China is after Canada’s pulp and paper industry – it’s a national-security issue -- (Opinion)

Written by Robert Dimitrieff, chief executive officer of Patriot Forge Co., a metalworking company in Canada. He also serves on the International Economic Policy Council of the C.D. Howe Institute.

In the shadow of escalating global conflicts and the pressing demand for military supplies, a critical component of national security is being overlooked: the strategic importance of pulp and paper. Traditionally seen as mundane commodities, these materials are in fact pivotal in the production of military-grade components such as nitrocellulose, a key ingredient in artillery ammunition.

Canada, home to vast tracts of forest, has long been a powerhouse in pulp and paper production. Yet, recent developments raise concerns about national security.

The March, 2023, acquisition of Resolute Forest Products by privately held Paper Excellence – among other purchases of Canadian producers by parties related to foreign corporations, notably from China – places these essential resources under the control of overseas interests.

Paper Excellence, despite being based in British Columbia, is controlled by a member of a Chinese-Indonesian business dynasty and has already amassed a sizable share of Canada’s forest products industry. While Paper Excellence denies this, a whistle-blower has called the company’s rapid North American expansion since 2007 a “fibre grab” for China in an investigation by the International Consortium of Investigative Journalists and 39 media outlets, including the CBC and Glacier Media.

NDP MP Charlie Angus raised concerns about this issue during a meeting of the House of Commons Standing Committee on Natural Resources back in March, 2023. I could not agree more with his assertion.

The fact is this shift not only threatens to redirect essential supplies during crises but also exposes Canada to geopolitical vulnerabilities.

Nitrocellulose, or guncotton, is produced primarily from wood pulp and is critical for producing smokeless gunpowder used in military ammunition. Currently, China dominates the global nitrocellulose market, controlling the production and export of this vital material. Europe’s dependency on Chinese nitrocellulose has already led to supply shortages, hampering efforts to support Ukraine amidst its ongoing conflict with Russia.

There is a reason foreign entities are trying to control a significant portion of Canada’s pulp production: Our country is a crucial player in the supply chains for these military components.

The Canadian government’s failure to recognize the strategic military applications of the pulp and paper sector during national-security reviews reflects a broader lack of awareness of the importance of maintaining control over critical supply chains.

Even more ironic is the fact that industrial processes required for the production of nitric acid, sulphuric acid and toluene are tightly correlated with hydrogen production, a sector the government of Canada has targeted for development.

Again, one can see that a wider and more detailed understanding of the supply chain networks for critical infrastructure and national security, and their intrinsic role in supporting the defence industrial base, is being greatly overlooked by our policy makers.

To safeguard national security and economic sovereignty, I believe Canada must re-evaluate its strategic industries through the lens of contemporary global challenges. This re-evaluation should include:

• Policy reforms: Implement policies that incentivize the production of high-value derivatives such as nitrocellulose, toluene and other core defence inputs within Canada.
• Strategic partnerships: Foster partnerships within the North Atlantic Treaty Organization and with other allies to secure and stabilize supply chains for critical military components; if NATO ammunition producers are sourcing guncotton from China and are worried about the potential risks of this, there is a natural opportunity to de-risk and source from Canada directly.
• Investment in domestic capabilities: Encourage investment in sectors that support defence needs, such as nitrocellulose and the other key materials required for a sovereign defence production capability. In nearly all cases these are dual-use technologies that aid in securing our modern way of life and not only defending it.

As the global landscape becomes increasingly precarious, Canada must not only protect but also strategically leverage its natural resources and industrial capabilities. Ensuring national security in an era of uncertainty requires recognition that industry is not just about economic benefits to individuals or governments.

Even industrial sectors that during peacetime are not directly considered part of the defence industry, such as pulp and paper, must be protected and maintained in the interests of national security.

In redefining how we view these resources and the existing capabilities within Canadian industry, Canada can strengthen its position both as a global leader in sustainable resource management and a reliable defender of the free world.