential and non-residential construction. Currently, the CWC member associations are the Alberta Forest Products Association, APA Wood (U.S.), Quebec Forest Industry Council, Canadian Wood Truss Association, Certiwood Tech Centre, Council of Forest Industries, Manufactured Housing Industry Association, Maritime Lumber Bureau, Ontario Forest Industry Association and Wood Preservations Canada.

The Quebec Wood Export Bureau (QWEB) represents firms producing softwood and hardwood lumber, and value-added products including hardwood flooring and pre-fabricated wood-frame housing. With NAWF funding, QWEB delivers Cecobois, the Quebec version of WoodWorks, promoting the use of wood in multi-family and non-residential construction in Quebec.

The Wood Products Council (WPC) is an alliance of Canadian and American wood products industry associations whose charter members include the American Wood Council (AWC) of the American Forest & Paper Association, APA-The Engineered Wood Association, Canadian Wood Council, Southern Forest Products Association, and Western Wood Products Association. After more than 20 years as a vehicle to develop and coordinate wood industry market education and promotion programs in North America, the Wood Product Council officially incorporated as a U.S. non-profit organization in 2006 in order to more effectively facilitate industry-wide initiatives to increase wood product demand. Specifically, it incorporated in order to become eligible for government and industry funding for the U.S. WoodWorks Program which is focussed on promoting wood use in non-residential construction in the U.S. The WPC, through its Board of Directors, provides oversight and direction to the U.S. WoodWorks Program. Funding for the U.S. WoodWorks Program comes from NRCan, B.C. FII and the Binational Softwood Lumber Council (BSLC).Footnote 11

Exhibit 10 presents a breakdown of NRCan NAWF funding recipients from 2006-07 to 2009-10. The Wood Products Council has received the largest proportion of NAWF funding at 57.5%, for its administration of the U.S. WoodWorks Program.

Exhibit 10: NRCan NAWF Contribution Recipients (2006-07 to 2009-10) ($000)
Recipient 2006-07 2007-08 2008-09 2009-10 Total %
Wood Products Council 84.1 1,687.60 2,786.50 2,608.30 7,166.50 57.5
Canadian Wood Council 0 786.30 914.60 972.50 2,673.40 21.5
Quebec Wood Export Bureau 0 475.50 500.00 1,445.40 2,420.90 19.4
Western Red Cedar Lumber Association 0 0.00 0.00 194.10 194.10 1.6
Total 84.10 2,949.40 4,201.10 5,220.30 12,454.90 100.0

Source: Canadian Forest Service

2.2.4 NAWF Activities and Outputs

The central objective of NAWF is to fund WoodWorks, Cecobois, and U.S. WoodWorks activities to increase wood use in North American institutional and non-residential construction.

NAWF-funded WoodWorks and Cecobois programming focuses on addressing awareness through broad promotions and web presence, information and advice through educational seminars and workshops, specific technical support (including the provision of a design software tool in some cases) and direct one-on-one assistance to groups to help them ‘convert’ projects to wood (from steel, concrete, etc.) in non-residential applications. The Program's change theory is a classic innovation diffusion process where awareness and knowledge lead to persuasion which leads to decisions (in this case to use wood), implementation and confirmation.

NAWF Program Activities by Market

Exhibit 11 provides a breakdown of NAWF spending on WoodWorks projects in each target market over the evaluation period. As noted earlier, total NAWF expenditures can be divided into three geographic market areas: Canada (outside Quebec), Quebec and the U.S. Over the past four years, the U.S. market accounted for over one-half (59.1%) of NRCan’s program spending, followed by Quebec at 19.4% and the other Canadian target markets at 21.5%.

Exhibit 11: NRCan NAWF Expenditures by Market (2006-07 to 2009-10) ($000)
Market 2006-07 2007-08 2008-09 2009-10 Total %
National Overlay 0 400 346 112 858
Prairies, Maritimes 0 16 46 34 96
Ontario 0 141 207 336 684
Alberta 0 134 154 161 449
British Columbia 0 96 162 330 588
Total Canada (Outside Quebec) 0 787 915 973 2,675 21.5
Total Quebec 0 475 500 1,445 2,420 19.4
California 0 676 974 806 2,456
Southeast U.S. 0 501 817 661 1,979
North Central U.S. 0 115 561 643 1,319
National Overlay U.S. 84 396 434 691* 1,605
Total U.S. 84 1688 2,786 2,802 7,360 59.1
Total all markets 84 2,950 4,201 5,220 12,455 100.0

* National Overlay U.S. includes the expenses of the Western Red Cedar Lumber Association
Source: Canadian Forest Service

2.2.5 NAWF Resources

NRCan NAWF program funding is leveraged by funding from provinces, industry, and federal regional development agencies (i.e., FedNor and Western Economic Diversification Canada (WED)). Contributions from each source over the evaluation period are summarized in Exhibit 12. Note that over the past four years, NRCan accounted for $12.4 million (47.6%) of total funding, provincial funding for almost $6.9 million (26.4%), and industry associations contributed $5.4 million (20.8%).

Exhibit 12: Sources of Funding for NAWF Projects (2006-07 to 2009-10) ($000)
2006-07 2007-08 2008-09 2009-10 Total %
NRCan 84.1 2,949.4 4,201.1 5,220.3 12,454.9 47.6
Other federal (FedNor, WED) 0.0 272.1 135.6 224.0 631.7 2.4
BC-FII 34.6 503.7 755.3 1,196.5 2,490.1 9.5
Other provincial (Ontario, Quebec, Alberta, N.B.) 0.0 1,213.5 1,194.3 2,015.5 4,423.3 16.9
Industry 81.0 1,300.9 1,943.9 2,819.7 6,145.5 23.5
Total 199.7 6,239.6 8,230.2 11,476.0 26,145.5 100

Source: Canadian Forest Service

2.3 Value to Wood Program (VW)

The following section presents an overview of VW. The overall objective of this program is to improve the productivity and competitiveness of the value-added wood products sector in Canada. NRCan VW expenditures from 2006-07 to 2009-10 totaled $14 million of the $54.5 million covered by this evaluation.

Funding partners for VW activities include provinces and other federal government departments that provide funding to the Industry Advisor Network. Several of the larger provinces (British Columbia, Ontario and Quebec) also fund technology assistance programs that are designed to complement the VW technology transfer component.

2.3.1 Context and Rationale for VW

The value-added wood products sector is an important contributor to the Canadian economy. The large majority of firms in this sector are small-medium enterprises (SMEs) that have little technological capacity in house and benefit from assistance to help solve their technological problems with a view to improving productivity and competitiveness. The objective of the Value to Wood Program is to provide wood products manufacturers in all regions of Canada with technical advice, research and knowledge in order to improve their competitiveness. VW research efforts are focused on developing new and improved products and manufacturing processes in product areas where Canada could have a competitive advantage.

The predecessor of VW, known as the Value-Added Program, was created in 1998 and received $4 million in funding for the four-year period 1998-99 to 2001-02 to carry out value-added wood product research at Forintek Canada (now part of FPInnovations) to enhance competitiveness in the value-added wood products industry. In 2002, the Program was expanded and subsequently renamed the Value to Wood Program, with $15 million in funding over five years from 2002-03 to 2006-07. This new program included both research and technology transfer components. In 2007, the Program received $8 million in new funding for two years from 2007-08 to 2008-09, and in 2009-10 an additional $8 million for a further two years from 2009-10 to 2010-11.Footnote 12

2.3.2 VW Governance and Delivery Structure

VW is a contributions program with two core components: technology transfer and technology development (i.e., research). The Program is delivered through FPInnovations and a select group of universities with funding from NRCan, and in-kind (i.e., staff, materials, and equipment) contributions from industry. Provinces also contribute funding for technology transfer activities. VW is administered by CFS using the governance structure described below.

CFS Management

The policy advice and strategic direction of the overall VW Program is managed and overseen by NRCan program staff. NRCan is also responsible for approving research proposals for contributions funding under the technology development component based on recommendations from the Research Advisory Committee.

Research Advisor Committee (RAC)

The RAC is composed of representatives selected by NRCan-CFS from wood product manufacturing companies of all sizes, product types and regions across Canada. They provide strategic guidance, identify research needs, and review research proposals and recommend for funding those projects most likely to result in improved value added wood products industry competitiveness.

FPInnovations (FPI)

FPInnovations is central to the delivery of VW and has several roles in the program. For the Technology Development component, researchers at FPI and four universities (Laval University, University of British Columbia, University of New Brunswick, and University of Toronto) submit proposals to the RAC for contributions to support wood products research. In addition, FPInnovations is charged with disseminating results to industry (subject to confidentiality).

The Technology Transfer component is also managed by FPI on behalf of NRCan. FPI managers oversee a network of industry advisors (IA) in each of the regions who provide direct problem solving support to wood product manufacturers across Canada. Theses advisors, who are also funded under regional development initiatives and provinces, make on-site visits to manufacturers and answer questions to help them improve their processes. Industry advisors have a range of expertise (e.g., sawmilling, lean manufacturing, furniture, finger jointing, engineered wood products, drying, etc.) which they use to advise VW client firms.

Wood Products Manufacturers

Industry sometimes provides resources (e.g., the use of their mills or machinery) to assist in the research if it is of particular interest to them.

Exhibit 13 illustrates the functional relationships between the program governance structure and the program target groups:

Exhibit 13: VW Program Structure

Exhibit 13: VW Program Structure

[Larger image - Exhibit 13]

Text version - Exhibit 13

Exhibit 13: VW Program Structure

Exhibit 13 shows a diagram of the program structure for VW. Each group identified in the structure is in a box with arrows indicating the linkages between groups. CFS administers the Technology Development and Technology Transfer halves of the program. On the Technology Development side they and monitor the contribution agreements with FPInnovations and Universities who develop research proposals and conduct research. Proposals are submitted to the Research Advisory Committee who prioritize and recommend to CFS approval of projects based on relevance of research proposals to industry needs. Value added wood products manufacturers provide resources to support research. FPInnovations reports research results to industry through its technology transfer activities. On the Technology Transfer side, CFS provides funding for FPInnovations to administer an Industry Advisor network that provides direct and in-plant problem solving and support to industry. Provinces and Federal Regional Development Partners also provide funding for industry advisors through regional programs. Together, the Technology Development and Technology Transfer components influence Canadian value added wood products manufacturers to implement new and improved products and processes.

2.3.3 VW Funding Recipients

There are two stakeholder groups within the Value to Wood Program: 1) the firms in the sector or supplying the sector that receive assistance through the technology transfer arm of the Program (i.e., they receive technology transfer services but no funding), and 2) the research organizations that receive contributions for eligible research projects.

Firms in the sector

The first stakeholder group is made up of firms within the value-added wood products sector and firms supplying the sector (i.e., adhesives, etc.). This includes:

  • engineered wood products manufacturers of glued and laminated products such as I-joists;
  • appearance product manufacturers of furniture, flooring, doors and windows; and
  • re-manufactured products firms which add value to the primary forestry sector products.
Research Organizations

The second stakeholder group is made up of the organizations carrying out research projects. These include FPInnovations, and four universities: University of British Columbia (UBC), University of Toronto (UofT), Laval University (Laval) and the University of New Brunswick (UNB).

2.3.4 VW Activities and Outputs

The VW program has two core components: 1) technology transfer and 2) technology development (i.e., research).

Technology Transfer Component

The Technology Transfer component is delivered by FPInnovations – Forintek Division, which is mandated to deliver an extensive, nation-wide program to support and accelerate the innovation process within the Canadian value-added wood products sector. The objective of this component is to provide direct help to manufacturers in all regions of the country so that they can get new knowledge and technologies into useful application as effectively as possible, and identify business opportunities. This effort uses Forintek’s established technology transfer expertise, as well as other existing competencies across Canada that are available to VW clients through complementary programs offered by Forintek Division.

To deliver the Technology Transfer component, industry advisors – co-funded by FPInnovations, federal regional development agencies and provincial governments – provide direct technical assistance to all types of value-added wood product firms when asked by those firms for assistance. In 2009-10, there were 33 industry advisors located across the country. Exhibit 14 shows the distribution of industry advisors across Canada in 2010.

Exhibit 14: Industry Advisors by Province in 2009-10
Province # of Industry Advisors
Nova Scotia 1
New Brunswick 1
Quebec 9
Ontario 4
Manitoba 2
Saskatchewan 2
Alberta 5
British Columbia 9
Total 33

Source: FPInnovations staff

Technology transfer outputs include: technical advice, mill visits, reports, workshops and technical publications. Industry advisors also work with other technology assistance organizations such as the NRC Industrial Research Assistance Program to support larger product and process development projects.

Industry advisors provide up to four days of support at no cost to the client. For projects requiring longer term assistance, additional costs are sometimes shared between Value to Wood and the client. The ratio of support varies by province across Canada. In several provinces (B.C., Ontario and Quebec), the costs for longer-term projects are covered by complementary programs funded by the province and federal regional development agencies.

Exhibit 15 shows the total number of IA interactions with VW client firms during 2009-10. During that fiscal year, the Program facilitated over 1,500 interactions with wood products industry firms.

Exhibit 15: Number of Industry Advisor Interactions by Activity in 2009-10
Province Mill Visit/Technology Assessment
(short terms support)
Technology Projects
(long term projects)
Other Visits
British Columbia 308 34 45
Alberta 82 5 25
Saskatchewan 43 3 35
Manitoba 47 3 12
Ontario 186 43 219
Quebec* 216 169 81
Atlantic 43 8 7
Total 925 265 424

*Includes visits by VW industry advisors delivered under complementary technology transfer programs.
Source: Value to Wood Technology Transfer Annual Report 2009-2010.

As noted earlier, the industry advisors share their expertise with each other so that clients can benefit from the knowledge of the total network rather than just that of their assigned IA. “FCCExpert” is an online tool developed within the Value to Wood Program. The tool allows industry advisors to seek assistance from the whole IA network across Canada when responding to specific technical questions raised by firms. During 2009-10, a total of 7,560 questions were posted and 1,586 responses were provided. “FCCExpert” was consulted over 12,000 times in 2009-10 by users seeking answers to technical questions that were logged on the site.

Technology Development (i.e., research)

The VW Technology Development component carries out short-term applied research projects chosen to address the knowledge and technology needs of Canada’s value-added wood sector. The research is performed by FPInnovations and four universities (UBC, UofT, Laval and UNB). Projects are approved for funding by NRCan based on recommendations from the RAC.

VW funds research projects that address the following five types of value-added wood products research areas:

  • appearance wood products;
  • engineered wood products;
  • manufactured buildings and components;
  • structural and non-structural panels; and
  • structural wood products.

Exhibit 16 shows the distribution of projects among the five categories over the life of the Program (2002-2010). To date, the largest share of research projects has been in the appearance wood products area (52 projects).

Exhibit 16: Distribution of VW Research Projects (2002-03 to 2009-10)
Area FPInnovations UB.C. U of T Laval UNB Total
Appearance 31 8 7 4 2 52
Engineered Wood 19 3 0 0 8 30
Structural Products 9 5 2 4 3 23
Panels 6 4 2 2 1 15
Manufactured Buildings 5 2 0 2 0 9
Total 70 22 11 12 14 129

Source: http://www.valuetowood.ca/html/english/research_development/index.php.

Deliverables from the research component include research reports, technical information on wood manufactured products and processes, models of product performance, and presentations of research findings.

2.3.5 VW Resources

Over the evaluation period (2006-07 to 2009-10), NRCan provided total funding of $14.5 million to the VW Program. Exhibit 17 shows the breakdown of funding provided to the VW program during this period.

Exhibit 17: NRCan Value to Wood Funding2006-07 to 2009-10 ($000s)
2006-07 2007-08 2008-09 2009-10 Total %
Contributions 3,203 3,617 3,740 3,492 14,052 96.7
O & M 18 62 70 88 238 1.6
Salaries 0 0 0 200 200 1.4
Accommodations (PWGSC) 0 10 10 26 46 0.3
Total 3,221 3,689 3,820 3,780 14,510 100.00

Source: Canadian Forest Service.

NRCan contributions funding for VW is divided between the two program components: Technology Transfer and Technology Development.

Technology Transfer

The Value to Wood Program provides $1.7 million in core funding annually for the Technology Transfer Component. Funding is also provided by eight provincesFootnote 13 and three federal regional development agencies (WED, FedNor and Atlantic Canada Opportunities Agency ACOA) to support these activities. Exhibit 18 presents a breakdown of the funding sources for 2009-10 in each province.

Exhibit 18: Value to Wood Funding Sources for Technology Transfer by Province
(2009-10)
Province Co-funding Partners Total Contribution ($)
British Columbia Province, WED 500,000
Alberta Province 655,000
Saskatchewan Province, WED 266,000
Manitoba Province, WED 345,000
Ontario Province, FedNor 800,000
Quebec Province 820,000
Nova Scotia Province, ACOA 120,000
Newfoundland and Labrador Province, ACOA 35,000
Total 3,541,000

Source: FPInnovations Staff

Technology Development (i.e., research)

VW allocates $2 million annually to fund research projects under the technology research component. About half of this is allocated to FPI and the other half to the four universities. Exhibit 19 describes the actual amount of funding each organization received for VW research projects over the five year evaluation period (2006-07 to 2009-10).

Exhibit 19: Distribution of VW Research Funding to Research Provider
2006-07 to 2009-10 ($000)
2006-07 2007-08 2008-09 2009-10 Total %
FPI Research 1,117,500 1,000,000 1,000,000 1,083,000 4,200,500 54.8
UBC 274,375 244,365 345,705 321,060 1,185,505 15.5
UofT 96,500 211,00 229,808 132,960 459,268 6.0
Laval 185,288 165,725 165,725 180,024 696,762 9.1
UNB 414,628 171,275 252,890 74,980 913,773 11.9
Total 2,088,291 1,792,365 1,994,328 1,792,024 7,667,008 100.0

Source: Canadian Forest Service.

3.0 Evaluation Approach and Methodology

3.1 Evaluation Scope and Objectives

The evaluation examined the Securing Forest Products Markets: Market Development Component from 2006-07 to 2009-10.

The overall approach was to provide a strategic assessment of the relevance and performance of the three programs (CWEP, NAWF, and VW), individually, as well as at the overall Market Development Component level. The evaluation responded to the following evaluation questions that were approved by NRCan’s Departmental Evaluation Committee.

Relevance

  1. To what extent do the programs address a demonstrable need and are responsive to the needs of Canadians?
  2. Are the programs consistent with government priorities and NRCan strategic objectives?
  3. Is there a legitimate, appropriate and necessary role for NRCan in the Program? Is NRCan’s role appropriate in the context of the role of others?

Performance (effectiveness, efficiency and economy)

  1. To what extent have intended outcomes been achieved as a result of the programs?
  2. What internal and external factors affect the achievement of expected results?
  3. Have there been unintended (positive or negative) outcomes?
  4. To what extent does the design of the programs facilitate the achievement of their outcomes in an economic and efficient way? What other factors (internal/external) influence the programs’ efficiency and economy?
  5. Are there any additional activities not being undertaken by the programs that would fall within their mandates and would be helpful in achieving their objectives?

3.2 Evaluation Methodology

The evaluation consisted of a multiple lines of evidence approach including document, project and administrative data reviews; 6 case studies; 83 interviews; surveys of industry associations and VW technology transfer clients; and a market analysis. Exhibit 20 presents an overview of the methods used in this evaluation.

Exhibit 20: Methods Used in the Evaluation of Market Development Programs
Program Document, project file, and administrative data review Interviews Case studies Surveys Market Analysis
CWEP Yes 37 2 1 Yes
NAWF Yes 35 2 1 Yes
VW Yes 27 2 1

The following is a description of how each of these methods was applied in this evaluation:

  • Document, project files and administrative data review: The document review was comprised of an examination of over 60 documents provided by NRCan and others as identified during the interviews. In addition, literature pertaining to foreign and domestic trade and market development issues and practices was identified and reviewed. The administrative data review involved reviewing and analyzing project level activity and outcome data and financial information.
  • Case studies: Six case studies were completed, two for each program. The case studies focussed on specific projects and/or activity areas funded by the programs. Information was gathered through 34 interviews (some of whom were consulted for the broader evaluation as well), project documentation and other supporting evidence, as appropriate (e.g., project data, survey results). The information from the case studies helped address all issues but contributed particularly to answering the questions related to the performance of the programs. In general, the cases were selected based on the following criteria:
    • materiality of effort during the focus period;
    • apparent linkages across the innovation spectrum (i.e., value to wood linked to market development); and
    • availability of traceable history.

Exhibit 21 outlines the case studies selected for each program:

Exhibit 21: Case Studies Selected for Market Development Programs
Program Case Studies
CWEP
  • Korea Wood Market
  • China Wood Frame Construction
NAWF
  • WoodWorks
  • Green Building
VW
  • Engineered I Joists
  • Development of Canadian Wood Adhesive Standards

Interviews: Excluding the case study interviews, a total of 83 individuals were interviewed (either in person or by phone) between June 28 and October 13, 2010. Some interviewees were able to provide information on more than one program while others were able to speak to specific aspects of only one program. Lists of potential interviewees were provided by program representatives. Interviewees were selected to ensure a broad representation of type of interviewees across the three programs. Interview guides were sent to interviewees in advance to help them prepare. The interviews contributed to all evaluation issues.

Exhibit 22 provides a breakdown of interviews by program and type. Note that some interviews covered more than one program. The total number of interviews is therefore not the sum of the individual columns but rather reflects the number of individuals consulted. These totals exclude the case study interviews.

VW Industry Advisors

Exhibit 22: Distribution of Market Development Interviews by Type and Program
Type CWEP NAWF VW Total # of Individuals Interviewed
NRCan/CFS 4 4 2 6
Other Federal Governments 4 5 5
Provincial Government* 3 2 5 9
Association Representatives 14 9 18
Industry** 7 2 7
Canada Wood Offshore Offices 5 5
Canada Wood Council / Wood Products Council 9 9
FPInnovations 4 3 7
VW Industry Advisors 5 5
VW Research Advisory Committee 5 5
VW R&D Working Group 3 3
VW Researchers 4 4
Total 37 35 27 83

*For VW, these are comprised of members of the Technology Transfer Network.
** For VW, industry representatives were interviewed as members of the Research Advisory Committee.

