It has been an especially challenging year for the economy in northern Manitoban.

Beyond the potential closure of the Port of Churchill and the Hudson Bay railroad, British Columbia-based Tolko Industries announced in August 2016 its intent to close a pulp-and-paper mill that has operated in The Pas for more than 40 years. This could result in more than 300 lost jobs and hurt several other contractors engaged in the region’s forestry industry.

While an international company has reportedly expressed interest in acquiring the Tolko paper mill, there is more trouble on the horizon for Manitoban forestry: It is unlikely that a new U.S.-Canada Softwood Lumber Agreement (SLA) will be reached by the end of the year. This carries with it the prospect of higher tariffs on Canadian softwood lumber bound for the United States and its recovering housing market.

Forestry is not as significant an industry for Manitoba as it is for some other Canadian provinces; Manitoba accounts for just one per cent of Canada’s total lumber exports.* Given the province’s geographic location in the centre of North America, Manitoba faces bigger challenges getting its products to Asia-Pacific markets for its forest products than B.C. and Alberta. Instead, the prosperity – and, indeed, the viability – of Manitoban forestry has hinged on its access to the U.S. Higher tariffs on softwood lumber would have an even worse impact on the livelihoods of northern Manitobans than the closure of the Tolko mill.

Manitoban forestry is diversifying its markets, and that might spare the sector some of the pain of failed SLA negotiations. In 2015, the value of Manitoba’s softwood lumber exports to Malaysia exceeded $330,000, while Japan and China received lumber worth approximately $191,000 and $157,000 respectively.*

The U.S. still accounts for roughly 99.3 per cent of Manitoba’s softwood lumber exports, but new markets could be further developed, especially given the tariff reductions on softwood lumber that would be secured from Japan through membership in the Trans-Pacific Partnership (TPP). Although political considerations have delayed overseas travel for Premier Brian Pallister and his newly elected government, it is important that these Asian markets be priority international destinations. This applies to other sectors of the Manitoban economy as well.

The Northern Forest Diversification Centre (NFDC), established in 2000 by the University College of the North in The Pas, has also played a valuable role in diversifying the kinds of products that are developed by the region’s forestry industry beyond timber, pulp, and paper. Specifically, this has entailed incorporating bark into herbal teas, lip and skin salves, and even birch wine.

The Manitoban government is also supporting the use of biomass-fueled power, which uses waste products from the forestry industry, as a heating fuel source.

But these products are mainly intended for niche markets and would not on their own carry the industry through increased U.S. tariffs on softwood lumber. Manitoba must invest more heavily in the research and development of value-added forest products if northern Manitoba is to thrive in the coming years.

Of the total provincial land area, which spans 63.6 million hectares, 36.4 million hectares or 57.1 per cent is comprised of forest and other wooded areas. Much of this is oak, maple, birch, and hickory – hardwood varieties, not softwood. Manufacturing jobs could be created by producing quality furniture and other hardwood goods, and then promoting these among discerning European and Asian customers.

Manitoba has not yet harnessed its hardwood potential, as much of the relevant forested lands enjoy protected status. To address this, the forestry industry should seek deeper partnerships with First Nations communities in the region, ensuring inclusive economic development in the future. The drive by Mathias Colomb Cree Nation and a consortium of other indigenous groups to purchase the Port of Churchill demonstrates the desire among First Nations to be active participants in the northern Manitoban economy. The partnership formed in 2006 between B.C.-based Ainsworth Lumber Company and the First Nations Forestry Limited Partnership (FNLP) to develop hardwood inventory in Manitoba’s Interlake region should be looked to as a model.

Manitoban forestry has been left out on a limb by the lingering softwood lumber dispute between Canada and the U.S., despite the industry’s tremendous potential for growth. Branching out into new markets, establishing new relationships with First Nations, and innovating new products will give forestry more staying power, so long as there is sufficient interest among the province’s political leadership and business community.

*Trade figures obtained from the Canadian International Merchandise Trade (CIMT) database maintained by Statistics Canada

– Paul Pryce is a frequent writer on public policy and economic trends in western Canada