Thank you very much.
My name is Bill Reedy, as you heard. I am an owner and the president of Gorman Bros. Lumber Ltd. I'd like to thank you for the opportunity to speak to this committee.
Gorman Bros. is a family-owned business located in Westbank, British Columbia. We've been in business for 55 years. We employ 350 people and contract another 125 to work in the forests. We've spent the last 10 years developing an extremely high-end product and carving out a niche market for it.
To be blunt, we feel like Alice in Wonderland: all logic and reason appears to have been abandoned. This agreement is an abomination. Collectively, we have spent four years and more than $200 million to prove, once and for all, that the forest companies of Canada are not subsidized. All decisions by U.S.-dominated trade panels have unanimously stated that there is no basis or justification for the current duties on softwood lumber. It is incomprehensible why anyone would refuse to allow the final legal ruling to be made in our favour; give away $1 billion of our money, which was taken illegally; and then turn around and put an export tax on our products, effectively acknowledging that we are subsidized.
For the Prime Minister, Mr. Emerson, and this government to participate in this total capitulation to use pressure illegally is an unforgivable abdication of the trust and responsibility assumed by those taking these elected offices.
We are a specialty mill that produces only one-inch boards and the products made from them. We do not produce any dimensional lumber used in constructing wood-frame homes. Our products are used for decorative finishing, furniture, and mouldings. No mill in the United States is capable of producing spruce or lodgepole pine boards equal to our product. The demand for our boards is so strong that we have not been able to take on a new customer for more than five years, even though we have increased production every year.
Most importantly, our boards have no impact on the sales of U.S. board producers, as we sell to customers who do not want their lower-quality products. If you review Random Lengths, an independent survey of the average selling prices for boards, you'll see that our product is priced between $50 and $130 U.S. per thousand board feet, which is higher than any other product on the market. On top of this, our customers must pay significantly higher freight costs to get our boards.
This absolute fact, which can be substantiated by anyone who wishes to do so, is clear proof that neither are our boards the cause of lower lumber prices, nor are they sold at less than market value because they are allegedly subsidized. There is no reason for any of our products to be included in this dispute.
We've managed to survive because 10% of our production was excluded by law from the duty. These products were known as end-matched boards. As a last-minute strong-arm tactic, the coalition recently had the U.S. Department of Commerce drag this product from its original category into the scope of the current duty. This has been devastating for our company.
We sold about $100 million Canadian last year. In our industry, it is reasonable and necessary to make at least a 10% margin on sales. The $10 million would provide $4 million in taxes to the government and would give us $6 million to reinvest in modernizing our business. As a result of the stronger Canadian dollar and the illegal duty, we generated only $290,000 after-tax dollars last year.
If the end-matched products had not been illegally drawn under the scope of the duty, we could have earned another $1.5 million, with the after-tax portion available for reinvestment. The end-matched exclusion represented the 1.5% margin left in our business.
By agreeing to impose an export tax based on the price of a commodity such as dimensional lumber, this agreement prevents even a specialized mill like ours, with expensive high-end products, from being successful. This effectively reduces the industry's earning ability to almost zero, eliminates the capital improvements needed to remain competitive, lowers employment, and reduces the taxable wealth in this country.
While the U.S. government has stood solidly behind this industry, even in the face of the repeated defeats of the NAFTA and WTO panels, our government has not only abandoned our industry, but it has also handed the U.S. coalition everything it wanted.
I respectively request that this government set aside this destructive agreement and continue with litigation, which will invariably confirm that our industry is not subsidized and which will return all the money that was illegally collected to its rightful owners. This money will be taxed by and for the Canadian government, with the remainder going back into the economy. It is criminal to give the coalition our money to pay for their unfounded allegations and legal fees.
While I make no claims of political expertise, I am competent enough as a negotiator to know that with this complete legal victory, we'll be in a much better position to work toward a long-term, fair solution to this problem with the U.S.
I'm sure everyone is aware that when Canada won the last labour dispute, and the U.S. was ordered to return our money with interest, they simply refused to do so until we signed a quota agreement. Given the U.S. government's policy of bullying, we'll probably not see our money until a solution is found. But we will have the findings of the law on our side, we will have honoured our commitments to NAFTA, we will have complied with international treaties, and we will not have to bribe the coalition with our money. This makes considerably more sense than giving up all our legal victories and facing the same unfounded protectionist claims three years from now.
It is not the stronger Canadian dollar, but rather the imposition of duties or export taxes that makes it impossible to compete. Gorman Bros. has proven that in the absence of protectionist measures, we can successfully compete with anyone anywhere in the world.
I urge this committee, and all the political parties it represents, to do what is necessary to stop this agreement from taking effect and replace it with a sound solution, based on the principles of the NAFTA agreement, which both governments signed, and on the decisions given by both the NAFTA and WTO panels.
Gorman Bros. Lumber, and many other Canadian lumber manufacturers like it, can only succeed if our government will fulfill its obligation under these international treaties and insist that other signing countries do the same.
Once again, thank you for the opportunity to express our concern. We request your immediate assistance.