  • Surveys: Two web-based surveys were conducted for this evaluation: one with members of industry associations to obtain perceptions on program awareness, importance and impacts of CWEP and NAWF, and one survey with representatives of organizations that had received services from industry advisors through the Value to Wood Program to solicit information on satisfaction with services and perceived value of the VW technology transfer component of the Program.

    For the survey of industry associations, a list of members of associations who had not been otherwise contacted during the evaluation (e.g., interviews or case studies) was compiled using information provided by NRCan as well as membership lists provided by some industry associations. Respondents were asked to provide feedback on CWEP, NAWF, or both. The survey was in field from September 21 to October 11, 2010. Invitations were sent by e-mail to a total of 333 members of associations asking them to complete the survey in English or French using a web-link provided. Two reminders were sent. A total of 70 responses were received, representing a response rate of 21%.

    For the Value to Wood Technology Transfer client survey, a list of technology transfer clients was obtained through the FPInnovations database. All clients were sent an invitation to complete a web-based survey in either English or French. The survey was in field from September 16 to October 11, 2010. The initial invitation was sent to 530 clients for whom valid e-mails were available with two reminders. A total of 161 responses were received, representing a response rate of 30.4%.
  • Economic/Market Analysis: Economic data and indicators that profile Canada’s wood products export markets over the past ten years were analyzed. This included an analysis of total Canadian exports based on World Trade Atlas data (by market and product type), followed by a wood products’ import analyses for each key market (the U.S., Japan, China, Europe (EU 27), and South Korea). In addition to the quantitative/statistical data, qualitative findings based on the document review, interviews, and case studies completed as part of this evaluation were used to give context and identify factors that have affected Canadian exports over the past 10 years (from 2000 to 2009).

3.3 Evaluation Limitations

While the overall study methodology is strong and provided the basis for addressing all study issues through multiple lines of evidence, there are some limitations that should be considered when interpreting the findings. These are outlined below:

  • The scope of activities in the sub-activity: This study included only three of the five programs included in the “Securing Forest Products Markets” sub-activity (the other two are IFPP and LEAF). Because the five programs are complementary, an evaluation of only three of the five programs makes attribution difficult as the range of programs target similar groups with similar types of activities and expected outcomes. In fact, some projects are funded through more than one of the five sub-activity programs. It was therefore difficult to determine the incremental impacts of one particular program to the measured outcomes and impacts. Nevertheless, the study did yield information on whether or not program efforts are contributing to positive or negative results.
  • The four year scope of this evaluation: The evaluation was limited to the four-year period of 2006-07 to 2009-10 to avoid duplication of the 2006-07 evaluations for CWEP and VW. As it takes years to achieve some of the project and program outcomes and impacts identified in the logic model – and many of the activities have been underway for five to ten years or more – the reported impacts span a broader timeframe than identified in the evaluation scope (e.g., some of the case studies had to span a much larger timeframe because the ‘case’ could not be limited to three years). This also meant that when assessing the efficiency and economy of the programs, the “costs” were limited to three fiscal years whereas the “effectiveness” spanned a broader timeframe.
  • Short program history for NAWF: As NAWF was a new program, only beginning in 2007-08, it was difficult to identify individuals who were knowledgeable on the Program and its results. Additionally, it was too early to assess many of the impacts of the Program.
  • Limited generalizability of Industry Association Survey findings: While this study was quantitative in nature, there are several factors that limit the ability to generalize to the full population. First, the response rate was relatively low overall (21%), and respondents that were aware of the programs represented a smaller sub-set of that group (n = 42 for CWEP, and n = 22 for NAWF). Second, the sample did not contain a complete member list for all associations. Third, survey respondents were only from two regions: – 67% from B.C. and 33% from Quebec (association members from Ontario did not respond to the survey invitation). While these regions contain the industry associations that have received the greatest proportion of funding and are the largest forestry regions in Canada, the survey has clearly not captured the views of forest products companies in other parts of the country including Alberta and Ontario. Therefore, these survey findings provide a general indication of the opinions of the industry association members, but should not be taken as statistically generalizable to the full population.
  • Interview sample was identified by CFS: At the Strategic Evaluation Division’s request, contact information for potential interview respondents was compiled by CFS program management and staff. It was necessary to involve CFS program management in the identification of potential interviewees as they are in the best position to identify key program stakeholders. While interviews were ultimately the decision of the evaluation team, this may have resulted in a possible selection bias.

4.0 Evaluation Findings

This evaluation was conducted to serve two purposes: 1) to provide a strategic level assessment of the Market Development Component of the Securing Forest Products Markets sub-activity; and 2) to provide an assessment of the individual programs contained within it (i.e., CWEP, NAWF, and VW). Findings at the program level are presented under the program headings of CWEP, NAWF, and VW for each evaluation question. The higher-level strategic findings and summary for the Market Development Component of the sub-activity are identified with a shaded box.

4.1 Relevance

This section of the report presents the assessment of the relevance of the Securing Forest Products Markets Market Development Component programs, addressing the following issues:

  • the extent to which the programs address a demonstrable need and are responsive to the needs of Canadians;
  • consistency with government priorities and NRCan strategic objectives; and
  • the legitimacy, appropriateness, and necessity of NRCan’s role.

4.1.1 To what extent do the programs address a demonstrable need and are responsive to the needs of Canadians?

Strategic Level Findings and Summary - Need

The evidence strongly confirms the need for all three Market Development programs. Moreover, the findings indicate that the programs effectively respond to the needs of the forest products industry in Canada.

Interviewees all report that the Canadian forest sector’s need for government assistance have increased over the past four years as a result of increasing competition in offshore markets, a decline in demand for exports to the U.S. and a decline in the overall health of the sector. Employment, sales, exports and profitability have all declined over the study period. The Canadian forest industry experienced a virtually unprecedented economic decline at the outset of this program funding. The sector continues to face significant challenges due to increased competition in export markets (driven by technology advancements, cheaper wood, faster-growing trees, lower labour costs, and a lighter regulatory burden) and a reliance on the U.S. market (which accounted for over 89% of Canada’s wood product exports in 2005; but had fallen to 75% in 2009). The dramatic downturn in U.S. housing starts (from 2.1 million in 2005 to 554,000 in 2009), the strong Canadian dollar and the historical softwood lumber trade issues pose a threat to the sector.

Diversifying export markets and encouraging R&D and investment in new value-added products should logically increase the resiliency of the sector. Emerging markets such as China, and South Korea, non-residential construction in North America, and value-added wood product markets were identified as key opportunities for growth and diversification.Footnote 14

CWEP

The evaluation found that CWEP addresses several demonstrable needs of the wood products export industry, and is seen to be responsive to those needs. The Program, which is highly valued by industry and government stakeholders, is addressing the needs of industry to reduce reliance on the U.S. as a primary export market, and facilitating unique market development initiatives in target markets that industry associations and firms are unable to do on their own. In general, industry is satisfied with the areas of focus (i.e., Japan, China, South Korea and Europe). However, some interviewees are concerned that the Program’s increased focus on China may be taking away from its ability to address potential in other markets.

Evidence
  • Industry and government stakeholders see a need for CWEP and consider it to be highly valuable: Interviewees in industry and federal and provincial governments all reported that the need for government assistance addressed by this program has increased over the past four years as a result of increasing competition in offshore markets, a decline in exports to the U.S. and a weakening in the overall health of the sector. The survey of industry association members confirmed support for the Program as well. Respondents were asked to rate the extent to which they believe a program like CWEP is needed in Canada using a 10 point scale (where 1 = not at all, and 10 = fully). The average rating was 8.8, with 67% giving this the highest rating (i.e., 10 out of 10). Of the 42 respondents that were specifically aware of the Program, 71% believed that it had been very or somewhat useful to their companies, and 72% indicated that not having CWEP would have had a negative impact on their company or their organization.
  • The Canadian wood products export industry remains in distress: The economic analysis found that sector employment, exports and profitability have declined over the evaluation period, suggesting that the need for intervention remains. The total value of Canadian wood products exports in 2009 was $8.7 billion; this was the first time that exports fell below $10 billion in 15 years, and represents a 65% decline from peak exports in 2005 ($25.1 billion).Footnote 15 As well, employment levels have been dropping since 2004. According to the Forest Products Association of Canada (FPAC), between 2007 and 2009, the Canadian forest sector closed or suspended operations at 250 mills and many more reduced production levels due to the downturn in the economy.
  • Need to reduce reliance on U.S. market: The core rationale for CWEP is to respond to the need to reduce the sector’s reliance on the U.S. as an export market. In 2005, exports to the U.S. accounted for 89% of wood product exports. By 2009, the U.S. accounted for 76% of total shipments, largely due to the massive drop in U.S. housing starts. Despite this change, interviewees are in agreement that the Canadian forest sector is still too reliant on the U.S. market. The current recession has had a significant impact on Canadian wood product exports due to the collapse of the U.S. housing market, weak U.S. dollar and waning consumer confidence. In 2005, there were 2.1 million housing starts in the U.S., while in 2008, new housing starts fell to below one million units for the first time since the 1950s. In 2009, annual U.S. housing starts totaled only 554,000.Footnote 16 Expanding exports to offshore markets should further decrease the reliance on the U.S. market and the related susceptibility to these shocks.
  • Need to support market development strategies to suit specific target markets:Offshore market development needs vary by country and product type. Since the program launch in 2002, CWEP priority markets have been Japan, China, Europe and South Korea. The rationale for these markets varies by country and strategies have been developed for each market (with updates to the South Korea and China strategies in 2008 and the Japan strategy in 2009). Japan and Europe are mature markets with wood building traditions.

    To support Canadian exports to mature markets, CWEP supports product promotion for high-end (high value and quality) niche products, and provides on-going monitoring to address market access or regulatory concerns as they arise. The China Wood Frame Construction case study revealed that China does not have a history of building with wood. The CWEP activity in China is geared towards raising awareness of wood construction, providing technical support in this market for building code revisions, training builders and providing quality assurance services for new wood frame construction buildings.

    However, the need for the current level of focus and size of investment for market development in China was questioned by several interviewees in both industry and government. They expressed concern with whether the level of investment is justified by the results and to what extent the increased exports to China are tied to market development efforts as compared to other factors (e.g., Canadian pricing, China’s growing need for wood fibre to support its re-manufacturing sector, the decline in log exports from Russia). For example, since China consumes a large volume of spruce-pine-fir (SPF), focusing on this market may be sacrificing the longer-term development of value-added markets for shorter-term success in volume driven markets.
  • Limited capacity of industry to undertake sufficient offshore market development activities: Interviewees in the B.C.-based value-added wood products industry associations noted that CWEP responds to their members’ needs by building awareness of Canadian products primarily through promotional activities such as the annual Global Buyers Mission (GBM)Footnote 17 held in Whistler and hosted by B.C. Wood. The objective of the GBM is to bring together international buyers with value-added B.C. companies to generate new sales opportunities. B.C. Wood has 130 members, the majority of which are SMEs (with sales between $3 and $10 million, and 6 to 20 employees) that lack the capacity to undertake offshore marketing individually.

    Similarly, in Quebec, QWEB represents the value-added sector through its CWEP-funded market development activities in Japan, China and in Europe through the CWG offices. Activities include market research on key sub-sectors (e.g., hardwood flooring and factory built wood frame houses), export training, participation in tradeshow/seminar to raise awareness of Canadian wood products, development and distribution of promotional material, and market access activities (e.g., promoting CE certification). According to interviewees, no one firm or association would be able to undertake these necessary coordinated investments on behalf of the industry.
NAWF

NAWF addresses a need to expand the markets available to the wood products industry so that it is less susceptible to shocks in the housing market. The domestic North American market for non-residential construction is large, but wood shares in this market are small (compared to steel and concrete). Needs assessments conducted for NAWF-funded WoodWorks and Cecobois programs strongly suggest that the barriers to entry can be overcome, and that these programs are designed to address those barriers. Therefore, there is a large and achievable opportunity to gain market share and see significant returns in the medium term. Industry values the WoodWorks and Cecobois programming, but is not generally aware of the NAWF role in it.

Evidence
  • Industry stakeholders perceived a need for NAWF-funded initiatives, but the role of NAWF specifically is not well-known: The survey of Canadian industry association members found support for NAWF. Respondents (n = 52) were asked to rate the extent to which they believe a program like NAWF is needed in Canada using a 10-point scale (where 1 = not at all, and 10 = fully). The average rating given was 9.0, with 60% of respondents giving this the highest rating (i.e., 10 out of 10). Of the 22 respondents that were aware of the Program, 54% believed that it had been very or somewhat useful to their companies, and 67% indicated not having NAWF would have had a negative impact on their company on their organization. The low awareness of NAWF and moderate levels of perceived usefulness and positive impact suggest that the federal role may not be absolutely clear. Interviews suggest that NAWF is not easily identifiable to industry stakeholders given the multiple players and strong provincial presence in this area. Stakeholders are more likely to be aware of WoodWorks and Cecobois initiatives, but not necessarily of the federal funding mechanism for them.
  • Need to address the downward trend in residential construction by diversifying wood applications: The use of wood in construction is historically dominated by use in residential buildings. The strategic plans for Cecobois and U.S. WoodWorks in support of NAWF investments suggest that the Program is addressing an important need: to address the significant downward trend in North American residential wood use (over 30% in the period of study) by seeking out opportunities to expand the use of wood in non-residential construction. The 2010 Evaluation of the U.S. Woodworks Program concluded that this type of programming is well-suited to move the industry away from mostly residential construction and to expand the overall North American market for wood.Footnote 18
  • North American market for non-residential construction has great potential for wood applications: All Canadian industry and government interviewees agreed that there is untapped potential for wood applications in non-residential construction markets. The document review found ample support for this assessment, as extensive research was found to have been conducted in support of the U.S. WoodWorks Program in 2006 (updated in 2009 along with Cecobois and Canada WoodWorks strategic plans). The significance of this opportunity has been recently confirmed by the fall 2010 Evaluation of the U.S. WoodWorks Program which concluded – based of non-residential construction data from 2007 to 2009 in the U.S. – that wood holds a relatively small share of the non-residential construction market, signifying potential for considerable growth.Footnote 19 Not surprisingly, most U.S. WoodWorks stakeholders consider this opportunity to be very significant to the industry.Footnote 20
  • Needs assessments have shown that there are specific barriers to increase wood use in non-residential construction: The needs assessment conducted as part of the Wood Products Council’s 2006 strategic plan concluded that there is a significant opportunity to grow the market provided activities are substantial and sustained, and tailored to individual market needs (e.g., creating awareness, incentivizing wood relative to other materials).Footnote 21Stakeholder interviews conducted as part of the fall 2010 U.S. WoodWorks evaluation confirmed that factors that constrain the use of wood in non-residential construction are:
    • a lack of education and training among architects and builders in the use of wood;
    • a lack of available design resources such as software that can reduce the time spent on making wood designed plans (such software has been available for concrete and steel applications for many years);
    • building codes that do not allow for wood in non-residential construction applications;
    • lack of understanding in the community that non-residential construction applications can use wood in codes that have been amended; and
    • that steel and concrete can compete more efficiently with wood because the industries are well organized compared to the more fragmented nature of the wood products industry.Footnote 22
    The WoodWorks and Cecobois initiatives funded by NAWF are designed to meet these challenges through an integrated program targeted at educating designers, specifiers and architects on opportunities for use of wood in non-residential applications.
VW

The value-added wood products industry in Canada is subject to increasing competition from producers in other markets. The Canadian industry is comprised mostly of SMEs that are generally not able to access the technical expertise necessary to improve their products and practices in-house. Evidence from the document review, interviews, and the online survey of technology transfer clients all showed that the VW Program is addressing a real need for products and process innovation and is responsive to the needs of Canadian SMEs manufacturing wood products. All interviewees also agreed that VW fills a need for technical support to firms in the value-added wood products sector to solve technical problems and to develop new and improved products and processes. Those who received VW industry advisor services felt that they addressed their company’s needs to improve processes or products.

Evidence
  • Wood products industry has suffered from increased competition in lower-value commodity markets and must seek higher-value niche markets: In a June 2008 House of Commons Standing Committee on Natural Resources report, most witnesses reported that finding ways to add value to forest products is critical to the future success of Canada’s forest sector. While in the past the focus has been on commodity products such as pulp, newsprint and lumber, many other countries can now produce them more cheaply and the industry should redirect itself toward high value-added products.Footnote 23 This concern over increased competition from foreign markets was confirmed by some interviewees. With the drop in market demand in the U.S., some U.S. firms are marketing their products in Canada which exacerbates an already difficult situation for Canadian companies. There is also competition in specific value-added sectors from other countries, such as Brazil (flooring) and China (inexpensive furniture).
  • Canadian value-added wood products sector does not have necessary technical skill or resources in-house: Several interviewees noted that Canada does not have a very well-developed secondary wood manufacturing sector. The sector comprises many small start-ups with little technical expertise (e.g., scientific research). Most do not have the needed technical skills in-house or easy access to the required technical expertise and information, and therefore rely on VW to provide access to these skills.
  • Research is needed to provide the technical innovations necessary to move industry to higher value products: The 2000 Technology Roadmap for Lumber and Value-Added Wood ProductsFootnote 24 produced by FPInnovations – in consultation with the forest industry – reported that industry sees engineered and appearance wood products (both are high value) as growth sectors dependent on technical innovation. VW focuses on developing these value-added markets through research and technology transfer. A number of interviewees reported that VW supports the sector needs for technical support to improve competitiveness by reducing costs, improving quality, performance and productivity. The focus of VW is on meeting the firm’s short and intermediate-term needs. In addition to technical support, the firms in the value-added wood products sector also have a great need for market information that is now available through the VW Program.
  • Industry is clearly responsive to and sees value in VW programming: The number of wood products firms that come in contact with VW illustrates that the Program is addressing a need for research and technical support. In 2009-10, VW industry advisors carried out 925 mill visits and technical assessments, 265 projects and 424 additional client interactions. In addition, VW held 26 seminars across Canada attended by a total of 444 individuals. Given this level of uptake, it is not surprising that the online survey of VW technology transfer clients found that 77% felt that the services met their firms’ needs (scores of 7-10 on a 10-point scale where 1= not at all met, and 10 = fully met). As well, 87% of clients surveyed found the services useful, with 51% indicating that the services were very useful.

4.1.2 Are the programs consistent with government priorities and NRCan strategic objectives?

Strategic Level Findings and Summary - Priorities

Each of the three programs in the Market Development Component of the Securing Forest Products Markets sub-activity are clearly aligned with current federal government priorities as described in the 2009 and 2010 budgets. Budget 2009’s section on Sectoral Competitiveness Short-Term Support for Key Sectors identifies the challenges to Canada’s forestry sector caused by declining demand in the U.S. housing market and competition in emerging markets.Footnote 25 The government response to these challenges was to provide $170 million for a range of measures, including VW, to improve the competitiveness of forest products SMEs, and to NAWF and CWEP to market Canadian wood products in the U.S. and internationally. More recently, Budget 2010 emphasized the creation of economic growth and jobs through innovation through the commercialization of research addressed by programs such as VW.Footnote 26

The Market Development programs are also clearly aligned to current departmental strategic priorities. The mandate and objectives of the three programs are consistent with NRCan’s first strategic objective which focuses on economic competitiveness. The intended strategic outcome is that Canada’s “natural resource sectors are internationally competitive, economically productive and contribute to the social well-being of Canadians”.Footnote 27 In pursuit of this outcome, in the 2010-11 Report on Plans and Priorities, NRCan committed to “promote innovation, investment and the enhancement of Canada’s natural resources and related industries though the provision of knowledge and tools, trade development and the removal of barriers at home and abroadFootnote 28”. The CWEP, NAWF and VW programs each focus on multiple aspects of developing new economic opportunities for the forest sector through technical research and removal of barriers to wood use in international and national markets.

CWEP

CWEP’s mandate is to expand export opportunities for Canadian wood products in traditional and emerging overseas markets. Diversifying markets for forest products directly supports NRCan’s economic competitiveness strategic outcome by limiting the reliance of the wood products industry on the U.S. as an export market. Interviewees in NRCan and in other federal departments each agreed that this was consistent with both federal and NRCan priorities of natural resources industries that are internationally competitive.

NAWF

By focusing on the use of wood in non-residential building applications, NAWF supports market diversification which contributes to the achievement of NRCan’s Economic Competitiveness objective. Interviewees noted that NAWF supports the need for diversification by helping North American producers shift their focus away from low-rise residential applications.

In addition to the Department’s economic competiveness priority, NRCan’s core mandate is to support the sustainable development of Canada’s natural resources.Footnote 29 NAWF funds sustainability initiatives, which were found to be prominent in WoodWorks promotion of wood use in non-residential construction in some targeted areas (e.g., B.C. and California). For example, the U.S. WoodWorks has been involved in several life-cycle analysis studies which provide estimates of net carbon gains from wood conversions.Footnote 30

VW

Document analysis and interviewees were consistent in showing that VW is aligned with government priorities associated with strong economic growth, competiveness and sustainability of the forestry sector. VW’s mandate is to improve the productivity and competitiveness of the value-added wood products sector in Canada by helping SMEs to improve their productivity and develop new and improved products. This is consistent with government and departmental priorities of increased competitiveness and fostering innovation.

Interview evidence showed consensus among federal government representatives and industry that VW supports federal priorities. Internally, the Program was seen as supporting the NRCan strategic objective of economic competitiveness for the natural resources sector. Interviewees noted that VW supports the competitiveness of firms in the value-added wood manufacturing sector that do not have sufficient internal expertise and financial resources to make technological improvements on their own. Others mentioned that VW contributes to economic sustainability of communities by helping small firms that provide employment in small towns and rural areas across Canada. Several interviewees commented that VW also supports the NRCan’s sustainability mandate by helping SMEs that manufacture wood products improve energy efficiency and reduce waste.

