Canada is home to about 10 percent of the world's forests, and more than 90 percent of the country's forestland is government owned.

The report, which was light on specifics, said the forests will feel the impact of global warming even if steps are taken internationally to reduce emissions of greenhouse gasses linked to climate change.

Potential problems include more large-scale fires in Western and Northern Canada, outbreaks of tree-eating insects that are normally controlled by cold weather, and wetter conditions and ice storms in Atlantic Canada.

The country must also look at using some of its forest as "carbon sinks" that can offset greenhouse gas emissions by capturing and storing carbon dioxide from the air, according to the report, which is still subject to public comment.

Canada must recognize that changing technology has made its lumber and paper firms less competitive with those in other countries with lower labour costs, but the traditional way of dealing with that situation will not work in the future.

"Investments to reduce costs and increase efficiency in commodity paper and lumber production can slow this trend, but they cannot stop it," the report warns.

Canada's forest industry exported about C$38.2 billion (US$37.5 billion) in products in 2006.

(US$1=$1.02 Canadian)