Thank you very much for this opportunity to talk to you all here today regarding your study of the July 1 legal agreement text. I'm here in my capacity as the executive director of the Canadian Lumber Remanufacturers Alliance. This group represents leading independent remanufacturers of softwood lumber, with operations in Alberta, Manitoba, Ontario, Quebec, and the Maritimes.
Before I begin, I remind you that the CLRA and its members are different from the rest of the Canadian lumber industry. They have unique circumstances. Generally, these operations are small, privately held, family-run businesses. They don't hold rights to crown tenure, they don't process logs, and they are not owned or controlled by those operations that do. This is what makes them unique. This is what makes them independent.
The manufacturing process for these operations begins with sawn lumber. This lumber is purchased at arm's length. They bring value by further processing the commodity, and they do this here in Canada, on this side of the border, in communities just like those located in your constituency.
For the CLRA and its members, the softwood legal text initialled on July 1 is not perfect. A lot of blanks still need to be filled in, and more work at the operational level has to be done.
For the benefit of the committee, I'll limit my comments to three areas: the select sections of the agreement that we do support, the operational areas that still require clarification and further work before implementation, and the outstanding items that do not form part of this proposed agreement.
Although not perfect, this deal does represent some significant progress. This is critical. For the first time in the history of this dispute, independent manufacturers of remanufactured softwood lumber are recognized as a distinct class of exporters. Moving forward, this distinction between tenure and non-tenure holders will be profound. This will facilitate the distinct recognition of this group as a distinct sector in any future litigation efforts.
Further, the agreement does offer a broad approach for remanufactured product scope. This, again, is novel. It is an approach to product scope based not on a stagnant product list, but rather, on recognition of accepted processes, and any output from these processes is recognized as a legitimate remanufactured process. This recognizes the reality that remanufacturers in Canada produce all lumber types, from basic 2x4s to window and door frame components, and more. Again, this is significant and new. What is critical here is not what lumber product is being made, but rather, who is making it and how they are making it.
Finally, independent remanufacturers are being offered an FOB first-mill export price. This is not perfect and it's a far cry from the exemption or exclusion we have been asking for and are entitled to. Nonetheless, it is a step towards a level playing field. This will, in part, help to get these producers back exporting. This must be a starting point, as the status quo is not an option.
These are some of the positive elements of the legal text.
For the first time, recognition has been extended to a distinct class of independent Canadian exporters. This is critical for the group having its rights and claims recognized in the future. You have to appreciate that the dispute has been devastating for Canada's independent remanners. Over the dispute period, we have enjoyed little government support. We have experienced a lot of disproportionate economic injury. The irony is that we are widely regarded as collateral damage or innocent victims in a trade war aimed at and being fought over tenure in logs.
When Minister Emerson appeared before you previously, he stated that Canada's independent remanufacturers experienced disproportionate economic injury. He added that, going forward, we need to ensure that the remanners, as a group, benefit disproportionately.
In terms of operational matters, we still need to work with officials on several important issues to make sure the government delivers on the disproportionate benefits moving forward. Of course, we look forward to working with Revenue Canada on the certification process for independents and those types of issues, but we also have to work to ensure that we make up what we lost.
A sample of our members from Ontario clearly illustrates and confirms a national trend. Over the dispute period, which is also the reference period for the agreement, remanufacturers lost 65% to 80% of their U.S. exports, depending on the province. This is the quota gap. We have to make up for this gap on the Canadian side. We are looking to the federal government and the provinces to establish a special quota set-aside to make up for these losses experienced over the dispute.
When the dispute began, reman exports to the U.S. accounted for 7% to 10% of Canada's total. Now, remanners account for around 3%. We cannot simply shrug our shoulders now and walk away from these losses. We want allocations made on traditional pre-dispute export levels. This is the only way to fairly ensure that the hardships of the dispute are not made permanent for independent remanners over the full term of the agreement.
We also have to work with government officials on the rules for interprovincial trade in lumber and province of declaration requirements. It's important to remember that remanners buy and process lumber from multiple regions. We need clear rules on how quota will be allocated to remanners in other regions and how lumber from a quota region is treated when further processed and exported from a region that opted for the tax.
Finally, it's critical that independent producers have representation on all boards, committees, working groups, and dispute panels to be established under this agreement. Again, we look forward to working with officials to see that this is the case. Full recognition requires direct representation.
In conclusion, Canada's wins on lumber have always been incremental--the maritime exemption, the exclusion of the border mills. On this continuum, independent remanufacturers across all provinces are the next to get out. Although the agreement before you does not deliver on this, it is a step in the right direction. We are Canada's next big win.
We want to work with the government and put in place a tracking system to monitor shipments from independent producers over the agreement. When the next dispute erupts--and it will erupt--we want to ensure that Canada can deliver on our legitimate claim to exemption. Without a deal now, Canada's small and medium-sized independent remanufacturers are at serious risk of becoming extinct. We cannot afford the status quo. This is not an option for our group. For those who say Canada can do better without this deal, ask them what they propose in the interim for the small and medium-sized producers who are on the brink.
To sum it up, it's not a perfect deal, but it's a deal that puts us on an important step towards a level playing field.
Thank you very much.