4.1.3 Is there a legitimate, appropriate and necessary role for NRCan in the Program? Is NRCan’s role appropriate in the context of the role of others?

Strategic Level Findings and Summary - NRCan Role

NRCan’s role in the delivery of all three programs was generally seen as important by stakeholders in industry and government. The role for a Canadian presence appears clear given the magnitude of the economic crises experienced by the sector. Market development also requires sustained intervention in terms of developing a market presence and the long term research investment needed for innovation. NRCan is well-placed to provide these compared to other players. The federal government also has a clear role to play in providing information to support codes and standards work (a typically government-to-government activity).

In terms of appropriateness of role, it is necessary that NRCan be involved in NAWF, CWEP, and VW programming as it is uniquely placed to facilitate industry transformation because of its ability to take a strategic level view of the industry.

However, a question remains regarding the extent that highly-engaged elements of the sector – both regionally (e.g., B.C.) and product wise (e.g., softwood lumber) – are directing CWEP and NAWF priority-setting.

CWEP

Interview, document review and case study findings show that the federal government (NRCan) has an appropriate, legitimate and necessary role in both the identification of market development priorities for Canadian industry, and offshore in-market coordination of project activities among numerous stakeholders. NRCan leadership has maintained the longer-term momentum necessary to effectively develop offshore markets. In some cases, interviewees felt that the federal government should play a stronger leadership role through the development and coordination of a Canadian forest global markets strategy which would fully integrate the needs and priorities of all regions and industry sub-sectors.

Evidence
  • Effective offshore market development requires government involvement: CWEP activities, such as product testing and seismic research support market access initiatives (e.g., building code revisions, grading, etc.), depend on government-to-government consultations. Evidence from case studies and interviews show the importance of the federal government’s participation to the success of the program’s international codes and standards development work. Under the CWEP banner, NRCan and other government departments and agencies – including the National Research Council and DFAIT – work collaboratively and are seen by Canadian industry as ‘honest brokers’ providing unbiased and factual information and advice to international governments and agencies on building codes, performance standards, product testing, and, increasingly, environmental issues (e.g., green buildings and sustainable forest management practices).
  • NRCan is uniquely positioned to provide a necessary coordinating function for the many market development stakeholders involved: The majority of interviewees highlighted the importance of NRCan’s national leadership role in coordinating the efforts of many stakeholder groups including: individual firms, industry associations, the CWG, specific forest and forest products sub-sectors (e.g., SPF, hem-fir, medium-density fibreboard, secondary products such as windows, doors, etc.), provinces, and other federal government departments. Prior to the program launch in 2002, there was some coordination of overseas efforts to promote wood product sales.Footnote 31 However, the CWEP design and its activities led to significantly-increased coordination among industry associations, and directly to the formation of the Canada Wood Group which coordinates CWEP-funded activities in offshore markets on behalf of its member associations. The staff in the CWG offices maintains relationships with key DFAIT personnel in offshore markets. Some interviewees also noted that NRCan maintains relationships with DFAIT, FPAC, FPInnovations and other stakeholders which put the Department in a unique position to deliver the Program.
  • Offshore market development requires long-term involvement not easily sustained by industry: The vast majority of interviewees felt that NRCan has a legitimate and necessary role in the delivery of CWEP as it is able to provide the level of sustained funding required to develop offshore markets. According to CFS and industry interviews, the turbulent nature of the industry over the last ten years has constrained resources for business development, and it is unlikely that this level of offshore market development would have occurred without NRCan’s involvement.
  • Some interviewees questioned to what degree CWEP activities fully reflect national priorities: In terms of appropriateness of role, some interviewees questioned the extent that the priorities of CWEP are truly ‘national’ as compared to regional and sectoral. They explained that the focus of highly-engaged elements of the sector – both regionally (e.g., B.C.) and product wise (e.g., softwood lumber producers) – seem to take greater advantage of CWEP funding than less organized elements whose priorities are consequently not reflected.
NAWF

The evidence confirms that there is a legitimate and appropriate role for NRCan in the delivery of NAWF, which is essentially an augmentation of the WoodWorks activities to expand the market for wood. Other governments had already been involved at the time NAWF funding was announced, and additional support was necessary to expand markets in the wake of an unprecedented housing market contraction. However, given the prior involvement of NRCan’s funding partners in this work, it may mean that NRCan does not have as strong a priority-setting role over the funding it provides to these initiatives as might be desired from a national program.

Evidence
  • NRCan's role in supporting the forest products industry was necessary to speed industry transformation in the wake of crisis: Interviewees aware of the nature of NAWF programming unanimously agreed that there is a legitimate role for NRCan in NAWF initiatives. For many interviewees, federal assistance was particularly necessary at this time given the crisis in the sector involving the sudden one-third drop in the residential construction market. New housing starts in the U.S. fell to below one million units in 2008, the first time since the 1950s that the number has been so low. The funding provided by NRCan under NAWF has expanded activities meant to grow the market for wood in North America to include non-residential construction so that Canadian firms are less vulnerable. Since other stakeholders had already begun funding such initiatives, NRCan’s additional funding allowed for a quick expansion of activities.
  • NRCan is uniquely placed to facilitate sector transformation: For some interviewees, the transformational nature of moving the sector from a more traditional outlook to a more progressive user needs-driven system approach (i.e., non-traditional uses of wood in non-residential construction) was also an important rationale for NRCan support. This was due to NRCan’s linkage to R&D and technology support.
  • Other interested governments are represented in WoodWorks activities: The U.S. WoodWorks case study, drawing on the fall 2010 U.S. WoodWorks evaluation, suggests that there is an important government role in promoting sector diversification. For example, the Binational Softwood Lumber Council (BSLC), BC-FII and NRCan each have representation on the U.S. WoodWorks board. NRCan is present at WoodWorks board meetings as an observer (i.e., non-voting) and is appropriately taking part in these conversations.
  • Concerns raised over NRCan’s role in setting priorities compared to other groups: Some interviewees noted the strong directional presence in NAWF-funded activities of other funding delivery agents such as B.C. FII, and the BSLC in the case of U.S. WoodWorks. These interviewees suggested that since both BC-FII and BSLC have prior involvement in this work, it may mean that NRCan does not have as strong a priority-setting role over the funding it provides to these initiatives as might be desired from a national program.
VW

Evidence from interviews suggests that NRCan’s role is legitimate and appropriate in the context of the roles of others. All interviewees perceive NRCan as providing necessary base level funding that would otherwise note be available to the value-added wood products industry. NRCan is a natural choice for delivering VW because of this links to the broader forestry support network (e.g., the Forest Innovation and Forest Research Institute Initiatives) and ability to coordinate funding partners.

Evidence
  • NRCan seen as providing necessary core funding to the sector that is otherwise not available: All interviewees reported that NRCan’s role is necessary and appropriate. Several federal government interviewees noted that NRCan through CFS has a legal mandate to support the efficient and sustainable use of Canada’s forest resources, and the VW funding demonstrates a commitment to the manufactured wood products sector. It was noted by government interviewees that NRCan is the only organization in a position to provide pan-Canadian core funding to the value-added wood products sector because of its federal as opposed to regional mandate.
  • NRCan links to the broader forestry sector support system make its role in priority-setting important: NRCan plays a significant role in priority-setting in the wood products sector. NRCan provides base level funding (approximately $4 million annually through VW), provides a national perspective, sets strategic direction, identifies priorities, designs the delivery process and develops and supports the co-delivery partner network including FPInnovations, the provinces, and complimentary federal program (e.g., FedNor, WED). It was noted that delivery of VW is through FPInnovations, as an important component of a broad forestry sector support system that also includes the FPInnovations national program, CWEP and NAWF.
  • NRCan provides oversight to a national system with multiple partners: Provinces and other federal agencies (i.e., WED Canada, FedNor, and ACOA) provide co-funding for the VW Industry Advisor Network. Several interviewees reported that the NRCan Value to Wood Secretariat provides good oversight and management of this technology transfer system without being obtrusive.
  • NRCan’s project selection process aligns research with industry needs: Responsiveness of the research funded by VW to the needs of the value-added wood products sector is supported by the project selection process. Project selection recommendations are made to CFS by the Research Advisory Committee, which includes members of the value-added wood products sector (e.g., windows, floors, etc.). This link to industry serves to legitimize the projects selected for funding as priorities for industry.

4.2 Performance - Effectiveness

This section of the report presents the assessment of the effectiveness of the Securing Forest Products Markets Market Development Component programs, addressing the following issues:

  • the extent to which intended outcomes have been achieved as a result of the programs;
  • internal and external factors that affect the achievement of expected results; and
  • unintended positive or negative outcomes.

4.2.1 To what extent have intended outcomes been achieved as a result of the programs?

The composite logic model for the Market Development Component of Securing Forest Products Markets is presented earlier in the report. Exhibit 23 below presents each of the composite logic model intended outcomes and identifies which programs contribute to each outcome.

Exhibit 23: Contributions of Programs to Market Development Outcomes
Outcomes CWEP NAWF VW
Immediate 1. Increased awareness of target markets* by Canadian industry for residential and non-residential construction, or value-added manufacturing. Check Check Check
2. Increased awareness in target markets about Canadian wood products (i.e., branding). Check Check
3. Increased awareness of Canadian wood attributes by construction regulation or standards bodies. Check Check
4. Increased cooperation, collaboration and efficiencies among Canadian suppliers/ stakeholders. Check Check Check
5. Increased capacity by builders, architects etc. to use wood products. Check Check
6. Production efficiencies for Canadian producers. Check
7. New product and process development. Check
Intermediate 8. Increased pursuit of new markets, export profile or readiness by Canadian suppliers. Check Check Check
9. Increased ability to respond to changes in target markets for wood products (construction and/or value-added). Check Check Check
10. Removal of technological restraints on trade in target markets and acceptance of Canadian products and building systems in codes and standards. Check Check
11. Increased receptiveness of target markets to Canadian products. Check Check
Ultimate 12. Improved quality and diversity of value-added wood products and processes available. Check
13. Increased use of wood in North American non-residential construction (shopping centers, schools, hospitals). Check

14. Increased Canadian wood product use/ exports in target markets.

Check Check

*Target markets refers to both offshore, U.S., and/or domestic markets depending on the Program. For example, NAWF activities relate to both U.S. and domestic markets, while CWEP focuses on offshore markets only.

Strategic Level Findings and Summary – Progress On Intended Outcomes

Each of the Market Development programs appear to be on track to meeting immediate and intermediate outcomes, and have demonstrated significant progress in all intended outcome areas. At a strategic level, there have been significant outcomes in terms of increased cooperation and collaboration among industry associations, federal and provincial governments and research organizations in the development of new markets and improving competitiveness; the development of codes and standards to facilitate wood use in target markets; some new technology adoption (both internationally, in terms of wood frame construction, and nationally through VW research on laminates and wood I-joists); increased ability for the industry to respond to changes in markets for wood products including the rising importance of green building and environmental performance; and removing technological restraints on trade and improving acceptance of wood in building codes and standards in target markets.

The evaluation found that CWEP has contributed to expanded export opportunities for Canadian wood products in traditional and emerging overseas markets; early evidence suggests that NAWF appears to be on track to supporting increased use of wood in non-residential construction in Canada and the United States; and that VW has made progress on improving the productivity and competitiveness of the value-added wood products industry.

The evaluation also identified some potential challenges for the Market Development programs going forward, discussed in detail in section 5.

Immediate Outcomes

Outcome 1: Increased awareness of target markets by Canadian industry for residential and non-residential construction, or value-added manufacturing
Strategic Level Findings and Summary – Increased Awareness of Target Markets

The evaluation found evidence that through CWEP, NAWF, and VW activities, Canadian industry has become more aware of target market opportunities. The evidence is strongest for CWEP (particularly in B.C.) as mills have been shown to be producing directly for offshore markets, and industry has been attending CWEP-funded trade shows for those markets. NAWF contributions to increased awareness among industry are difficult to asses because the funded initiatives mainly target specifiers and not industry (i.e., the benefits accrue to the forest products industry only once the former groups become interested in using wood). However, the selection of markets with existing commercial ties to Canada suggests that industry is likely aware of these potential opportunities. Awareness of new potential markets generated by VW is likely a new development given that market research services are a new program offering. However, initial uptake has been promising.

CWEP

Canadian firms are demonstrating awareness of target markets through their attendance at international trade events such as the Global Buyers Missions, and the fact that mills that were previously only being used for domestic markets are now geared towards shipping to offshore markets, in particular China.

Evidence
  • Canadian mills are now producing for international markets: According to industry interviewees in B.C., in the past two years, sales to Asian markets (including China) have allowed Canadian mills (particularly in B.C. and to a lesser extent, in Alberta) to maintain production levels. Interviews revealed that there are three mills in B.C. now dedicated to producing lumber for the China market, compared to none dedicated to China four years ago. Moreover, industry estimates that the 2010 volume of lumber exports to China will be 2.0 to 2.5 billion board feet or the equivalent of production from 10 medium-size mills. According to industry interviewees, the number of mills now producing for the China market demonstrates a higher level of Canadian industry interest in supplying offshore market needs than before.
  • Canadian industry is attending international trade events: The survey of Canadian industry found that of those aware of CWEP (n = 42), 74% had participated in trade shows funded by the Program. For example, the Global Buyers MissionFootnote 32 was attended by a total of 238 Canadian wood products sector and association representatives. Almost all company representatives interviewed for a November 2010 assessment of the Global Buyers Mission reported new sales, new contacts, and solidified relationships with existing customers. They also indicated that the GBM provided a forum for developing a network with local suppliers in foreign markets. The vast majority of companies interviewed were repeat attendees at GBM, indicating that they perceive a positive return on the investment for attending the event.Footnote 33
NAWF

Target markets for non-residential construction in the U.S. WoodWorks Program were selected based on their market potential and consideration of commercial ties to Canada, suggesting that Canadian industry is likely aware of the potential opportunities. Moreover, many of the Canadian industry representatives that were aware of NAWF specifically felt that it had contributed to their awareness of these new target markets. That said, attribution to NAWF is difficult given the low overall awareness of the initiative.

Evidence
  • Close commercial ties with Canada was considered in final selection of U.S. WoodWorks target markets: U.S. WoodWorks is designed to target U.S. states that have the best market potential for wood use. According to the 2010 U.S. WoodWorks evaluation, since the Program received all of its funding from Canadian governments (federal and B.C.) and industry sources, existing economic ties with Canadian forest and wood products companies was also a consideration in selecting the target markets.Footnote 34
  • Canadian industry attributes some awareness of target markets to NAWF: Of the 22 surveyed Canadian industry respondents that were aware of the NAWF, 14 (or 64%) felt that the Program had increased their organization’s awareness of target markets for non-residential construction, at least to some extent. Evidence from interviews indicates that the NAWF is not very well known by name among most industry representatives because they are not the direct target of program activities (i.e., NAWF activities target architects, builders, and specifiers, and the benefits accrue to the forest products industry only once the former groups become interested in using wood in non-residential construction).
  • Industry is aware of changes in target markets for non-residential construction: Many interviewees that were aware of NAWF noted that NAWF-funded activities are increasing acceptance of wood by key specifiers and have improved awareness of wood attributes. This demonstrated awareness of changes occurring in target markets for non-residential construction can be seen as tacit indications of industry’s interest in these markets.
VW

There is evidence that Canadian value-added wood products firms’ interest in pursuing new markets for their products has increased to some extent due to VW. Through interactions with industry advisors and the recent availability of market intelligence services from them, at least some industry firms are gathering information on potential new markets.

Evidence
  • Industry has demonstrated an interest in obtaining information on new potential markets for value-added wood products: Interviewed industry advisors reported that VW’s recently added market analysis component has been valuable to many firms as they seek to monitor market trends and determine whether to develop a new product or enter a new market. In addition, 24% of the technology transfer clients surveyed (n = 161) reported having asked for and received market advice or research from their industry advisors, which is fairly positive given the relative newness of this offering. Examples of the types of market intelligence information requested from industry advisors in 2008-09 include meeting regulatory challenges for eastern Canadian exporters of wood products to Europe, methods to identify unfulfilled client needs in hardwood components industry, information on markets for suspended wood ceilings, and information of wood products market trends in North America.Footnote 35
  • In September 2009, the traffic for the Value to Wood Website increased to 14,174 visits, up from 6,295 in September 2008 and the average visit length increased from 20:43 minutes to 25:53 minutes. The most requested files in 2009 were from the market trends section of the web site. Footnote 36 While approximately half of recorded visitors are Canadian, it is not clear how much of that traffic is Canadian industry. However, the upward trends in visits to the site, duration of those visits, and focus on market trends information is indicative of increased interest and awareness of value-added manufacturing markets.
Outcome 2: Increased awareness in target markets about Canadian wood products (i.e., branding)
Strategic Level Findings and Summary – Increased Awareness in Target Markets

CWEP and NAWF are clearly contributing to increased awareness of wood products in target markets among architects, engineers, and builders. CWEP has been able to promote a Canadian brand in its target markets and the presence of the Canada Wood Group has been integral to this. NAWF, not designed to promote Canadian products specifically, has shown clear progress in terms of promoting overall wood use in non-residential construction.

CWEP

CWEP has been instrumental in raising awareness of Canadian wood products in target markets primarily through the activities of the Canada Wood Group. CWG’s long-term presence and ability to promote a Canada brand were found to be key elements to this among industry representatives. Awareness has also been addressed through CWG arrangements for media coverage in trade journals and CWEP-funding for trade shows in which Canadian SMEs can showcase their products to international buyers.

Evidence
  • The Canada Wood Group offices have an established and well-respected brand in priority offshore markets: Currently there are seven joint offices for Canada Wood Group partner associations in China (Shanghai, Beijing and Chengdu), Japan (Tokyo), South Korea (Seoul), and Europe (London and Toulouse). By coordinating Canadian wood promotion in offshore markets under the ‘Canada Wood’ banner, there is now a unified branding strategy which facilitates market development. Industry interviewees were unanimous in their support for this approach and felt that the collective efforts of the associations has increased the awareness of Canadian wood species and products, and educated a potential client base including builders, architects, developers, designers and individual end-users.
  • Enhanced reputation of Canadian industry and government as committed participants in target markets: The longer-term presence (since 2004) of the CWG offices in offshore markets and low staff turnover, have resulted in sustained networks of contacts within government ministries, research organizations and buyers. Several interviewees commented that, in the past, Canadian companies did not have a reputation for reliable market presence, leaving offshore markets when North American markets recovered. The integration of Canadian activity under the Canada Wood brand helps to demonstrate a long-term commitment to these markets.
  • Canadian wood products receive media coverage in target markets: The case studies found that CWEP-funded activities have resulted in significant media coverage of Canadian wood products in target markets. For example, Canada Wood Korea conducted a Media Mission to Canada in 2009-10 with seven reporters and photographers representing one newspaper and four trade journals. Through visits to some B.C. forest operations, lumber manufacturing plants, and wood buildings, participants learned about Canadian sustainable forest management, the environmental benefits of building with wood, and green building design. Participants’ costs were covered by Canada Wood Korea in return for media coverage in the Korean industry magazines and journals. Examples of articles include: a full-page article on the Richmond OvalFootnote 37 in one of Korea’s leading daily papers, and a 16-page article in Jutech Journal (a monthly housing magazine) on Canada’s wood frame construction and wood industries. Canada Wood Korea estimates that the articles published as a result of this mission reached 825,000 people with a value of $687,000 in media coverage.
  • Growing numbers of buyers in target markets are aware of, and interested in, Canadian value-added wood products:The Global Buyers Mission mentioned earlier provides an opportunity for value-added wood products manufacturers to market directly to buyers. Value-added SMEs rely on CWG office staff to make introductions, set up meetings, and assist with translation on overseas trips. According to interviewees, this one-on-one in-market support combined with the GBM is highly-valued by B.C. Wood members as it ensures that buyers in target markets are aware of their product offerings. According to B.C. Wood reports to CWEP,Footnote 38 the 2009 GBM tradeshow attracted 700 buyers from offshore, U.S. and Canadian markets, and generated 300 new business leads and $20 million in expected future sales (according to exit surveys). Furthermore, the number of international attendees at the GBM grows annually and continues to exceed expectations (e.g., in 2009, actual attendance by buyers (700) was almost double that expected). Tradeshow support is the primary means by which CWEP provides support for the value-added wood products industry.
  • Activities in China focus on branding Canadian structural lumber as cost-effective, environmentally sustainable and seismic resistant products: Canada Wood delivers technical seminars and produces brochures and other marketing materials to raise awareness of structural wood and its applications. There has been an increased focus on mid-size and larger developers and designers. As in other markets, the ‘green marketing’ message of the benefits of wood, sustainable forest management, and lifecycle costs are of increasing interest to this market.
NAWF

Awareness of wood products in general (i.e., not necessarily Canadian wood products) has increased among target audience groups for non-residential construction, as evidenced by studies on the U.S. WoodWorks and WoodWorks B.C. programs. WoodWorks is meant to grow the North American market for wood in non-residential construction generally, but does not advocate for Canadian products specifically. Therefore, it is unlikely that NAWF activities have lead to any special awareness of Canadian products other than the incremental gains from architects now aware of wood products in general.

