Canada To Take U.S. To WTO Over Lumber Dispute

By BridgeNews Canada is going to the World Trade Organization (WTO) to challenge a U.S. decision to slap tariffs on Canadian softwood lumber exports as lumber mills north of the border begin to lay off workers. "Canada feels strongly that the recent U.S. preliminary countervailing duty and critical circumstances determinations are unfair and fail to meet WTO standards," says International Trade Minister Pierre Pettigrew. "Canada will not bend to unsubstantiated allegations based on protectionism," he states. Pettigrew called the Aug. 10 decision by the U.S. Commerce Dept. to impose the 19.3% duty "unwarranted and punitive," and said that Canada believes that the U.S. findings were flawed. The United States also has made a preliminary finding of "critical circumstances," making the provisional tariff apply retroactively to shipments made starting in mid-May. In a trade battle that has dragged on since 1982, Washington charges that Canada unfairly subsidizes its lumber industry by charging artificially low royalties and fees for cutting timber on public land. The U.S. forest products industry had tried three times to persuade the government to impose tariffs, but failed each time. U.S. lumber producers had asked the government to impose a penalty of nearly 40% retroactive to Mar. 31, when a Canada-U.S. accord on softwood lumber expired. The Canadian lumber is popular among U.S. homebuilders. The Canadian government has repeatedly denied that lumber producers are subsidized, vowing to challenge the move in a legal battle. Pettigrew initially said Ottawa would only consider appealing to the WTO if the U.S. Commerce Dept. keeps the tariff in place when it releases its final decision in October, but the pressure from both loggers and lawmakers is mounting. Mills in British Columbia, the province that accounts for 50% of Canada's C$10 billion (US$6.5 billion) in annual exports of softwood lumber, have already begun to lay off workers and idle operations. The U.S. economic slowdown has already clouded Canada's short-term economic prospects, and the recent trade action by the Bush Administration could harm business sentiment. Pettigrew called on the United States to hold urgent consultations with Canada within the framework of the world trade body on the dispute. He argued that the method used to calculate the duty is flawed because it compares fees for cutting timber on government land in Canada to charges for logging on privately owned land in the United States. Most lumber in Canada is harvested from government land, while timber from private land accounts for a higher percentage of U.S. logging.

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