Evidence
  • Early indications that awareness of wood products in general is increasing, but awareness of Canadian wood products difficult to determine: Interviewees close to the new U.S. WoodWorks initiatives and the U.S. WoodWorks case study conducted for this evaluation highlighted the challenge with calculating impacts on perceptions of Canadian wood products specifically. Quarterly reporting on U.S. WoodWorks progress suggests net gains for perceptions of wood relative to concrete and steel in terms of architects’ and designers’ satisfaction with, willingness to specify, and to recommend wood since the Program began in 2007.Footnote 39 Interviewees confirm that progress is being made in this area. The Program, however, is not designed to advocate for Canadian wood products specifically. It is, therefore, not likely that NAWF activities have lead to any special awareness of Canadian products other than the incremental gains from architects now aware of wood products in general.
Outcome 3: Increased awareness of Canadian wood attributes by construction regulation or standards bodies.
Strategic Level Findings and Summary - Increased Awareness by Regulators

Both CWEP and NAWF have funded considerable efforts at influencing the perceptions of construction regulation and standards bodies. For CWEP, this has included work on the strength properties of Canadian wood, life cycle analysis of wood frame buildings, and Canadian presence in wood frame construction regulatory decisions in target markets. For NAWF’s part, WoodWorks and Cecobois have engaged professional standards bodies of architects and engineers in their respective markets on the benefits and applications of wood. In both offshore
and North American markets, there is evidence that such activities have resulted in increased acceptance of wood specifications in construction projects.

CWEP

There is strong evidence that CWEP has raised awareness of Canadian wood products among construction regulation and standards bodies by promoting Canadian types of buildings – namely wood frame construction. CWEP activities have increased awareness of the strength properties of Canadian wood and life cycle analysis of wood frame buildings, and have promoted Canadian participation in wood frame construction regulatory decisions in target markets.

Evidence
  • Increased awareness among regulatory bodies of strength and durability of Canadian wood product in target markets: Market development activities funded by CWEP (e.g., market research, advertising and promotion, tours and missions to Canada, tradeshows and seminars, technical research and product testing) in Japan focus primarily on spruce-pine-fir (SPF), post and beam or coastal species (e.g., hemlock or Canada Tsuga), and oriented strand board markets. CWG Japan’s efforts with government agencies in Japan ensured that Canadian hemlock was included in the seven major building Computer Aided Design packages in use, thus highlighting to all Japanese architects and designers the strength and durability of this B.C. species. In Europe, CWEP provided support for technical research and testing related to the seismic performance of I-beams and developed span tables for Canadian lumber.
  • Sustainability of Canadian wood products are increasingly recognized by standards bodies: Activities to promote the sustainability of Canadian forestry operations and environmental performance of wood products (green building and life cycle assessments) are of increasing importance in all markets. The WRCEA, a CWEP funding recipient, recently completed a lifecycle assessment with FPInnovations and are using the results in its offshore promotional material and training.
  • CWEP activities have lead to Canadian participation and influence on foreign wood specification bodies: The China Wood Frame Construction case study found that CWEP supported early work on codes and standards in China which led to the wood design code (GB50005) coming into effect in January 2004. The provisions of the code align with North American wood design and thus allow for wood frame construction. According to interviewees, Canada’s participation at this early stage of wood frame construction development in China established Canada as a leader in this area and ensures ongoing participation by Canada Wood China and FPInnovations in committees that address codes, standards, quality assurance, accreditation and certification. More recently, Canadian experts from the National Lumber Grading Association and FPInnovations provided assistance to develop lumber grading standards that are consistent with the Canadian standard. China applies this standard to all imports which may give Canadian lumber, whose attributes are consistent with these specifications, some advantage in the China construction market.
  • CWEP promotional activities and construction industry outreach are associated with increased awareness of Canadian types of wood frame construction in target markets: The South Korea case study found that there has been a growing interest in wood frame construction. Wood frame construction currently makes up 8% of the single family residential market, compared to 5% in 2006. Moreover, wood frame construction is making a significant cross-over to the high-end housing market.

    Canada Wood Korea (CWK) has been active in promoting Canadian style of wood frame construction. In 2009-10, CWK conducted 17 technical seminars and workshops for consumers and professionals primarily in Seoul, with an attendance of almost 1,500. Most of the seminars were held in conjunction with major trade shows. CWK also participated in three trade shows in 2009-10 (with a total attendance of approximately 365,000), distributing technical manuals and brochures, and showcasing Canadian wood products at a Canada Wood information booth. At these events, CWK also participated in technical seminars for architects, wood frame construction industry, university and college students and professors, and consumers to educate them on the properties of and use of wood.
NAWF

The education and outreach activities undertaken by the NAWF-funded programs are reaching construction regulation and standards bodies with information on the benefits of using wood in non-residential construction. There is also evidence that projects are being converted to wood based on new awareness among these groups.

Evidence
  • Education and outreach activities have communicated the benefits of using wood in non-residential construction through organized interactions with professional associations of architects and engineers, as well as with municipalities: According to the CFS Wood Markets 2008-09 Annual Report, WoodWorks had sponsored speakers at well-attended trade shows for the Federation of Canadian Municipalities, Royal Architecture Institute of Canada, Canadian Green Building Council, and the Canadian Society for Civil Engineering.Footnote 40 The U.S. Woodworks Program had also engaged in outreach to construction and standards bodies including 38 American Institute of Architects-accredited seminars and workshops that drew a total of over 1,500 specifiers. These events attracted a significant proportion of architects and engineers who are in a position to influence the decision to use wood.Footnote 41 Cecobois has also engaged these standards communities by participating in seven construction seminars throughout Quebec in 2008-09, attended by up to 1,200 construction professionals.Footnote 42
  • Evidence of influence on community building councils’ decisions to allow the use of wood in non-residential buildings: A review of the Wood Products Council Project Leads Tracking SystemFootnote 43 for the U.S. WoodWorks Program found that of the 29 under construction or completed projects identified as influenced by the Program (i.e., project received at least some support from WoodWorks in deciding to use wood), 48% were converted to wood as a direct result of the Program, and 14% were significantly influenced to use wood.Footnote 44 Interviews with architects and engineers as part of the WoodWorks Program also noted that changing the attitudes of code officials in communities has played an important role in converting projects to wood. While some expressed continued frustration with code officials in their respective communities at not being willing to accept and understand change, most indicated that code officials at the community level had changed their beliefs about wood.Footnote 45
Outcome 4: Increased cooperation, collaboration and efficiencies among Canadian suppliers/stakeholders
Strategic Level Findings and Summary - Increased Cooperation

The evaluation found numerous examples of cooperation, collaboration and efficiencies among Canadian suppliers and stakeholders, as well as those in other jurisdictions. CWEP and VW exhibited purposeful coordination with the provinces in terms of in-market representation (CWEP) and the Industry Advisor Network (VW). The Canada Wood Group is seen by industry stakeholders as integral to coordinating the efforts of federal, provincial, and industry groups. The NAWF-funded initiatives have also lead to greater coordination within industry (which has traditionally been fragmented on North American market development). However, some concerns were raised regarding U.S. WoodWorks and the degree to which B.C.FII and BSLC may be driving priorities for NRCan efforts.

CWEP

The greater level of coordination provided by the Canada Wood Group has minimized duplication of market development activities across associations. Efficiencies have also been achieved in terms of coordinating federal and provincial in-market efforts and in facilitating greater coverage of target markets where industry associations already have a presence.

Evidence
  • Increased coordination among Canadian industry associations minimizes confusion and duplication of industry efforts in offshore markets. Many interviewees representing industry, associations and government commented that prior to the formation of the Canada Wood Group, the wood products associations and provinces operated in silos with respect to their offshore market development activity. It was noted in interviews that the CWG provides a platform for associations to cooperate.
  • In-market coordination in China between Canada Wood Group offices and BC-FII has resulted in an efficient division of labour: The China case study revealed that the Canada Wood China offices coordinate their market development activities with those of the B.C.FII China office in Shanghai. In addition, in 2008-09, when Canada Wood China offices increased their budget, BC-FII contributed 50% of the new funding. The other 50% came from CWEP. In 2009, an updated market strategy was completed by Canada Wood in collaboration with B.C.FII. The study concluded that the division of activity in China between the two organizations was appropriate with CWEP responsible for codes and standards, technology transfer, training, and marketing; and FII China is responsible for demonstration projects and government relations. Both CWEP and BC-FII are responsible for market research.
  • CWEP activities have augmented and facilitated existing industry outreach in some target markets: The Korea Case study demonstrated that without CWEP, the changes to the Korean Building Code and other standards would not have been achieved because of the level of government involvement necessary. CWK worked directly with building code officials to facilitate these changes. Industry associations may have been able to provide some technical training for builders and quality assurance support, but because of limited resources, would not have been able to cover the entire country the way that Canada Wood Korea had. B.C. Wood and COFI in-market representatives complement CWEP-funded activities with support for wood product promotion/market development activity (e.g., tradeshows, seminars).
NAWF

The design of the Woodworks and Cecobois programs to only promote wood in general has lead to greater sector coordination within Canada and North America (i.e., no single product or species is promoted). This is, in fact, the first time the wood construction industry has been coordinated in the North American market, compared to the long-term coordination of competitor materials of steel and concrete. While NAWF is able to extend its reach by closely coordinating with B.C.FII and BSLC, there exists some concern about the restrictions this places on NRCan.

Evidence
  • Prior to the WoodWorks/Cecobois initiatives, there was no centralized effort to promote wood use in non-residential applications: The very existence of a NAWF initiative was seen by some key informants as an important step in bringing together a sector which had been divided by recent softwood lumber disputes. By design, NAWF, and U.S. WoodWorks in particular, are contributing to greater sector cooperation and collaboration in North America, since they represent a program jointly-directed by Canada and U.S. forest-related associations. Moreover, interviewees that were aware of NAWF cited increased coordination among Canadian and U.S. sector players towards an integrated market development strategy as one of the key benefits of the Program.
  • Promoting wood use in general allows for efficient competition with similarly-organized lobbies for steel and concrete: The steel and concrete industry (wood’s major competitors) have had well-funded and organized marketing and advocacy initiatives/programs for many years. Prior to the introduction of the U.S. WoodWorks Program, there had not been any concerted industry effort to promote wood products in non-residential construction in a manner that is neutral across wood product types/species/producing regions.Footnote 46 Through coordination, industry has been able to improve its ability to compete with concrete and steel in non-residential construction markets as evidence by rising market share of wood in target U.S. markets (see outcome 14).
  • U.S. WoodWorks is cost shared and coordinates the interests of major wood stakeholders in North America into a single initiative with greater reach: The U.S. WoodWorks case study found that the fact that NRCan cost shares U.S. WoodWorks with B.C.FII, the Binational Softwood Lumber Council, and industry means that “on paper”, federal investments are leveraged by approximately 50%. Coordination with U.S. counterparts, though has meant that the Program can only promote wood in general as a replacement for steel or concrete in non-residential construction, which means that the ‘leverage’ of partner investments to achieve specific NRCan goals for Canadian companies is not clear. Given the active participation of B.C.FII and the BSLC in the governance of the U.S. WoodWorks initiative, some interviewees have raised concerns that these parties leverage NRCan funding – as opposed to the other way around. Nevertheless, engagement of B.C.FII and BSLC has coordinated funding in a manner that significantly expands the reach of the U.S. WoodWorks Program which would likely not have been possible if NRCan had funded the initiative alone.
VW

The VW program has facilitated collaboration in the value-added wood products sector at many levels. Industry, academia and government are collaborating on research priorities, and industry is committing equipment, materials, and staff to research projects. The Industry Advisor network is also a collaborative effort between VW and provincial programs, with funding for advisors coming from both VW and the provinces.

Evidence
  • There is widespread agreement that VW has contributed to new collaboration among industry stakeholders: Many interviewees, in particular Research Advisory Committee (RAC) members and industry advisors reported that VW has contributed significantly to increased co-operation and collaboration among industry stakeholders through meetings of the RAC and R&D Working Group. Industry advisors also reported that through workshops and seminars, firms in similar areas of business met and in some cases developed formal or informal partnerships. Moreover, the Industry Advisor network exists through funding from VW and counterpart programs in the provinces.
  • Industry and academia have worked together on research priorities for the industry: Through VW’s research program, there is evidence that VW-funded research increasingly reflects industry priorities and needs, bringing together academic researchers and value-added manufacturers. For all three I-Joist projects covered by the evaluation’s case studies, the RAC established a liaison team of experienced individuals from industry firms with a particular interest in these projects to provide technical input and advice to the UNB research teams. Without this coordination, academic interests in forestry research might not focus on projects of value to industry.
  • Industry has committed staff, equipment, and materials to VW research projects: Case study evidence demonstrated the collaborative nature of industry investment in VW-funded research. For example, research on Wood-I joists undertaken by the University of New Brunswick relied heavily on the in-kind contributions of several industry firms for providing materials and I-joist test samples. This led to increased credibility of the research results, as the materials and I-joists used for the research were taken from commercial production processes. The technical assistance and advice of the industry liaison advisors from the RAC also contributed to the success of the projects.
Outcome 5: Increased capacity by builders, architects etc. to use wood products.
Strategic Level Findings and Summary - Increased Industry Capacity

The CWEP and NAWF Programs have contributed to increased capacity to use wood products in target offshore and North American markets. Both programs have funded and delivered formal and informal training to engineers, architects and builders in order to develop this capacity. Moreover, these training and outreach activities have been well-attended and well-received. The programs also provided technical support for construction with wood and this, especially for NAWF, has been reported as key to encouraging use. That said, some stakeholders in China were concerned that there is not enough quality assurance support to ensure proper wood frame constructions in a still inexperienced market.

CWEP

There is evidence that capacity to build and design with wood has increased in target markets. Noteworthy accomplishments include the creation of formal university training programs for architects and engineers on the use of wood. As well, informal training and technical literature is well-received by builders and architects in these markets. As further evidence of increased capacity, a rise in wood-specified housing starts in both the Korea and China markets has been observed. Concerns, especially in China, exist about in-market quality assurance capabilities given that the building community is still inexperienced with wood frame construction.

Evidence
  • CWEP-funded formal training for architects and engineers has provided increased capacity in offshore markets to build with wood through the creation of university programs: CWEP funds wood frame construction training for builders and architects in South Korea and China. In South Korea, CWG helped to develop wood building design curricula for eight Korean university architectural and engineering faculties.

    In China, more than 400 builders and designers received training in 2009-10, and university courses in wood frame construction have been created at three universities.Footnote 47 Canada Wood College was first opened in 2003 by Canfor in Shanghai and was known as the Canfor Training Centre. The College is now managed by Canada Wood China and delivers training to builders and framers. In 2008-09, the Canada Wood College was expanded to Sichuan to support reconstruction activity, and five terms of builder training were delivered. As of 2009, more than 2,500 students had received formal builder training (in Shanghai, Beijing, and Sichuan). The first ever term of designer training in Shanghai was delivered in 2008. Canada Wood China launched the Inspector Training Program to develop capacity within inspection companies, which now also includes developers that are building wood frame projects. In this way, Canada Wood hopes to fill inspection needs for wood frame construction until a fully national inspection system is developed.
  • Informal training of practicing engineers and architects in target markets is well received: Technology transfer activities include professional development training, the development of manuals and guides, and outreach activities to increase capacity to use wood products. For example, Canada Wood China has developed a Guide to Good Practice (which is regularly updated to reflect building code changes) and has hosted numerous wood frame construction seminars in China. Interviewees report that these events are attended in large numbers and that specifiers in target markets consider the guide to be helpful.
  • Canada Wood Group has provided quality assurance services and training to ensure integrity of wood frame construction projects, but concerns over capacity have been raised: In both China and South Korea, Canada Wood provides quality assurance support for wood frame construction projects, ensuring that these buildings meet relevant codes and standards. By involving local builders and inspectors in quality assurance through joint inspections, CWG staff has increased the capacity in these markets to build and inspect wood buildings.

    Some interviewees, however, expressed concerns that more quality assurance support is necessary in these markets because of the lack of experience in building with wood. It has been noted that there is a risk that sub-standard building could damage the growing positive perception of wood frame construction. Despite the level of training being provided in target markets, there remains an absence of a skilled workforce. The quality of wood frame construction projects is an on-going concern for developers, construction firms, home buyers and Canada Wood China staff in particular.
  • Wood products are being specified in markets where wood has not been a traditional building material: Case studies of the Korea and China markets found evidence of increased instances of wood specifications in construction projects. In Korea, while the majority of housing units are built from concrete and steel, the Korea case study found that wood frame construction structures are increasing. The number of building permits for wood buildings increased by 6.5% in 2009, bringing the number of wood frame construction permits above 10,500 for the first time. A total of 9,300 wood frame construction (WFC) housing starts were recorded in 2009, up from 2,000 in 2005. There has also been some increase in the number of WFC building starts in China. COFI estimates that there are approximately 6,000 wood frame construction housing starts each year (of the approximate total of 10 million) which is an increase from the 500 WFC starts of five years ago.
NAWF

Similar to CWEP, activities aimed at providing training to the design and construction community have helped increase capacity to use wood products. Architects and engineers in all three NAWF-funded programs (WoodWorks, Cecobois, U.S. WoodWorks) have received training, and many believe it has positively influenced their decision to specify wood.

Evidence
  • Architects in target markets believe that their capacity to use wood has increased due to WoodWorks activities: A 2010 survey of U.S. WoodWorks target audience groups – including architects, engineers, designers, builders, and contractors (n = 144) revealed that they believed the U.S. WoodWorks program to have had a significant impact on their capacity to use wood. Using a 5-point scale (1 = no impact, 5 = major impact), respondents gave an average score of 3.9 in terms of increasing their access to expertise, resources and other wood-related support; an average score of 3.6 to increasing their awareness of opportunities to use wood in non-residential construction; and an average score of 3.4 on increasing the extent to which they have used or will use wood in such projects in the future.Footnote 48
  • The Program has provided active support and technical advice to those interested in using wood, which has translated into new wood specified construction projects: In total, 73 of 144 target audience respondents surveyed for the U.S. Woodworks evaluation, reported some level of U.S. WoodWorks influence on their decision to use wood in their projects, including 52 who reported projects that were currently completed, under construction, or planned. When asked about how the U.S. WoodWorks Program influenced their decision, these respondents referred to the central role of capacity building activities. For example, 67% indicated that the Program most commonly influenced them by increasing their general knowledge and understanding related to the use of wood through educational events, training, workshops, and literature/publications, and 63% percent of noted that program efforts to address their concerns about wood use in areas such as fire hazard, durability, building codes, wind resistance, and seismic protection influenced their use of wood.

    In addition, 43% of the respondents credited each of the following U.S. WoodWorks program activities to their decision to use wood materials in their projects: access to resources, tools and information on best practices; dissemination of knowledge on environmental benefits of wood products; and assistance on structural and building design. Some target audience member interviewees indicated that they found the educational components (e.g., seminars, Wood Solution fairs, online information, case studies etc.) of the Program the most beneficial. The Program was seen as providing high quality technical content without a sales pitch.Footnote 49
  • WoodWorks education activities are well-recognized by architects and builders in target markets: Virtually all architect and builder interviewees in the 2010 Walker Consulting Return on Investment (ROI) Study were aware of the Canadian (B.C.) WoodWorks Wood Solution fairs, courses, and workshops. Interviewees reported that the most effective and appealing aspect of the courses were that they offered non-residential construction training that provided architects with their 18 hours of continuing education each year. Moreover, workshops targeting younger architects were seen as providing a very helpful resource for young architects who may not have learned as much about wood during their university educations.Footnote 50
  • Professional development activities are being developed in partnership with professional associations: Cecobois signed a memorandum of understanding in 2009 with l’Ordre des architectes du Québec to offer sanctioned professional development training on non-residential construction wood use to its members.Footnote 51 As well, the Program delivered lunch and learn sessions on wood use with 11 architectural and engineering firms, attended by over 260 professionals.Footnote 52
  • Development of commercial scale wood design software has increased ability to design with wood, and has greater potential: A wood design module for proprietary structural engineering software was fast-tracked in partnership between U.S. WoodWorks and RISA Technologies LLC. Interviews as part of the U.S. WoodWorks evaluation revealed that without the financial and technical support that RISA Technologies received from the Program for developing this module, RISA Technologies would not have introduced the wood module on its own since its allocation of development resources, driven primarily by the potential for revenue generation, has traditionally been focused on steel and concrete design features, the two largest revenue sources.Footnote 53 Interviews with industry conducted as part of the NAWF evaluation also underscored the importance of such software in facilitating wood use. Such software modules are available and widely used for concrete and steel construction, so having this available for wood should make it more competitive for architects and engineers to use.
Outcome 6: Production efficiencies for Canadian producers.
Strategic Level Findings and Summary – Production Efficiencies

Only VW, discussed below, contributes to this outcome.

VW

Industry advisor interactions have lead to production efficiencies for Canadian producers, particularly in terms of implementing lean manufacturing processes. Production efficiencies was seen by stakeholders as the area in which VW had the most significant impact on value-added wood products firms.

Evidence
  • Industry advisors have assisted value-added wood products firms in finding new production efficiencies for their operations primarily through implementing lean manufacturing processes: The Value to Wood annual reports and newsletters to industry document a number of instances where industry advisors have helped firms to implement leaner manufacturing processes and become more efficient.
    • The Value to Wood newsletter, published by FPInnovations on a regular basis, includes specific case studies of production efficiencies. For example, a manufacturer of roof trusses and joists achieved an 8% increase in productivity with no additional investment by reorganizing some manufacturing tasks, with the assistance of a VW industry advisor.Footnote 54
    • Project summary reports for specific industry advisor interventions identify further production efficiencies. For example, working with a cabinet manufacturing firm’s staff to identify and implement lean manufacturing techniques, the plant layout and production processes were adjusted. The results included a 20% increase in productivity and increased profits. The firm reported that it was able to achieve a 25% increase in sales without having to move to larger facilities.
    • VW Program Highlights for 2008-09 identifies the impacts of technical support by industry advisors to clients. One lean manufacturing project that involved a $250,000 investment by the client resulted in a 15% increase in productivity, 50% reduction in raw material inputs and a 10% increase in production.Footnote 55 In another case cited, support from the industry advisor and a $5,000 investment resulted in $30,000 reduction in costs and a 15% increase in productivity for a wooden furniture manufacturer.Footnote 56
  • Industry sees potential to reduce costs and improve efficiency due to industry advisor interactions: A majority of technology transfer clients surveyed reported that VW support has, or may reduce costs for their firm. When asked if the VW services received have, or will result in reduced costs, 18% said that they had already, and 42% said that they could potentially result in reduced costs when fully implemented, though few were able to quantify the value of these cost reductions. Most interviewees felt that VW had the most impact on developing production efficiencies and improved product quality. These were also the most frequently requested areas made by firms for assistance from VW industry advisors.
Outcome 7: New product and process development.
Strategic Level Findings and Summary – Development of Products and Processes

Only VW, discussed below, contributes to this outcome.

VW

Evidence was found of new products and processes developed as a result of VW research and industry advisor activities. These new products and processes were seen to improve the competitiveness of value-added manufacturing firms that implemented them.

Evidence
  • Recipients of industry advisor support believe this has helped them to improve competitiveness with new products and processes: Interviewees commented that improved products were being developed through both research and firm level advice from the industry advisors. The survey of technology transfer recipients corroborated this as respondents felt that IA interactions had, or will contribute to improved competiveness generally (59%) as well as to reduced waste or improved efficiency (53%). A further 53% reported that their capacity to implement product or process innovations has, or will increase as a result of the IA intervention.
  • VW-funded research has resulted in new products and processes for value-added manufacturing firms: Interviewees noted that VW research has resulted in new products and processes for industry. For example, evidence from the case studies indicate that VW research developed a new method of producing glue-laminated beams made from wood treated with ammoniacal copper quaternary, a new water-based wood preservative with reduced environmental impacts. Unlike conventional beams, these are suitable for high exposure applications, such as utility poles and highway noise barriers. While still in the testing phase, this new process has the potential to increase sales of Canadian glued-laminated timber up to 20%.
  • VW research has lead to enhanced model development, and new processes and products for Canadian wood I-joist producers: VW-funded research at UNB on I-joist performance has produced experimental data and models that have helped manufacturers improve their design and production processes and to design new I-joists with improved performance. In many cases, it is necessary to have openings in I-joists to accommodate electrical, plumbing and forced air heating requirements. Improperly located openings can seriously degrade the performance of the I-joists. Based on this research, models developed for determining the effect of web openings have been used by Canadian wood I-joist producers to design and specify the size, shape and location of web openings that meet load bearing requirements. The models also help manufacturers design new I-joists more accurately, avoiding the costs associated with repeated product qualification testing. Several firms have utilized the research results to date to modify the I-joist production process and to design new joist models to meet performance criteria quickly and efficiently.

Intermediate Outcomes

Outcome 8: Increased pursuit of new markets/export profile or readiness by Canadian suppliers.
Strategic Level Findings and Summary – Pursuit of New Markets

The evaluation could not conclude on the extent to which Market Development programming has increased export readiness for Canadian wood products suppliers in target markets. However, the evidence suggests that the potential is strong. There are strong indications that CWEP has lead to a greater profile for Canadian suppliers in target markets. NAWF market development strategies appear to be on track, but it is too early to tell if they have had an impact on Canadian producers’ readiness to supply those markets. The impact of VW research on new market possibilities appears to be on the horizon (which is to be expected for science-based advances that must be translated into marketable material).

CWEP

Canadian suppliers are demonstrating readiness to export to CWEP target markets as evidenced by increased Canadian sales (especially to China), perceptions of Canadian market share in target markets among Canadian competitors, and participation in trade development activities sponsored by CWEP. However, industry continues to make minimal investments in market development activities in China despite the considerable growth it is experiencing. As well, some stakeholders expressed concerns that the larger suppliers are better able to take advantage of CWEP opportunities than are smaller secondary producers.

Evidence
  • Canadian suppliers are gaining a higher profile in CWEP target markets: Some interviewees noted that CWEP activities have increased Canadian supplier presence in target markets for engineered wood products to a point where those traditionally supplying those markets (e.g., Scandinavia, New Zealand and Russia) are concerned about the encroaching market share of Canadian firms. This is further evidence that Canadian firms are becoming active exporters to CWEP target markets.
  • Canadian firms aware of CWEP demonstrate export readiness through their participation in trade-related activities: The survey of industry association members asked them to self-assess their export readiness that can be linked to CWEP activities. Of those aware of CWEP (n = 42), 74% reported they had been involved in the Program through participation in trade shows, 56% through the participation of their industry association generally, 35% through incoming trade missions (i.e., offshore buyers coming to Canada), and 30% through outgoing trade mission (i.e., Canadian suppliers going to offshore markets). When asked specifically about how their organization has benefited from CWEP, 52% of the 33 who responded said that the Program had increased their export profile or readiness at least to some extent.
  • Canadian companies are exporting greater quantities of wood to China than ever before, but their investment in market development for that market has remained limited: The China wood frame construction case study shows that CWEP and BC-FII have pursued China as a key market for their investments over the past four years. Together, these organizations provide approximately 90% of China market development funding (50% from CEWP, 30 to 40% from BC-FII). Market analysis shows that Canadian exports to this market have increased dramatically over this time. In terms of volume, Canada exports of softwood lumber to China more than doubled between 2008 and 2009 (increasing from 1.17 million cubic metres to 2.55 million cubic metres). China is now the second largest export market for Canadian softwood lumber behind the U.S. (which imported 19.45 million cubic metres in 2009, down 29% from the previous year) in terms of volume. Interviews showed that there is increasing interest on the part of several large B.C. interior companies (SPF producers) in advising on activities in this market, and an advisory committee to BC-FII China activities has been formed. However, there is no evidence to suggest industry is taking a greater financial role in developing this market, despite the reported growth.
  • Relative size of companies in forest sub-sectors may mean larger companies are better positioned to take advantage of CWEP export opportunities: The primary industry and shippers are relatively large companies as compared to those in the secondary and value-added sectors. Some interviewees noted that while the entire industry has experienced significant downturns, larger companies (through their membership in COFI, FPAC, and WRCEA) are able to take greater advantage of offshore market development programs, such as CWEP, because of their size.
NAWF

The strategies behind NAWF-funded initiatives are sound and are being implemented, but identifying their impacts on Canadian suppliers is not possible at this time. However, those who were aware of NAWF engaged in trade-related NAWF activities designed to enhance export readiness.

Evidence
  • NAWF-funded initiatives come from carefully thought out and validated needs assessments and are being implemented, but impact on Canadian suppliers is not clear at this time: The market strategies for the North American markets are clearly articulated by the Wood Products Council strategic plan for U.S. WoodWorks, the Canada Wood Council Strategic Plan for WoodWorks and the Quebec Wood Export Bureau strategic plan for Cecobois. This evaluation has confirmed that these market strategies, although in the early stages, have been implemented and are generating results. It is, however, difficult to tell at this time what the impact has been on Canadian industry readiness to take advantage of NAWF target markets.
  • Canadian firms aware of NAWF demonstrate export readiness through their participation in trade-related activities: The survey of industry association members asked them to self-assess their export readiness that can be linked to NAWF activities. Of those aware of NAWF (or 22 respondents), 68% (or 15 respondents) reported they had been involved in the program through participation in seminars, webinars or trade shows and 32% (or 7 respondents) through participation in trade missions. Asked specifically about how their organization has benefited from NAWF (only 21 answered this section of the survey), 72% (n = 15) said that the Program had increased their export profile or readiness at least to some extent.
VW

While it was not apparent that VW had contributed to increased pursuit of new markets at the time of the evaluation, evidence from surveys and case studies suggests that the work conducted to date has the potential to open up new markets for value-added products.

  • Technology transfer clients believe VW services received have potential to increase sales: Forty-three percent of respondents to the survey of technology transfer clients (n = 144) said that the VW services they received through their IA could potentially result in increased sales in the future, while just 5% said that they had already. Only six of these respondents provided estimates of the level of annual increases in sales at an average of $142,667.
  • VW funded research has contributed to new product development that has the potential to generate new sales for Canadian value-added producers: The two case studies developed for the VW portion of this evaluation show areas in which Canadian firms have the potential to generate new sales. It is too early to identify the full effects of the new CSA performance-based structural wood adhesive standards developed as a result of VW research.

    However, as a result of the new standards, one new adhesive with improved properties for limited exposure (interior use) has been accepted for use by the CSA. The case study shows that use of this new adhesive in the I-joist production process has resulted in increased productivity and reduced costs for Canadian manufacturers of I-joists. As the new adhesive is transparent, it can also be used to laminate glued-laminated timber and laminated veneer lumber for appearance products that would be less appealing with the dark bond lines of the previously accepted adhesive. As the new standards are being accepted in the U.S. and more broadly through their inclusion in ISO standards, products made in Canada that meet CSA standards can be sold in the U.S. and abroad without further performance testing. In this way, the new adhesive standards contribute to market diversification and potential expansion of exports.
  • Research has lead to harmonization of standards for structural wood adhesives which has opened the cross-border market for Canadian wood products: VW funded projects on adhesives carried out between 2002 and 2010 resulted in new performance-based standards to replace existing prescriptive standards last updated in 1977. The results of the projects contributed directly to the development and refinement of the new CSA structural wood adhesive standard for exterior use and the corresponding standard for limited exposure to water. These new performance-based standards are providing the incentive for adhesive manufacturers in Canada to develop new cost-effective structural wood adhesives that are accepted in multiple jurisdictions. Firms developing structural wood products benefit from access to broader markets, as products using adhesives that meet CSA standards are also acceptable in the U.S. due to standards harmonization.
Outcome 9: Increased ability to respond to changes in target market for wood products (construction and/or value-added).
Strategic Level Findings and Summary - Increased Ability to Respond to Changes

All three programs have made significant contributions to progress towards increasing the ability to respond to changes in target market for wood products. CWEP has perhaps the most robust examples of success in this area due to the Canada Wood Group’s identification of residential market changes and promotion of wood frame construction to meet these. There is evidence that NAWF-funded initiatives are changing perceptions of wood in target markets for non-residential construction. However, it is too early to tell if Canadian suppliers are able to take advantage of these changes. VW technology transfer and research activities have generated potential for the value-added wood products industry to implement innovative products and processes in order to respond to changes in the market.

One of the most prominent changes in the market for wood products in recent years is the rise of environmental concerns in construction and green building interest. Marketing and awareness initiatives under CWEP and NAWF are tapping into these needs and VW-sponsored research is producing knowledge that can help the industry meet those needs. Green building is emerging as both a trend and a major market access issue across global forest product markets. Interviews conducted for this evaluation among all three programs suggest that Canadian suppliers have built up some strength in the field but more work is needed. There is likely an opportunity for greater coordination across Market Development programs here.

Although the LEAF and IFPP initiatives for the Market Access Component of Securing Forest Products Markets, which are to be evaluated in 2011-12, are intended to address and promote the environmental reputation of the Canadian forest products industry in foreign markets, interviews for both CWEP and NAWF confirm that green building initiatives represent both a contextual factor effecting markets and a potential area of competitive advantage to be promoted with respect to the use of wood in construction (both residential and non-residential).

CWEP

The convergence of activities funded by CWEP in priority markets have helped to open doors to Canadian producers and position them to take advantage of the changing demographics and housing needs in Japan, South Korea, and China. Work on codes and standards, and developing interest and capacity to build with wood frame construction are the key components of these efforts.

Evidence
  • CWEP monitoring of market trends, outreach, and codes and standards work has positioned Canadian firms to take advantage of changes to the Japanese construction market: Japan is Canada’s largest offshore market by value and has been an important offshore market for Canada for over 30 years. Changing demographics in Japan have lead to a move to build more elderly care facilities and multi-storey housing. Industry association interviewees credited CWEP activities with helping position Canadian industry to take advantage of these conditions.

    The Canada Tsuga (hemlock) Program has been supported by CWEP for eight years and CFPA attributes the current sales of B.C. coastal products in Japan to the work done by the Program. Several years ago, new Japanese standards for structural design threatened coastal hemlock exports to Japan. This threat was addressed by the Canada Wood office which worked to include the proper design qualities of Canada Tsuga in the computer-aided design programs used to design homes. Evidence from the interviews indicate that even mature markets can be undermined quickly by changes to codes or standards, and that Canada Wood Japan activities have helped to mitigate against potential market share losses as a result of such changes.
  • Demonstration projects funded by NRCan and supported by Canada Wood Group and CWEP outreach activities have positioned Canadian firms to take advantage of a growing and increasingly health conscious construction market in South Korea: Like Japan, South Korea has a history of building with wood, however, wood frame construction is not as prevalent as traditional post and beam. Wood is viewed by Korean builders as a healthy alternative to the ‘sick house syndrome’ associated with concrete buildings. There is a market ‘pull’ for wood housing, and wood frame construction more specifically, and the market is growing at a pace greater than the current Korean building system can support. In 2009, the demonstration project funded in Korea helped to open up the multi-storey, multi-family market for wood frame construction, and as a result of its success, the developer has decided to use wood to build the other 120 units in this project. Also, based on the publicity generated by this, another developer asked for Canada Wood Korea’s assistance in converting substantial elements of its concrete building to wood.
  • Canada Wood China efforts have helped to set the conditions necessary for Canadian firms to take advantage of changing housing needs in this market: China’s real GDP growth has averaged nine percent over the past 15 years and is expected to continue. The country’s rapid economic growth, growing middle class, large internal migration from rural areas to cities in coastal regions increasing the need for new housing, and expansion of its domestic furniture and interior decoration industries, have all combined to increase China’s consumption of wood and wood products. Interviewees report that Canada Wood China has played a key role in promoting wood frame construction in China by developing codes and standards (e.g., the Shanghai local code) and educating key decision-makers, including government officials, architects and investors.

    Between 2009 and 2011, China plans to spend approximately $140 billion on a national affordable housing initiative that will account for 20% of all new urban housing construction. Shanghai is the first city to implement the Program and this will include six-storey walk-ups, high-rise apartments and low-rise non-residential structures. Opportunities for wood use include partition walls, infill walls, wood truss roofs and hybrid construction. Canada Wood China’s Memorandum of Understanding with Shanghai (and NRCan’s financial contribution of $683,000 in 2009-10) is designed to illustrate how wood frame construction is cost-competitive and consistent with the affordable housing initiative.
NAWF

There is evidence that attitudes about sustainability and technical suitability of wood among specifiers in target markets for non-residential construction are changing due to U.S. Woodworks and WoodWorks initiatives. However, the ability of Canadian industry to take advantage of these changes, particularly in the U.S. market is not yet clear. WoodWorks’ efforts at promoting sustainability and capability of wood leading up to the Wood First legislation in B.C. is seen by Canadian builders as an important opportunity for non-residential construction.

Evidence
  • There has been a positive shift in awareness of wood as an environmentally sustainable building material among architects: According to interviews with architects and builders in B.C., conducted as part of a 2010 Walker Consulting Group ROI Study for WoodWorks, there is now a widespread recognition that environmental sustainability and green building is a necessary element of modern building, and that wood now meets the test of sustainability. Several architects noted that they did not feel that wood met environmental standards in the past, but now strongly believe that wood meets the environmental test far better than other materials.Footnote 57

    As part of this evaluation, several interviewees noted that NAWF awareness and education activities geared towards architects and builders, in conjunction with the Leadership in Environmental Advantage in Forestry (LEAF) Program and the International Forestry Partnerships Program (IFPP), has helped address market access barriers relating to green building, while addressing structural and durability concerns. The promotion of wood as an alternative to steel or concrete in non-residential construction has involved networking with experts on lifecycle analysis, ‘green building code’ and ‘green’ construction. Some interviewees close to green building initiatives indicated that assuming the marketplace for non-residential construction will increasingly be driven by environmental concerns, then consumption of wood will almost certainly increase, provided that the tools are there to enable its environmental benefits to be seen and valued in the marketplace.
  • Wood First legislation in B.C. is seen as a significant opportunity for wood in non-residential construction by Canadian builders: According to interviews with architects and builders in B.C., conducted as part of a 2010 Walker ROI Study, Wood First legislation (i.e., legislation that requires the use of wood in public buildings where feasible) is seen as critical to growth in use of wood for non-residential institutional buildings. Many interviewees noted that the legislation, and the funding that goes along with it, will increase wood use in municipal construction projects. Many municipal projects would not be built out of wood because the primary consideration with most government Request for Proposals is price; and if the only consideration is price, then wood will often have difficulty succeeding.Footnote 58 Related to this, 12 Quebec municipalities have adopted resolutions to use wood in public buildings following Cecobois networking activities.Footnote 59
  • Technical attractiveness of wood in target U.S. WoodWorks markets has increased, but the ability of Canadian producers to take advantage of this is not known: According to a 2010 Ducker Worldwide report for U.S. Woodworks (a follow-up to a baseline study in 2007), wood has significantly gained in relative technical attractiveness among architects and builders compared to concrete and steel in the target U.S. markets.Footnote 60 These increases can be attributed to WoodWorks activities which are actively changing attitudes about the use of wood in non-residential construction. It is likely too early to know if Canadian industry is able to take advantage of this change. However, the program logic and history suggest that the broadening the acceptable use of wood in areas outside of conventional low-rise construction will pay off in the future, particularly as lifecycle analysis of buildings, environmental issues and overall energy consumption considerations become more prominent.
VW

Value-added manufacturers indicate that their interaction with industry advisors has enabled them to take advantage of innovative products and processes to reduce their vulnerability to market changes. In addition, VW-sponsored research has produced new processes and products with potential to be used in a growing non-residential market. There is also evidence that the value-added wood products industry is exploring how best to take advantage of green building trends.

Evidence
  • Value-added manufacturers perceive greater ability to respond to market changes through innovation: According to a 2008 House of Commons Committee report, complacency in terms of innovation has contributed to industry vulnerability to market changes.Footnote 61 The survey of technology transfer clients suggests that IA interventions are generating potential for Canadian value-added manufacturers to use innovative products and processes which can decrease their vulnerability to market changes. In total, 71% of surveyed technology transfer clients (n = 150) reported that these VW interventions has, or will result in increased knowledge regarding product or process performance.
  • VW-funded research on structural properties of wood I-joists has given the value-added industry the potential to take advantage of shifts in non-residential construction in North America: The Wood I-Joists Case Study found that I-Joist load bearing research conducted across multiple projects from 2004 to 2007 has made it possible to use wood I-joists in larger buildings, thus taking advantage of new code specifications in non-residential construction. This VW-funded research has contributed to new product development, by producing models used by Canadian manufacturers to design and produce improved I-joists that meet the higher load bearing requirements found in multi-story commercial buildings.
  • VW research has improved the potential for the value-added wood products industry to respond to growing concerns about environmental impacts of adhesives: Concerns about air quality are leading to pressures for the development of new adhesives that are environmentally friendly, and have fewer contaminants and reduced out-gassing of volatile organic compounds. VW-supported research on adhesives has the potential to provide industry with the ability to produce adhesives that have fewer contaminant (e.g., formaldehyde) and lower impacts on air quality.
  • The value-added wood product industry’s demand for tools to learn how to access the green building market is growing: In 2008-09, through the technology transfer component of VW, FPInnovations produced a 40-page guide to help Canadian value-added manufacturers understand how to access the “green building” market. This guide was distributed to industry through workshops on marketing to the green building market.Footnote 62 These workshops were requested by industry through the Industry Advisor Network. The guide is available on the publicly accessible section of the FPInnovations Value to Wood websiteFootnote 63 and has been distributed at well attended (over 70 industry attendees in some cases) green building presentations organized upon request to industry advisors across Canada (B.C., Saskatchewan, Alberta, Quebec, and New Brunswick).Footnote 64
  • New market research capacity is producing information on markets requested by industry firms: At the request of value-added firms, VW funds have commissioned a number of market research studies focusing on topics such as European markets for aesthetic wood products, and comparisons of wood-frame window requirements in Canada and Europe. In many cases the research reveals potential market opportunities for Canadian manufacturers, but it is not clear how widely these reports are communicated to the value-added wood products industry.
Outcome 10: Removal of technological restraints on trade in target markets and acceptance of Canadian products and building systems in codes, standards.
Strategic Level Findings and Summary – Reducing Impediments to Trade

Both CWEP and NAWF have contributed significantly to removing technological restraints on Canadian products and increasing acceptance of building systems in target markets through promoting, testing, research, and working closely with building code authorities. In many cases, these changes are the result of several years of effort. Advances in the technology for wood use have been an important contributor to wood being specified in more applications. The importance of technological innovation cannot be overstated here. It would seem that VW activities are also well-suited to this and could play a closer role in this outcome (currently there is no officially articulated link).

CWEP

CWEP has supported code and standards development and promoted Canadian building systems in China, Korea, Japan, and Europe, and the evidence suggests that these efforts have facilitated increased use of Canadian wood in these markets.

Evidence
  • CWEP influenced changes to local codes and standards that facilitated wood frame construction in China: Canada Wood China in collaboration with researchers at FPInnovations provided assistance over four years (2005 to 2009) to the Shanghai Local Code Committee. This assistance included technical advice, research to support fire and seismic code amendments, presentations to the Committee and discussions with government departments. The new code was approved in September 2009 and provides greater opportunity to build with wood in areas that were previously under fire restrictions. This is the first code in China for wood frame construction that deals with all technical issues such as structural, fire, durability, energy conservation, sound transmission and construction inspection.Footnote 65 The China case study found that Shanghai is viewed as a leader in terms of building code development and adoption. It is hoped by interviewees involved in the Chinese market that the Shanghai Local Code will be used as the basis for codes in other jurisdictions around Shanghai.
  • Approval of wood frame construction in fire-protected zones in Japan: In Japan, wood frame construction was approved in fire-protected zones for 2 x 4 and post and beam structures in 2005 based on fire resistance research funded through CWEP. This has resulted in more than 1,100 construction projects using wood by 2009-10 that would not have otherwise been possible, as well as the construction of 24 elderly care facilities in 2009. The Program has also promoted hybrid homes (SPF and post and beam) to builders and one large company is planning to build 10,000 units in 2010 as a result of this promotion effort.
  • Updates to the Korean building code are favorable to Canadian wood suppliers: Korean building standards were updated in 2008 to allow the use of all species of Canadian structural lumber. In addition, fire, seismic and acoustic accreditations for construction with wood were secured for various wall assemblies in the Korean Building Code (K.B.C.).
  • CWEP helped achieve Conformité European (CE) marking for Canadian lumber and pre-fabricated homes: In Europe, key outcomes from CWEP activities over the past four years include approval for CE marking of Canadian lumber in March 2009, and CE marking of pre-fabricated homes in November 2009. Without CE marking, Canada would be excluded from some markets as the EU moves to adopt this standard in most building product areas.
NAWF

Initiatives funded by NAWF have had recent successes in removing technical constraints on wood use in non-residential construction, including changes to the B.C. and Arkansas local codes. Other activities focused on making specifiers more aware of what the building codes actually permit in terms of wood construction. Advances in wood construction technology are seen as important to these developments.

Evidence
  • NAWF influenced changes to the B.C. building code to allow wood frame construction in residential buildings up to six stories: Several years of effort by WoodWorksstaff and CWC’s technical team culminated in the amendment of B.C.’s building code in January 2009 to allow wood in mid-rise construction (i.e., in buildings up to six stories high). WoodWorks continues to work with the B.C. government to support the implementation of the code change through education and training programs for potential code users.Footnote 66
  • Code changes are seen as key to the North American market for non-residential construction, and WoodWorks has been instrumental in such changes in B.C.: About three quarters of the architects and builders interviewees had heard of the six-storey building code changes, though few knew that WoodWorks was involved. While relatively few believe that these code changes have had an immediate impact on the industry, most believe that over the next 5-10 years, this change will start to have a significant impact. Many interviewees suggested that it is very likely that six-storey wood structures will become a significant part of the B.C. landscape over the next couple of decades.
  • U.S. WoodWorks staff are seen as active in promoting changes to and providing clarifications on local building codes: Program staff and industry representatives interviewed for the U.S. WoodWorks evaluation identified accomplishments related to codes and standards efforts. These include informing regions of changes to the International Building Code (a national code in the United States) that now allow use of wood in non-residential construction, and influencing changes to specific codes such as the recently-amended Arkansas building code which allows use of wood in school construction.
  • Development of new technologies and techniques for wood use are crucial in breaking down technical barriers to non-residential construction: Engineers and architects interviewed as part of the WoodWorks ROI study indicated that acceptance of wood products in non-residential construction depends significantly on the introduction of new technologies, both in terms of wood products as well as techniques of using wood. For example, engineered wood products that now have better strength properties and the ability to deal with large roof spans have been critical in improving acceptance in wood use.Footnote 67 Interviews conducted for this evaluation supported these findings, noting that technological innovation has contributed to addressing barriers in the use of wood in non-residential construction.
Outcome 11: Increased receptiveness of target markets to Canadian products.
Strategic Level Findings and Summary - Increased Market Receptiveness

Canadian industry association members that were aware of CWEP and NAWF believed that the programs had contributed, at least to some extent, to increased receptiveness for their products (or wood products in general for NAWF). However, this view was strongest among those aware of CWEP (82%) compared to NAWF (52%). Interviews with engineers, builders, architects and project proponents attributed this increase to program informational activities. It was also noted that real-world demonstrations of the wood building systems are important contributors to increased market receptiveness. There is also evidence of preference for Canadian SPF in South Korea.

CWEP

CWEP activities in target markets are contributing to increased receptiveness to Canadian products among the building communities in target markets. Research to assuage fears about mountain pine beetle-killed lumber, presence of demonstration projects and missions to show real-world applications of Canadian building products, and a growing importance of environmental reputation have all contributed to this increase.

Evidence
  • Industry members perceive CWEP to have increased receptiveness of target markets to Canadian products to at least some extent: The survey of industry association members found that 82% of the 33 respondents to this question felt that CWEP had, at least to some extent, increased receptiveness to Canadian products in target markets.
  • Maintained international market access for Canadian SPF mountain pine beetle (MPB) affected lumber: CWEP funded strength testing and related research projects to demonstrate to offshore standards groups that the presence of blue-stain does not have a negative impact on the mechanical properties of lumber, nor on human health (e.g., research demonstrated that blue-stain is not a mold, only a discoloration caused by MPB death). This research led to continued acceptance of the product in key Asian markets (e.g., Japan and China) and maintained market access for Canadian SPF MBP-affected lumber in these markets. As pine accounts for approximately 70% of total B.C. SPF sales,Footnote 68 the impact of this continued receptiveness in offshore markets for the B.C. industry is significant.
  • Canada is currently a preferred source of softwood lumber to South Korea: In 2009, Canada was the largest exporter of softwood lumber by volume to South Korea, supplying 29% (250,000 m3) of its imports (mostly from B.C.). Chile (18%), Russia (17%), China (11%) and New Zealand (10%) were the next largest exporters. In 2010, Canada was surpassed by both Russia and Chile in terms of volume, but remained the largest supplier in terms of value (i.e., by shipping higher value products than Russia and Chile) at 23% compared to Russia at 20% and Chile at 18%. SPF softwood lumber has been the main species imported from Canada and is used mainly in the wood frame construction sector, followed by hemlock and western red cedar. The Korea case study found that the following CWEP-funded Canada Wood Korea activities contributed to this position: research to address technical issues related to the seismic performance of SPF, oriented strand board, and post and beam structures and the performance of blue-stain lumber; educational seminars and training; and participation in well-attended, national and regional offshore seminars and tradeshows to promote Canadian lumber products and value-added products.
  • Demonstration projects of wood construction play a key role in increasing receptiveness of target markets to Canadian wood products: There is evidence that Chinese developers and builders are increasingly interested in wood frame construction, roof trusses, and infill walls. Industry and government stakeholders interviewed agreed that demonstration projects are ‘vital’ to the success of wood frame construction efforts in China. The demonstration projects funded by the Economic Action Plan (which will be evaluated separately in 2011-12) are seen as an efficient and effective way to showcase the benefits of wood frame construction, while building credibility and important networks with Chinese developers, builders and government agencies. Canada Wood China provides the technical training and quality assurance for these projects.
  • Missions to Canada to witness wood frame construction have increased receptiveness to this type of building among Korean buyers: The importance of seeing wood frame construction demonstration projects was also evident in South Korea. Canada Wood Korea has been able to recruit developers, builders and architects to participate in cost-shared missions to Canada, an indicator of increasing interest on the part of large builders in Korea. Participants in the 2009 mission – Samgaksan Valley (a developer) and Kwang Jang Architects Grou – converted their 120 four-storey multi-family housing complex project (noted earlier on page 54) from concrete to wood after visiting a wood frame construction duplex project in B.C.
  • Industry perceives an increased receptiveness in Europe to Canadian building and to western red cedar: In Europe, CWEP activities address a range of issues and product types. The Canada Wood office promotes Conformité European marking for Canadian products (through technical literature, seminars); promotes wood frame construction, log-homes and pre-fabricated homes, Canadian hardwoods, and western red cedar (through tradeshows). Interviews conducted with B.C. Wood representatives indicate an increased awareness and profile for Canadian western red cedar, hardwood species and log homes in this market.
  • Environmental reputation is increasing receptiveness in target offshore markets: It was also noted in interviews that buyers in offshore markets are more receptive to Canadian products now than in the past due to the reputation that Canada has established as a supplier of quality wood from sustainably managed forests. Based on meetings with some of the participants in the CWEP-funded 2010 mission to B.C. for Korean builders, their interest lies in seeing demonstrations of eco-friendly wood housing and finding out more about Canada/B.C.’s sustainable forest management practices. The Korean government's low carbon and green growth policy has increased the interest of consumers and builders in green buildings, lifecycle analysis, and sustainable forest management practices. The missions to B.C. are designed to provide this information to key decision-makers and media.
NAWF

Evidence from reviews of WoodWorks and U.S. WoodWorks, and a survey of Canadian industry association members aware of NAWF suggests that NAWF-funded initiatives have begun to make a difference in the receptiveness of specifiers to using wood. High profile demonstrations of wood use in non-residential construction were seen as important in both Canadian and U.S. markets, as was the availability of information.

Evidence
  • Industry members perceive NAWF to have increased receptiveness of target markets to wood use to at least some extent: The survey of industry association members found that 50% (or 11) of the 22 respondents to this question felt that NAWF had, at least to some extent, increased receptiveness of Canadian and American engineers, architects, and builders to using wood products in non-residential applications.
  • High profile symbolic projects in regions across B.C., which visually demonstrates the breadth of wood's potential application, are seen as important to increasing market receptiveness: Interviews with builders and architects in B.C. said that it is important to have high profile public buildings with wood components that attract the attention of the building sector and the public. Two frequently-cited examples of high profile buildings are the Richmond Oval, whose promotion, design and construction was supported by WoodWorks with funding from NAWF,Footnote 69 Surrey’s central city, and Aboriginal community centres. Interview respondents indicated that these structures give influencers – outside the building sector (in the community as a whole) – evidence of change and progress, and they act as a reference point to refute concerns or claims that such structures cannot be built.Footnote 70 Engineers and architects interviewed generally endorse these types of initiatives where a new and unique type of non-residential building is constructed with wood, which may be more expensive to build, but which results in an iconic structure that is widely recognized.Footnote 71
  • Project proponents in U.S. markets indicated that U.S. WoodWorks’ information activities were key to making them receptive to using wood in their projects: Interviewed project proponents in target markets noted that the U.S. WoodWorks influenced their use of wood by increasing their awareness of the options and the advantages of using wood. Interviewees cited increased awareness through informative discussions and case studies of similar projects; providing direction/referrals, advice and technical information to facilitate the use of wood; reducing the perceived level of risk involved in using wood through dispelling misconceptions; and providing literature/publications and evidence that could be used to persuade others (e.g., clients) to use wood. In addition, the Program helped project proponents to connect with vendors that provided quality products, and arrange visits to see examples of similar projects that successfully used wood.Footnote 72

Ultimate Outcomes

Outcome 12: Improved quality and diversity of value-added wood products and processes available.
Strategic Level Findings and Summary – Quality and Diversity of Products and Processes

Only VW, discussed below, contributes to this outcome.

VW

The evidence indicates that VW has considerable potential to improve value-added products and processes, and have, to some extent, realized these improvements. Survey with technology transfer recipients suggests that the Technology Transfer Component of VW is helping to improve processes and create new products. However, it is important to note that this group is divided relatively evenly between those who reported actual impact and those who expect impact eventually. Similarly, case studies of the Research Component have shown a number of tangible benefits to firms in terms of new processes and products implemented. However, interviewees suggest that there is much more potential than what has currently been accomplished.

Evidence
  • Technology transfer recipients perceive strong potential of VW technology transfer interactions: The majority of surveyed technology transfer recipients (n = 150) reported that VW had contributed, or will contribute to increased knowledge regarding product or process innovations (a total of 73%, including 42% who say this has occurred and 31% who expect it to), improved product quality for their business (a total of 57%, including 26% who say this has occurred and 31% who expect it to), and new or improved processes implemented (a total of 55%, including 22% who say this has occurred and 33% who expect it to). Respondents tended to be divided on the actual impact and the potential impact of technology transfer services. There was a range of opinion from interviews about the contribution of VW to new and improved products and processes. Some felt VW focused on new technology development, while others reported that the focus was on improvement of existing products and processes.
  • The VW research component is, overtime, laying the groundwork for a more diverse offering of valu- added wood products: The I-joist and adhesives case studies conducted for this evaluation both found instances in which VW-funded research has lead to new potential for, and in some cases, the actual implementation of new product offerings and new processes by the value-added industry. These have been observed across different parts of the industry including both structural and aesthetic wood products. Beyond new product development, these case studies both underscore the long-term and iterative nature of wood products research, as the eventual products offerings came from the accumulation of knowledge across several research projects over number of years.
  • Case studies identified several new products and processes originating directly from VW-funded I-Joist and adhesives research: Below is a listing of product and process offerings or improvements identified in the case studies:

    Sample of results from I-Joist research:
    • models developed for Wood I-joist load bearing performance with web stock holes of various shapes and locations;
    • modifications to I-joist production process based on this research;
    • use of the research results to help design a new joist model;
    • tailoring of oriented strand board properties to meet the needs of I-joist manufacturers; and
    • access to the UNB I-Joist research that reduced the need for in-house R&D and design and testing requirements for each major I-joist design change, at an estimated reduction in costs of $100,000 and three months in time.
    Sample of results from adhesives research:
    • experimental data contributed directly to development of the new performance based structural wood adhesive standards for exterior use (CSA O112.9) and limited exposure (CSA O112.10); these new standards replaced existing prescriptive standards dating from 1977;
    • a U.S. structural wood adhesive standard ASTM D2559 is being modified to harmonize it with these new CSA standards for exterior use and limited exposure O112.9 and CSA O122.10; both Canadian and U.S. glued-wood product standards have been or will be revised to reference the new CSA standards;
    • an adhesive company has indicated that one of its new adhesives has been accepted for exterior use; also, for use in limited exposures, emulsion polymer isocyanate (EPI) has been accepted, in addition to the traditional PRF and phenol formaldehyde adhesives;
    • the acceptance of EPI as an alternative adhesive for use in I-joist manufacture has resulted in opportunities for a significant increase in production; EPI does not require curing at an elevated temperature, which can speed up production; elimination of the heating requirement also removes the need for a large space for the oven and conveyor belt system; this allows for a much smaller, more efficient plant layout; and
    • companies are now making some glued-laminated timber and LVL appearance products using EPI, as they show no bond lines and have greater consumer appeal (PRF is dark, and, as a result, adhesive bond lines in LVL and glued-laminated timber bonded with PRF were visible).
  • Research projects have demonstrated potential, but greater impacts will rely on favourable economic conditions and greater dissemination of research findings: The above-noted new processes and products – notwithstanding, the potential impacts of these research projects in terms of actual new sales – have been severely affected by the economic downturn of the past several years. For example, in 2009, I-joist sales in North America were about 43% of the 2006 level. Interviews with industry reveal that there is a potential for much greater impacts from VW research projects as the results are disseminated and firms adjust their design and production processes. Unfortunately, there is no evidence from the evaluation to indicate that the research component of VW actively engages in communication of targeted research results.
Outcome 13: Increased use of wood in North American non-residential construction (shopping centers, schools, hospitals).
Strategic Level Findings and Summary – Use of Wood in Non-residential Construction

Only NAWF, discussed below, contributes to this outcome.

NAWF

Although major market shifts take many years to occur, NAWF-funded initiatives are demonstrating early and significant progress in expanding the non-residential construction market for wood products. Interviewees perceive a clear change emerging in the North American market, and attribute this in part to WoodWorks, Cecobois, and U.S. WoodWorks. Furthermore, project tracking reports, particularly for Wood Works U.S., confirm that the programs have influenced construction with wood in non-residential buildings. It is expected that the impact will grow over time as awareness of the Program, its services, and opportunities to use wood increases and as those project proponents who converted to wood continue to specify wood in future projects.

Evidence
  • Industry and government interviewees report positive impacts of NAWF-funded programs on wood product use in non-residential construction: Interviews conducted as part of the NAWF component of this evaluation confirmed the findings of other studies in terms of progress towards the ultimate outcome. The Canadian WoodWorks was not very well-known among many respondents, but those who were aware of the initiative were very positive in their estimations of its impact, with some noting anecdotally that use of wood in non-residential construction is beginning to rise. As well, interviewees aware of the new Wood Works U.S. initiative, while noting that it is still early in the life of the initiative, suggested that there are significant outcomes emerging in terms of Wood Works U.S. achieving its goals to change perceptions of wood, the intent to use wood and, to a lesser extent, the actual use of wood in non-residential applications.
  • Architects and builders perceive a critical shift regarding wood frame construction emerging due in part to WoodWorks: Interviewed architects and engineers for the WoodWorks ROI study expressed an overwhelming belief that wood use in non-residential applications has reached, or is soon to reach, a tipping point in British Columbia, where it will be a norm that wood be considered and utilized in the construction of non-residential buildings, rather than the exception. While a number of factors have contributed to this, interviewees believe that Wood Works activities, such as promoting wood first building polices, code changes, recognition awards, seminars and training, and promotion, have played a major role in facilitating this change. These interviewees indicated that wood use for non-residential applications is increasing, that it will increase in the future, and that these increases would not have occurred in the absence of WoodWorks activities.Footnote 73
  • Cecobois reports that wood projects are influenced by its outreach and informational activities: Cecobois reports that in 2009-10, its outreach activities including informational sessions, lunch and learns, and consultations with builders have directly or indirectly contributed to firm-level decisions to include wood in their non-residential construction projects in Quebec. Cecobois estimates that this translates to $15 million in wood products for that year.Footnote 74
  • WoodWorks, Cecobois, and U.S. WoodWorks project tracking data indicates that program activities have been associated with conversion of construction projects to include wood: Each of the NAWF-funded initiatives keeps track of the number of non-residential construction projects directly influenced by their activities (e.g., proponents requested information on wood, program staff have been involved in the project and provided guidance, etc...). Exhibit 24 shows the year over year increase in directly influenced projects across the three initiatives from 34 projects in 2007-08 to 81 in 2008-09 and 165 in 2009-10.
    Exhibit 24: Number and Value (in $000) of Non-residential Construction Projects Completed or Under Construction Directly Influenced by NAWF-funded Programs
    2007-08 2008-09 2009-10 Total
    # of Projects Value of Wood # of Projects Value of Wood # of Projects Value of Wood # of Projects Value of Wood
    Cecobois (Quebec) 11 $3,284 11 $3,284
    WoodWorks Canada (outside Quebec) 34 $25,000 55 $27,500 77 $63,000 166 $115,500
    U.S. WoodWorks 26 $2,033 77 $53,448 103 $55,481
    Total Converted Projects 34 $25,000 81 $29,533 165 $119,733 280 $174,266

    Source: Project tracking data provided to Canadian Forest Service.
    Note: While WoodWorks has been operating since 2000, Cecobois and U.S. WoodWorks were new initiatives that had not yet had the opportunity to influence construction projects in their first year of funding.

    In total, 280 projects worth approximately $174 million in wood are thought to have been directly influenced by NAWF-funded program activities. While this gives an indication of the progress being made, the criteria used to assess influence vary widely between programs. For example, in calculating the value of wood used in directly influenced projects, the U.S. WoodWorks’ Project Leads Tracking System (PLTS) uses a multiplier of 25% to 100% based on the degree of their staff involvement in influencing the decision to use wood (e.g., requesting information on wood is a lower level of influence than asking WoodWorks staff to assist with design of the project). Meanwhile, the other two initiatives do not make such distinctions when calculating value of wood influenced. This inconsistency makes it difficult to be certain of the degree of impact of the programs.

  • Evaluation of U.S. WoodWorks suggests that there are additional projects converted to wood indirectly: The PLTS includes only those projects for which program staff are aware of the Program’s influence in the decision to use wood. According to the 2010 U.S. WoodWorks evaluation, a survey of directly-influenced construction project proponents identified projects influenced by the Program but not found in the PLTS. These proponents estimated that the value of wood sales from these additional completed/under construction projects was approximately $51.8 million, with a further $8.3 million for planned projects.Footnote 75 This suggests that the value of indirect conversions to wood could potentially be as high as the value of direct conversions.
Outcome 14: Increased Canadian wood product use/exports in target markets.
Strategic Level Findings and Summary – Wood Products Use and Export

There is evidence to suggest that CWEP and NAWF are making positive contributions to increasing Canadian market share in target markets for wood products. Stakeholders in Canadian industry perceive these programs to be having a positive impact. This is due, in part, to work on awareness, education regarding Canadian styles of building, and influence on codes and standards.

An economic analysis done as part of this evaluation study examined trends in exports to targeted countries of China, Japan, South Korea, Europe and the United States. In terms of international market diversification, market shares in South Korea and China have increased in recent years and CWEP activities may have prevented an erosion of market share in Japan. However, the European market continues to be a declining market for Canadian producers. It is noteworthy that softwood lumber is the main Canadian wood product exported to each of these markets, and that higher value wood products remain less represented. Overall, Canadian exports to targeted offshore markets are increasing. By contrast, market share for Canadian wood products in the United States has generally been declining over the last 10 years. However, efforts of NAWF-funded initiatives are increasing the size of the market for wood in non-residential construction, although the impacts of this on Canadian producers are not clear at this early stage.

There are also many intervening factors contributing to the increases and decreases in Canadian market share in each of these markets. While these will be discussed in greater detail in section 4.3.2, new housing initiatives in South Korea, government action to support domestic industries in Japan, Russian log taxes, and the global financial crisis more broadly make it difficult to identify the specific level of influence that CWEP and NAWF have had in market diversification.

CWEP

CWEP, in existence since 2002, is showing progress in terms of diversifying the target export markets for Canadian wood products. Market share for Canadian wood products in China and South Korea has increased since 2006. While shipment volumes continue to be dominated by lower-grade lumber, there is evidence that demand for higher grade wood products is increasing, or has the potential to increase. A number of persistent challenges have been identified in each of the target markets, but interviewees and respondents report that CWEP activities are making progress on many of these issues.

Evidence
  • Industry members believe CWEP is having an impact on increasing the use of wood in target markets: Out of the 33 industry association members specifically aware of CWEP, 79% (or n = 26) indicated that their organization had, at least to some extent, benefitted from increased use or exports of wood to target markets as a result of the Program.
  • Wood shipment to China at historical highs and China showing signs of increased Canadian wood use in construction applications: Exports of Canadian wood products to China have been increasing over the last ten years. In 2002, shipments were valued at $59 million and by 2009 shipments totaled $381 million. Shipments of on-grade lumber increased by 400% between 2007 and 2009. In 2009, lumber accounted for 85% of the total mix of wood product imports from Canada, followed by logs at 12%, and particle board/oriented strand board and fibreboard/medium density fibreboard (each valued at approximately $2 billion). Case study interviews reveal that Canada Wood China staff and COFI estimate that, in 2010, between 22% and 30% of on-grade lumber is being used in structural applications (e.g., for re-roofing, interior walls, wood frame construction). This would be an increase of between 15% and 18% from 2009. This increase is significant considering that China does not have a history of building with wood, and CWEP activities in this market are geared towards raising awareness of wood construction, providing technical support to building code revisions, training for builders and quality assurance services for new wood frame construction buildings. Overall, Canada’s market share of total China wood product imports increased from 1.8% in 2006 to 5.6% in 2009.
  • Market gains in China due primarily to increased low-value shipment facilitated by many external factors, but potential growth for higher value shipments remains plausible: Interviewees agree that China has provided a market for low grade lumber which has helped keep some Canadian mills operating, noting that much of the increase in Canadian sales was due to low prices and restricted to low grade/low value products (e.g., economy and utility grade) that the Chinese market demands for re-manufacturing applications, concrete forms, etc. While a boon to B.C. shippers to have a market for this low-end product and development of trade channels, fluctuations in price and freight costs could quickly alter this situation. According to a recent market trend analysis report for B.C.FII, the dramatic jump in net import demand for softwood lumber in 2009 is primarily a result of log supply shortages (due to a shift of supply away from Russia and its uncertain log tax situation) and the corresponding need to import lumber to fill the domestic production gap.Footnote 76 Some interviews, however, believe that this is only the beginning, and that the potential future market share for higher value wood products remains.
  • Canada has remained Japan’s top supplier of softwood lumber for over 10 years, and interviewees credit CWEP activities for this: In 2009-10, exports of Canadian wood products (mainly softwood lumber) to China (by volume) surpassed those to Japan for the first time. However, because of the higher average unit value of wood products exported to Japan than to China, the total value of sales to China ($381 million) was lower than that to Japan ($782 million in 2009). Nevertheless, the value of wood product exports to Japan has steadily declined over the past ten years. In 2009 exports were valued at $783 million (softwood lumber accounted for almost 75%) down from a high of $2.2 billion in 2000. While Canadian exports of softwood lumber to Japan are down by approximately 50%, Canada’s market share as the number one supplier of softwood has been steady at approximately 45% (i.e., Canada accounts for 45% of Japan’s total imports). Interviewees from industry associations credited CWEP activities with maintaining Canadian market share in Japan despite adverse market conditions. It was noted that in recent years, Japan has adopted a number of policies to protect its domestic forestry industry in the wake of the economic crisis.
  • Persistent challenges for Canadian suppliers to Japan need to be overcome in increasing value of Canadian shipments: While the value of Canadian exports to Japan was found to be higher than the value shipped to China, challenges were identified in terms of further raising the value of Canadian exports to this market. Interviews and economic analysis revealed a number of challenges to supplying the Japanese market with higher-value Canadian products. Canada has not been successful at supplying the non-structural laminated lumber market in Japan. This market is dominated by Malaysia, with modest imports from Indonesia as well. Neither Canada nor the U.S. has been successful in penetrating the medium density fiberboard panel market which continues to be dominated by southern hemisphere producers, namely New Zealand and countries in the South Seas region. The South Seas region also dominates the hardwood plywood import market.
  • South Korea remains a key market for Canadian wood products: Canada has re-gained its position as the top supplier of lumber to this market. The value of Canadian exports has risen substantially from $61 million in 2002 and stabilized in 2009 to $98 million (after falling by 12% in 2008 from an all-time high of $112 million in 2007). Softwood lumber accounts for 37% of Canadian exports to South Korea by value (World Trade Atlas). The wood products import mix from Canada to South Korea is dominated by logs (52%) followed by lumber (35%) and particleboard & oriented strand board (9%). There was a 10% increase in shipments of logs by Canada to South Korea in 2009. Canada is the primary supplier of softwood lumber imports to South Korea, meeting 25% of its import needs. South Korea relies entirely on imports for its oriented strand board supply, whose primary end use is in wood frame housing construction. B.C. provided almost all oriented strand board in 2009 (47,000 m3). South Korea imports account for 75% of total plywood consumption and B.C. supplies one-third of this total.Footnote 77 Canada’s share of the South Korea wood products market increased from 2.6% in 2000 to 5.0% in 2006 and to 5.9% in 2009.
  • CWEP has positioned Canada to take advantage of greater housing production in South Korea: Canada Wood Korea has been working with architects, universities and others to promote Canadian wood products and construction techniques. The extent to which any changes in exports to South Korea can be attributed to Canada Wood Korea is currently limited to the few projects directly influenced by the Program. That said, interviewees believe that the impacts of recent changes to codes and standards, as well as other CWEP market development activities (including training, curriculum design), will likely only be seen after these have been in place for a longer period of time. This was seen as being particularly likely given South Korea’s plans to rapidly grow its housing stock over the next ten years.
  • European market share is falling, but Canada remains a key supplier of softwood lumber: Canadian exports to the E.U. have declined in all product segments. The value of wood product exports to the E.U. has steadily declined over the past ten years. In 2009 exports were valued at $421 million (of which softwood lumber accounted for 38%) down from $678 million in 2000. E.U. imports from Canada are dominated by lumber (46%) and wood fuel (33%). Overall, imports from Canada fell by almost 30% in 2009. Almost one-third of Canada’s wood product exports to Europe are shipped to the U.K. China is the largest supplier of wood products to Europe ($6.3 billion of the total $20.4 billion in 2009), followed by Russia, Africa, Indonesia, Brazil, the U.S. and Malaysia. Canada does not fall within the top ten suppliers of wood products to this region. However, Canada is the second largest supplier (behind Russia) of softwood lumber to the E.U., followed by Norway and Switzerland. E.U. imports of softwood lumber overall declined by 23% in 2009 from 2008 levels (there was a 38% drop in Canadian shipments to the E.U. over the same time period). In the last two years (2007 to 2009) softwood lumber imports from all sources, including Canada, fell 50%.
NAWF

The initiatives funded by the relatively new NAWF Program (2007) are showing signs of progress at increasing market share for non-residential applications of wood in their target markets. Performance data is best for the U.S. WoodWorks Program, suggesting strongly upward trends in wood use in targeted markets as compared to markets without U.S. WoodWorks activities. However, overall, Canadian companies’ market share in the United States has been in decline for 10 years. Nonetheless, industry members, engineers, and architects see NAWF-funded initiatives as having a positive impact on wood use in non-residential construction.

Evidence
  • Industry members, engineers and architects believe WoodWorks is having an impact on increasing the use of wood in target markets: Out of the 21 industry association members specifically aware of NAWF, 48% (or n = 10) indicated that their organization had, to at least some extent, benefitted from increased use or exports of wood in North America (i.e., in Canada or the United States) for non-residential applications as a result of the Program. Engineers and architects interviewed for the WoodWorks ROI study also universally agreed that WoodWorks initiatives had had a positive impact on the marketplace for wood use in non-residential construction.Footnote 78
  • Market data indicates that wood’s share of the non-residential construction market in target U.S. markets is showing growth relative to other materials: According to McGraw Hill data purchased and reported on by the Wood Products Council, the market for wood is growing in the target markets. Exhibit 25, excerpted from U.S. WoodWorks progress tracking reports,Footnote 79 shows the growth in wood market share of the non-residential construction market by year in all buildings four stories and under. The vertical bars show wood growth in target market share (i.e., California, north central, and south east U.S.) has increased from 14.2% market share in 2007 to 16.1% in 2009. Moreover, wood market share is consistently higher in markets with U.S. WoodWorks activities compared to those without, and this gap is growing. Meanwhile, the horizontal lines illustrate the potential for continued growth, based on the growing commodity price difference between wood (lumber and plywood) and the higher priced concrete and steel.

    Exhibit 25: U.S. WoodWorks Wood Market Share and Commodity Price Tracking

    Exhibit 25: U.S. WoodWorks Wood Market Share and Commodity Price Tracking
    Text version - Exhibit 25

    Exhibit 25: U.S. WoodWorks Wood Market Share and Commodity Price Tracking

    Exhibit 25 shows a diagram that depicts the growth in wood market share of the non-residential construction market by year in all buildings four stories and under.  Vertical bars show WoodWorks target market share for wood in 2007 at 14.2%, in 2008 at 14.8%, and in 2009 at 16.1%. Vertical bars show market share for wood in all of the U.S. in 2007 at 13.8%, in 2008 at 11.9%, and in 2009 at 12.8%.  Vertical bars show market share for concrete in 2007 at just under 40%, in 2008 at just under 30%, and in 2009 at just over 20%. Vertical bars show market share for steel in 2007 at just under 50%, in 2008 at just under 60%, and in 2009 at just under 60%. These numbers are approximations, as the chart only shows exact figures for wood.

    Horizontal lines on the diagram illustrate the commodity price levels for wood, concrete, and steel between 2007 and 2009. The diagram does not contain exact numbers. The index trend line for steel is highest at just over 150 in 2007, between 200 and 250 in 2008, and at 150 in 2009. The trend line for concrete is level at between 100 and 150 for 2007, 2008, and 2009. The trend line for wood is at just under 100 in 2007 and slightly lower in 2008 and 2009.

  • Market share for Canadian wood products in the United States is in decline: The above successes notwithstanding, the market analysis undertaken for this evaluation shows a trend of declining market share for Canadian wood products in the United States overall. Canada’s market share of U.S. wood products imports overall has been in steady decline since 2000. Ten years ago, Canadian products accounted for 55% of all imports; by 2004, market share had fallen to 47%, and by 2009 it fell to 27%. The most recent decline, however, is primarily due to the effect that historic low housing starts have had on softwood lumber shipments to the U.S. (traditionally 50% of Canadian wood exports to that market).

4.2.2 What internal and external factors affect the achievement of specific results?

Market Development Strategic Level Findings and Summary

A wide range of internal and external factors were found to affect the achievement of Market Development outcomes across the three component programs.

Factors contributing to the success of all three programs include the selection of delivery partners, the rising prominence of environmental considerations in product selection, and links to industry priorities. Regarding the latter, some concerns have been noted about the underrepresentation of regions other than B.C. and Quebec, although it is important to remember that these are the greatest share of Canada’s forest products industries. CWEP has also benefited from international market changes that have made Canadian wood products more attractive (e.g., Russian log tax and Chinese lumber imports), and has suffered from protectionist policies emerging in Japan’s wood products sector. NAWF has benefited from a growing gap in the price of wood compared to other materials, greater numbers of professionals able to use wood, and the apparent lower susceptibility of non-residential construction markets to recessions compared to residential markets. VW effectiveness at engaging industry has been a positive factor, although some issues with the project selection process may be hampering achievement of results.

Industry has been in a state of restructuring for the last few years which has lead to some companies suspending or curtailing production and laying off staff. There is also a general problem of aging capital stock and not being able to invest in new technology or market development activities. Canada also faces increased global competition from lower cost producers such as Chile, Russia, Malaysia, and China.

CWEP

As CWEP is delivered through industry associations, one of the most important factors influencing achievement of results is the capacity of industry associations to deliver CWEP activities. Interviews and program data suggest that capacity is generally strong. However, some associations are better established than others. As well, the presence of other NRCan and provincial market development activities in target markets – particularly China – has magnified Canadian influence in these regions. CWEP achievements are also highly affected by changes in the international market context such as price fluctuations, economic strengths, trade policies of other governments, and the Russian log tax. Finally, the ability of provincial governments to help their associations leverage CWEP funding likely plays a role in the selection of projects for funding.

Evidence
  • Capacity of the industry associations to deliver CWEP activities: All program activity is delivered by industry associations, some of which have been promoting Canadian forest products offshore for more than 30 years (such as COFI, which opened an office in Japan in the 1970s to promote the sale of B.C. spruce-fine-fir). That said, not all are as well established. For example, the association representing Ontario’s export interests – the Ontario Wood Products Export Association – was formed only in May 2008 and has a smaller capacity for contributing to market development programs such as CWEP. Almost all associations interviewed for this evaluation indicated that they have been able to take part in the Program to varying degrees, and many are members of the Canada Wood Group.
  • The presence of other NRCan and provincial programs in target markets contributes to a critical mass of Canadian influence: In addition to the investments made by CWEP in target offshore markets, interviewees noted that there are significant complementary federal (e.g., LEAF) and provincial (e.g., BC-FII in China) investments in market development initiatives. CWEP and these other investments were viewed by most interviewees who were aware of the other programs as mutually supportive. According to interviewees, activities funded by other investments often (i) support the achievement of CWEP long-term outcomes, and (ii) benefit from the capacity created and maintained by CWEP in the target markets (e.g., CWEP quality assurance programs, builder training programs, networks of contacts, etc.). Thus the Program supports both the achievement of its own long-term objectives while contributing to the achievement of other programs’ goals.
  • The capacity of provincial governments to participate in CWEP affects the extent to which each region of the country participates: The provinces primarily involved in wood products exports from Canada are B.C., Ontario and Quebec. Each is involved in the Program through representation on advisory committees and funding to its industry associations. However, the levels of involvement and investment vary significantly. The government of B.C., through BC-FII, contributes significantly to CWEP projects with a small portion of overall provincial funding coming from Quebec and Ontario. For example, in 2009-10, BC-FII contributed $5.8 million compared to a total of $0.4 million from Quebec and Ontario combined. As a result, it is easier for B.C.-based associations to propose CWEP projects as FII has a significant budget for these activities which leaves less for the private sector to fund.
  • Changes in the characteristics of international market: The case studies, interviews, and economic analysis each uncovered an array of international market factors that affect the achievement of CWEP outcomes:
    • The Russian log tax has created much more room in the China market for non-traditional exporters including Canada: In 2009, shipments to China from traditional suppliers such as Russia and Africa declined by close to 15% over 2008 values, while sales from Canada and New Zealand increased by approximately 70%. Sales from Thailand and Vietnam also increased (44% and 14% respectively). The Russian tax on logs (25%) was one factor affecting sales to China. Sales of softwood logs from Russia were down 17% in 2009, allowing for growth in sales from other exporters including the U.S., New Zealand, Australia and Canada. In 2009, the value of imports from Canada totaled $475 million, up 68% from the previous year.
    • China’s strong economic growth and exponentially expanding remanufacturing sector have created considerable demand for imported lumber: While Canada’s exports to China increased between 2008 and 2009, China’s overall wood product imports declined by 3.6% over the same time period (based on China trade data collected for this evaluation). Imports of lumber, however, increased by 21% between 2008 and 2009 and this is attributed in part to the Russian log tax and the remanufacturing sector demand (e.g., laminate wood flooring, wood panels, etc.). Exports from Canada and others such as New Zealand (up by 70.8%) and Thailand (up by 43.5%) increased to meet this need. Based on interview and document review findings, neither Thailand nor New Zealand have market development programs in China.
    • Efforts to protect Japanese softwood lumber industry in the wake of worsening economic conditions reduce Canadian exports: As a result of its worsening economic situation, Japan’s softwood lumber market was hit particularly hard with consumption down 14% in 2009. Interviewees reported that these conditions led to a focused effort by the Japanese government to support and protect its domestic industry through government subsidies and trade measures. As a result, Canada and Finland saw substantially reduced market share in Japan.
    • Growing prominence of environmental guidelines: Environmental issues and the extent to which Canadian wood is recognized as sustainable building material is increasingly important in offshore markets. Case study research found that some governments have implemented green procurement guidelines (i.e., Europe, South Korea, Japan and China) and are undertaking studies to compare the full lifecycle cost of wood (which includes emissions from shipping wood from Canada) versus other building products such as concrete and steel. The ‘wood is good’ message and promotion of Canada’s sustainable forest management to offshore governments and buyers should help position Canadian suppliers to take advantage of this greening trend.
NAWF

The success of NAWF-funded initiatives were seen to be impacted by several factors in the marketplace, including the lower level of susceptibility of non-residential construction to recessions compared to the residential market, the relative prices of wood, concrete and steel at particular times, changes to building codes that reflect environmental principles, and the availability of professionals able to work with wood. The composition of stakeholders restricts the kind of work that can be pursued under U.S. WoodWorks (i.e., no promotion of Canadian products). Similarly, in the Canadian WoodWorks programs, the B.C. and Quebec versions have much higher profiles than do the Ontario and Alberta counterparts.

Evidence
  • The lower susceptibility of non-residential construction starts to economic crises: The recent economic crisis showed that the residential construction market is much more susceptible to sharp declines than is the non-residential market. The ongoing U.S. recession, which began in 2007, saw new housing starts fall to below one million units in 2008, the first time since the 1950s that the number has been so low. This has had significant impact on total U.S. imports of Canadian wood, falling from $45.9 million in 2004 to $22.7 million in 2009. Research by the Wood Products Council has shown that non-residential construction was much slower to decline during this recession. This represents an opportunity for Canadian producers.
  • The Canada –U.S. composition of the Wood Products Council: One important factor for U.S. WoodWorks is the political fact that the Wood Products Council is made up of members from both the U.S. and Canada. The Program cannot – by governing mandate – favour one wood product type or region of supply over another (i.e., it cannot do specific promotions of Canadian products). Some interviewees expressed concern over this restriction. However, it was also noted that this binational effort may serve to promote perceived neutrality among target audiences (e.g., architects, engineers, builders) that would not otherwise be possible. By promoting wood in general, program activities do not come across as sales pitches, but helpful professional information for target audiences.
  • Construction material commodity prices: Project proponents interviewed for the U.S. WoodWorks evaluation said that the costs associated with purchasing, transporting, installing and maintaining construction materials play a significant role in their decision. Trends in the market for construction materials and the subsequent changes in prices of products, as well as past dealings/good rapport with construction material specifiers and suppliers also affect the decision to select particular products. Footnote 80 Similarly, architects and engineers interviewed for WoodWorks ROI Study reported that the material cost of wood relative to concrete or steel is an important factor when selecting materials, particularly since the main consideration with government building projects is price.Footnote 81
  • Changes to building codes to reflect green building principles: Recent changes in building codes, including those requiring more environmentally-friendly approaches, along with increasing demand for green and sustainable buildings, were cited as reasons to use more wood in non-residential construction projects. Footnote 82 Interviewees for the NAWF portion of this evaluation also noted Leadership and Environmental Design (LEED) standards being used in many U.S. states that could give an advantage to wood construction through lifecycle analysis requirements.
  • Availability of skilled construction professionals able to work with wood: Many project proponents interviewed for the U.S. WoodWorks evaluation mentioned that the availability of skilled contractors and labourers for a given construction material is also an important deciding factor. Footnote 83 Similarly, engineers and architects interviewed for the WoodWorks ROI Study also noted that engineers have become much more amenable to using wood, and architects know what engineering firms they can use to work with on wood projects. According to some, even 5 years ago it was difficult to find an engineering firm that was willing to work with wood, and that was a huge impediment to making progress in wood use.Footnote 84
  • Structure of WoodWorks seen as having potential to bias efforts towards B.C. and Quebec: Some interviewees noted that the structure of WoodWorks likely plays a role in who is funded for what types of initiatives. The predominance of initiatives in Quebec and B.C. makes sense given the relative importance of the forest sector to these provinces. However, it may be important to explore why WoodWorks in Ontario and Alberta are seen as having lower profiles than WoodWorks in B.C. or Cecobois in Quebec, and if this profile can be raised in order to improve program impacts overall.
VW

Factors that positively impact VW’s ability to achieve results include the relationships with FPInnovations and programs in the provinces for technology transfer purposes, and the formal inclusion of industry in selecting research projects. Factors found to impede the ability to achieve results include potential issues with communicating research to industry, a possible mismatch between VW funding and the university research cycle, research proposal quality concerns, the limited resources of value-added firms to participate in the Program, and, to some extent, increased competition in this market from foreign wood products firms.

Evidence
  • Appropriate partnerships in program delivery: VW’s relationships with FPInnovations and with provincial programs greatly enhance its ability to deliver on intended outcomes.The use of FPInnovations as the primary delivery mechanism for VW was identified by interviewees as an important factor, as FPInnovations is well-recognized by the community as the primary forestry research agency in Canada. Support from partners (funding and in some cases complementary programs) was also identified as critical to the success of the VW industry advisor component. As an example, in 2009-10, FedNor and the province of Ontario contributed $800,000, which was added to VW resources to fund the Northern Ontario Value-Added Initiative (NOVA). NOVA was delivered by five industry advisors who provided technical advice and support for projects for firms in the value-added forestry sector.
  • VW R&D Working Group and Research Advisory Committee (RAC) link industry priorities to research, but some see the need to further strengthen this relationship: Several interviewees reported that the VW R&D Working Group and RAC provide effective linkages between research providers and the value-added wood products sector. The recent addition of new members to the RAC from the value-added wood products sector was also viewed positively by interviewees, as it improves the linkages between the project selection process and the needs of the value-added wood products sector. However, concerns about the current project selection and delivery process were raised at a 2009 R&D Working Group meeting. The minutes of the meeting indicated the importance of having an effective and engaged project champion from the RAC to improve project relevance and success. Some interviewees also suggested that each project have a champion from industry, and contain a plan for the utilization of results. Some interviewees felt that the selection process needs to be modified to ensure that projects are more industry-focused, based more on industry needs, and less on researchers’ interests.
  • Industry’s awareness of research with implications for new product or process development is important for success: Industryutilization of research depends upon the extent to which relevant firms are aware of it. For example, the I-Joist case study found that fully realizing the potential for this research would mean that each I-joist component provider and manufacturer is aware of the research and has the technical capacity, resources and willingness to take advantage of the results. This is the major factor affecting utilization of the results. Based on interviews conducted in gathering evidence for this case study, at least one major Canadian I-joist manufacturer was not aware of the I-joist research funded by the Program.
  • Research component is negatively impacted by a mismatch between VW project funding sunsets and the university funding cycle: Minutes of a 2009 R&D Working Group MeetingFootnote 85 describe concerns with the research project selection process. The two year renewal was considered to be restrictive, and incompatible with the university funding cycle. Interviewees commented that VW project funding is not long enough to support a PhD project and therefore most projects are carried out by research associates and/or master’s students.
  • Some concerned over quality of VW research proposals: Some interviewees were concerned about the scientific quality of some research proposals and suggested that to improve quality, proposals should undergo peer review as an initial step. Several reported that, in a few cases, proposed research projects would have repeated previous research, not recognizing that related work had already been done. While these projects were ultimately not funded, there is potential for such projects to impact on the availability of resources for new research areas.
  • The economic crisis in the forestry sector has been particularly pronounced for value-added firms and limits their ability to participate: Many interviewees reported that the present economic downturn is a major negative factor for the value-added wood products sector. The downturn has caused some firms to go out of business, and many more to lay-off staff and lose technical expertise. Firms that have stayed in business have been described as busy, just surviving. As a result, companies have fewer financial and human resources and are less able to take advantage of VW support.
  • Foreign competition for value-added products producers in traditionally Canadian markets: China continues to be a strong player in the wood products market, particularly in the United States. The economic analysis found that, in 2008, China surpassed Canada as the largest source of U.S. wood product imports. In 2009, China accounted for 36% of all U.S. wood products imports, followed by Canada at 27%. This increased level of competition in Canada’s primary wood products market likely contributes to smaller available market share for Canadian value-added wood products producers.

4.2.3 Have there been unintended (positive or negative) outcomes?

Strategic Level Findings and Summary - Unintended Outcomes

The evaluation identified few significant negative unintended outcomes for the Market Development programs overall. It is worth noting that the Green Building Case Study found that while CWEP, NAWF, and VW have not specifically focused on the green building market, their efforts are making wood more attractive in that context. VW research contributes to reduced environmental impacts and efficiencies, and NAWF and CWEP wood promotion efforts showcase wood to governments that are increasingly sensitive to green building issues. This is likely contributing to increased wood use.

The only major unintended consequence reported was for CWEP. Concerns were raised about the overburdening of Canada Wood Group offices with the increase in demonstration projects, particularly in China. Other unintended outcomes were positive. For NAWF, it was noted that U.S. WoodWorks’ partnership with RISA Technologies LLP to develop wood design software module has resulted in at least one competitor entering the market with a competitive product, thus increasing the availability of wood design software. VW research projects have also occasionally resulted in completion of graduate and post-graduate training and, in follow-on proprietary research work, to develop specific applications of VW research for industry firms.

CWEP

The enhanced in-market coordination of Canadian market development efforts provided by the Canada Wood Group Offices has become an integral component of program delivery. However, a number of stakeholders were concerned about the extent to which recent, large demonstration projects have had an impact on their ability to deliver base program activities of monitoring and supporting the ongoing wood frame construction promotion efforts in these countries. These interviewees referred specifically to the impact of demonstration projects in China over the last two years (i.e., the Wenchuan reconstruction effort, and the Economic Action Plan demonstration projects).

NAWF

The partnership between the U.S. WoodWorks Program and RISA was found to influence other design software providers to develop similar wood modules. The U.S. WoodWorks evaluation found that Bentley (owns RAM structural design software program), the other largest design software provider, has partnered with APA-The Engineered Wood Association to incorporate a wood module in its design software in response to the RISA module. This will likely complement the programs’ educational and promotional efforts to increase the use of wood in non-residential construction.Footnote 86

VW

Some interviewees noted that VW-funded research projects occasionally result in training of highly-qualified personnel. Although many projects are too short to utilize a student, in some cases, masters and doctoral students are involved and some former students are now working in industry and government after having completed their studies. Universities and FPInnovations have also reported receiving some follow-on contract work as a result of the VW research program and VW-funded projects. This contract work usually involves further confidential and proprietary development and implementation of generic results of VW projects for industry.

4.3 Performance – Efficiency and Economy

This section of the report presents the assessment of the efficiency and economy of the Securing Forest Products Markets Market Development Component programs, addressing the following issues:

  • the extent to which the design of the programs facilitate the achievement of their outcomes in an economic and efficient way;
  • other factors that influence their efficiency and economy; and
  • additional activities that could be undertaken within the programs’ mandates.

4.3.1 To what extent does the design of the programs facilitate the achievement of their outcomes in an economic and efficient way? What other factors (internal/external) influence the programs’ efficiency and economy?

Strategic Level Findings and Summary – Efficiency and Economy

The Market Development programs are generally being delivered in an efficient and economic way. The strong focus on cooperation and collaboration among all key stakeholders has increased program capacity and avoided any significant duplication. The programs have also benefited from engaging with complementary programs to effectively support the achievement of objectives. The Market Development programs have also successfully leveraged resources from federal and provincial government partners. However, there is some evidence that increased industry engagement would improve the delivery of these programs, and that CWEP and NAWF would benefit from improved provincial leveraging outside of B.C.

CWEP

CWEP design facilitates the efficient achievement of outcomes by strengthening relationships and securing cooperation among Canadian industry associations and industry members. CWEP investments in offshore infrastructure and Canada Wood Offices is an efficient means of building and maintaining relationships in offshore markets. These investments have generated significant capacity which is also being used to support other complementary funding programs. CWEP leverages funding from its main provincial partners in B.C. and Quebec, but industry’s share of funding has remained relatively low.

Evidence
  • Canada Wood Offices efficiently deliver CWEP activities through long-term infrastructure investments: Program design and delivery have evolved since CWEP's inception. The formation of the Canada Wood Group in 2004 has increased cooperation, coordination and collaboration among industry associations and contributes significantly to the economy and efficiency of program delivery. The investment in offshore infrastructure and the Canada Wood Offices has built significant capacity through in-market presence and building of networks which is being used to support other funding programs. For example, to ensure that demonstration projects in China are built to code, the Canada Wood office is providing quality assurance programming and training.
  • Canada Wood Offices facilitate multi-program cooperation in target markets: Industry association and government interviewees reported significant cooperation on a number of other federal and provincial offshore initiatives which can support the CWEP objectives. The Canada Wood Offices in the U.K., Japan, China and South Korea are a platform for the delivery of other programs (e.g., LEAF, IFPP, demonstration projects). Interviewees from the Canada Wood Offices and the associations generally felt that these other programs are complementary to CWEP and, when delivered in combination with other activities (such as seminars, training programs, market access/codes and standards revisions, etc.), contribute to the achievement of CWEP objectives.
  • Delivery through industry associations efficiently aligns the program with industry priorities: The delivery of CWEP activities by industry associations is viewed by stakeholders as an efficient way to ensure that activities are aligned with industries’ priorities in the product areas represented by the associations. The Program design leverages the expertise of industry associations, some of which have been operating in offshore markets for decades (e.g., COFI, FPAC).
  • CWEP leverages funds from provinces and industry, however contributions from provincial governments outside of B.C. and from industry remain low: The Program funds up to 50% of total project costs with the balance coming from industry associations and the provinces. As shown in Exhibit 8 of this evaluation report, industry’s total contributions to CWEP-supported projects from 2006-07 to 2009-10 has been just 16% of total expenditures in CWEP-supported projects. Similarly, the governments of Quebec and Ontario contributed just 2% of the total funding to CWEP-supported projects over this period compared to 32% from B.C. The significant BC-FII contributions available to project proponents make it easier for B.C. associations to propose projects for CWEP funding as FII has a significant budget for these activities, leaving less for the private sector to fund. This design efficiently coordinates CWEP-BC FII efforts but it may have an impact on CWEP project selection, biasing the program towards B.C. industry priorities and target markets (e.g., a bias towards investment promoting B.C. wood products and in Asian markets). CWEP does make efforts to select projects proposed by Eastern wood products associations for funding. However, fewer of these are proposed because of the greater resources required from industry in that region compared to B.C.
NAWF

Given that NAWF has a short operational history, it is difficult to assess the efficiency and economy of the Program. Similar to CWEP, NAWF has worked closely with key forest sector assistance programs linked to provincial governments. This is viewed by some as a positive model of collaboration which avoids duplication and takes advantage of complementary programs to gain efficiencies.

Evidence
  • NAWF leverages funds from provinces and industry to increase economy of NRCan spending, but investments from outside of B.C. are low: NAWF funds up to 50% of the cost of U.S. WoodWorks, WoodWorks, and Cecobois activities. Given the history of the WoodWorks initiative in Canada (which began in 1998), NAWF focused its support on increasing the overall size of the initiative by specifying that its contributions were to be for incremental activities. Consequently, WoodWorks grew to a $3.1 million initiative with NRCan contributing approximately 34% of the entire value of the initiative. Overall, NAWF’s leveraged investments include 20.8% from industry associations, 9.5% from B.C., 16.9% from other provinces, and 5.1% from other sources (i.e., federal departments and universities). The evaluation found that with respect to Canadian operations, the WoodWorks initiatives in Alberta and Ontario have much lower profiles than do the activities in B.C. However, overall, the program funding arrangements effectively leverage provincial and industry investment in program activities.
  • The U.S. WoodWorks evaluation found that the program delivery model is efficient: Program staff, Regional Advisory Committee members and board members all agreed that U.S. WoodWorks is effectively delivered. They attributed this to the close alignment between services/resources and the needs of the target audience groups, and the dedication and experience of program staff at running similar market development programs.Footnote 87
  • Governance structure of NAWF-funded programs: Overall, the NAWF-funded initiatives are seen as well managed. However, there was some concern expressed by a few interviewees related to the specific governance structure for U.S. WoodWorks as being too “layered” – potentially reducing efficiency and transparency. Conversely, the governance of Cecobois was identified by some interviewees as a good model due to its clear and transparent decision making approach.
VW

VW is generally considered to be delivered efficiently and effectively. The Program has successfully leveraged funding from federal and provincial government partners. VW was also seen to take advantage of complementary programs to effectively support its activities. It was noted, however, that leveraging participation from the private sector has been challenging, particularly in the context of the current economic climate, and that communication of research results to industry could be improved.

Evidence
  • VW leverages funding from other federal and provincial programs: Interviewees reported that the Technology Transfer Component of VW is delivered efficiently and effectively through collaborative agreements with federal regional development agencies (WED, ACOA, FedNor, and CEDQ) and provincial partners. Through these agreements, partners provide co-funding, and in some cases dovetail their technology support programs for the value-added forest sector with VW. For example, in 2009-2010, VW provided $1,000,000 and its partners $3,541,000 to fund the Industry Advisor Network. Interviewees reported that this program design provides a pan-Canadian, nationally coordinated program, with the ability to respond to differing regional needs. Some interviewees noted the complementarity between the VW research component (which focuses on short-term solutions identified by the sector) and NSERC forestry related projects (which fund more fundamental long-term research).
  • VW collaboration with other technology transfer programs has expanded reach of its technology transfer activities: Interviewees noted that while there are no other technology transfer programs specifically for the value-added forestry sector, the National Research Council's Industrial Research Assistance Program (IRAP) delivered by over 200 industrial technology advisors across Canada has been a key partner. Examples of cooperative projects include market research and engineering studies associated with cross-laminated wood panels for modular building assembly, a new product. According to interviews with VW staff and industry advisors, VW and IRAP work together to meet client needs on numerous projects. IRAP projects are typically larger than the short-term problem-solving projects normally carried out by VW.Footnote 88 Interviewees also identified similar partnership with the Canadian Manufacturers and Exporters Association Technology Support Program. By working cooperatively with other technology transfer programs, VW services are delivered efficiently and economically.
  • VW technology transfer activities seen as efficient by some interviewees: Some interviewees reported that the workshops, seminars and webinars funded by VW and delivered by FPInnovations were effective means of efficiently communicating with a group of firms with similar interests and needs.
  • Efficiency of VW research component is potentially hindered by perceived difficulties communicating research to industry: Some interviewees expressed concern about the VW research component, noting that the university culture is not well aligned with the VW objective of responding to the immediate needs of value-added firms through short-term research projects. Several interviewees commented that university researchers are not skilled in technology transfer, and that the language in research reports is often too academic for companies to easily understand. Some interviewees felt that there is a need to involve companies more directly in research projects and that not all work needs to be done at universities or FPInnovations.
  • Difficulty leveraging industry participation during current economic climate: Some interviewees noted that engaging the private sector to participate in VW is especially challenging during these difficult economic times when firms are more focused on short-term survival and do not have the resources (time or in-kind contributions) available for longer-term investments.

4.3.2 Are there any additional activities not being undertaken by the programs that would fall within their mandates and would be helpful in achieving their objectives?

Strategic Level Findings and Summary – Additional Activities

The evaluation did not identify any additional activities that could be undertaken by the market development programs, although some suggestions were made by stakeholders for improving the programs by augmenting certain aspects of them. Incorporating demonstration projects into the program offerings figured prominently among suggestions for CWEP and NAWF to compliment existing efforts.

It was also suggested that CWEP examine the applicability of activities to the value-added wood products sector and that NAWF expand activities into new markets and develop more web-based activities. Suggested program improvements for VW generally referred to the applicability of research results and included increased engagement of industry, improved linkages with provinces on research priorities, and improved awareness of VW as a brand within industry.

CWEP

In general, interviewees are satisfied with the breadth of activities supported by the program, and the linkages between the three funded areas (market presence or infrastructure, branding and market access). The main suggestion for additional activity concerned support for demonstration projects. CWEP does not currently fund demonstrations, but Canada Wood Group Offices have recently been providing support to such projects. It was also suggested that CWEP take into consideration the different market development needs of commodity vs. value-added producers. Some also suggested focusing activities in China on a narrower range of issues.

Evidence
  • Demonstration projects seen as effective and necessary to building on CWEP activities: Demonstration projects are viewed by industry and associations as cost-effective and a necessary market development tool when combined with other activities such as codes and standards, awareness building, education, etc. CWEP activities and the demonstration projects conducted in target markets have been mutually supportive. The CWEP design does not provide for demonstration funding; however, the majority of interviewees felt that demonstration projects are a key element of an effective market development strategy in some countries.
  • Reconsidering the mix of CWEP-funded activities vis-à-vis higher value product promotion: A few industry and government stakeholders noted that there is a difference in the applicability of CWEP activities between primary commodity wood products producers and value-added products producers. Primary commodity producers (e.g., lumber producers) tend to be larger firms and compete on the basis of price and often face market access issues in the forms of unfavorable codes, standards, compliance, product testing requirements, etc., which CWEP is well-positioned to address. Manufacturers of value-added products tend to be small and medium sized enterprises and require market development support in the form of introductions to potential buyers, market intelligence, and export readiness. This type of assistance can be delivered through large events funded by CWEP such as the Global Buyers Mission in B.C. However, the one-on-one support some interviewees say is needed is resource intensive and the Program is not designed to support this type of activity to any large extent. While it’s not the mandate of CWEP necessarily, it is noteworthy that the Program is not well suited to the needs of value-added exporters which could be important for increasing the value of Canadian exports to target markets. Marketing high-end products to niche clients requires more targeted investment and is different from CWEP’s current activities which generally promote more ‘standard’ wood products such as lumber, and secondary wood products.
  • Some suggest narrowing the range of activities in China: In the case of China, several interviewees suggested that a better focus (i.e., fewer activities) is needed and that priorities should be determined in consultation with industry, based on market demand (e.g., low-rise hybrid projects) and Canada Wood China’s demonstrated strengths (e.g., quality assurance and training).
NAWF

The NAWF initiative is seen by stakeholders as early in its development but very effective in its short existence. For this reason, interviewees did not suggest any activities beyond those currently offered under the initiatives. However, some suggestions in terms of expanding current activities were made, including demonstrations of wood construction to municipalities.

Evidence
  • Engineers and architects suggest more demonstrations of wood construction results to municipalities: The 2010 WoodWorks ROI Study concluded that very little about the scope and character of the activities of the program should change. They did, however, note that engineers and architects felt that making further efforts to reach out to municipalities, to demonstrate how wood institutional structures have benefitted communities across the province could improve program results. There is a perceived need to concretely demonstrate results with wood construction. It should be noted that WoodWorks and Cecobois both produce case study reports on applications of wood in non-residential construction for public consumption through their program websites. However, perhaps more targeted use of this information could be helpful.
  • U.S. WoodWorks should consider improving productivity by taking greater advantage of distance technologies as well as social media marketing: The 2010 U.S. WoodWorks evaluation only suggested one new type of activity for the initiative – place increasing emphasis on web-based educational events. According to the evaluation, webinars are more efficient than in-person educational events since, for a fraction of the cost for one in-person event, the Program can host numerous webinars. In addition, webinar information/content can be stored/accessed later which is beneficial when learning/reviewing highly technical content and the feedback from target audience groups on webinars has been positive so far.Footnote 89.
  • Some suggested expanding NAWF activities and target markets: A few interviewees and industry association survey respondents suggested expanding NAWF activities to include other regions, construction types and products (e.g., multi-storey condominiums). However, these views were not widely held. Both the 2010 WoodWorks ROI Study and U.S. WoodWorks evaluation concluded that program funders should consider expanding these initiatives to other markets given the apparent success of the approach in the B.C., California, north central, and southeast United States.
VW

Most interviewees held very positive opinions of VW. That said, some stakeholders suggested making changes to specific aspects of VW in order to improve the relevance and early application of funded research for industry. Interviewees suggested several additional initiatives and activities that would be helpful for achieving VW objectives through the funded research element in particular.

Evidence
  • Add a method for improving application and communication of research results for industry: Some interviewees suggested improving the application of the results of research projects by industry. For example, the VW Program could add an initiative similar to the Short-Term Competitiveness Initiative (STCI), which is available only to FPInnovations members. STCI provides funding to firms to pilot the application of research results and support knowledge transfer to industry. A related suggestion recommending greater industry involvement was that research projects did not have to be carried out only at FPInnovations or a university, and that some elements could involve the production facilities of an interested firm.
  • Improve awareness of VW among the provinces: Some interviewees suggested improving awareness and support for VW among partners and the target value-added sector. Several provincial interviewees suggested ways to improve support from the provinces. It was noted that the Technology Transfer Network had not met recently which had affected awareness of VW in the provinces. Some reported that efforts to improve linkages with provincial departments and programs could lead to increased support for VW projects in terms of project funding and program delivery assistance (e.g., Ontario Ministry of Northern Mines and Economic Development field officers could promote VW and provide linkages to potential clients).
  • Consider marketing the VW brand of activities to the value-added wood products sector: Some interviewees commented on the need to promote and market VW to the value-added sector. It is possible that insufficient promotion and marketing of VW has produced some confusion amongst firms about who was eligible for VW services. It appears that some clients consider VW services as being received from FPInnovations, when in fact they are delivered by FPInnovations but paid for by NRCan. Interviewed industry advisors revealed that some firms may believe that they would have to become a member of FPInnovations and pay membership fees in order to receive VW support. It was suggested that VW could engage the industry advisors in developing a marketing strategy for the Program since they are in close contact with the target client group.
  • Consider adjusting the project selection process to better reflect province and industry needs: While many interviewees felt positively about the project selection process, a number of them also suggested improvements. The two most frequently cited suggestions were to make greater efforts to identify industry needs to help researchers propose relevant projects; and to find ways for provinces to provide input on needs in their regions. To this end, some interviewees suggested that there be an industry champion for each research project to ensure relevance and a commercialization strategy to support the transfer of research results to industry application (note that over the course of this evaluation, VW decided to assign an industry champion from the RAC for each approved project). Others suggested that firms be more directly involved in research projects, through mill trials, etc.

5.0 Conclusions and Implications for Future Programming

Recommendation 1: For the Value to Wood Program, CFS should implement mechanisms to better engage industry to ensure that future research will meet industry needs.

Advances in the technology for wood use have been an important contributor to wood being specified in more residential and non-residential applications, as well as the development of new products and process for value-added producers. Technological innovation is, and will continue to be a key component of expanding market opportunities for wood products. VW activities are well suited to this in general, but industry engagement on research priorities has suffered during the recent period of industry restructuring and the global economic crisis. Industry stakeholders perceive there to be greater potential for VW research and technology transfer to contribute to improved products and processes that address their needs. There is also an opportunity for industry to help VW play a stronger role in meeting research needs (e.g., addressing technical barriers), including perhaps those identified for CWEP and NAWF. Currently there is no officially articulated link.


Recommendation 2: CFS should ensure more equitable opportunities for wood products industry associations in all provinces and a broader mix of wood products industry sectors to participate in the Canada Wood Export and North America Wood First Programs.

Developing strong partnerships and coordination with industry, provinces, and the research community has been a strong element of the Market Development programming.
The close relationships with the B.C. and Quebec forest products industries including the larger producers and complimentary provincial programs (i.e. B.C.-FII) have been valuable. However, participation from other forestry regions including Alberta and Ontario has been minimal so far. Concerns were also raised that the associations of larger forest products companies are generally more able to take advantage of CWEP and NAWF than are associations of smaller and value-added producers.


Recommendation 3: CFS should implement a performance measurement approach for its North America Wood First-funded initiatives similar to that implemented by the Wood Products Council for U.S. Woodworks.

Performance measurement for the market development programs has improved since the last time they were evaluated. There are still opportunities for improvement, particularly with respect to NAWF-funded initiatives. For example, the evaluation was unable to identify the specific impacts of NAWF programming on Canadian suppliers (due in part to the fact that NAWF is not permitted to promote Canadian products specifically), and found the approach to measuring influence of activities on wood use in non-residential construction to vary considerably across WoodWorks, Cecobois, and U.S. WoodWorks. However, the evaluation found that the performance measurement system established by the Wood Products Council for the U.S. WoodWorks initiative may be a strong model to follow. For example, degree of influence on wood use in non-residential construction projects is based on standardized criteria related to the level of program involvement in the decision to use wood. This system also includes establishing baseline measures on perception of wood in target markets, and setting clear expectations for program achievements that are regularly measured.


Recommendation 4: CFS should consider how best to encourage greater industry investment to maintain market development efforts in rapidly growing markets such as China and others.

The high level of coordination between B.C.-FII and CWEP for market development activities in China has meant that industry’s contribution of funding for these activities has remained small. As this market is experiencing significant growth for Canadian producers, there is an opportunity to increase the industry contribution to this effort.