Posted on 07/26/2002 11:35:32 PM PDT by Black Powder
OTTAWA (CP) - Canada and the United States are both claiming victory in the first round of what's likely to be a long battle over crippling U.S. duties on Canadian softwood lumber exports.
Softwood exporters, politicians and even American home builders were jubilant Friday after the World Trade Organization ruled against the United States on eight of nine important points. The ruling is preliminary but will make it much harder for Washington to continue to justify punishing duties that now average 27 per cent against Canada's $10-billion softwood industry, said Trade Minister Pierre Pettigrew. "Clearly, this decision goes the way Canada had hoped," Pettigrew said from London. "It puts the bar very high for the Americans ... we have established a foundation for the future."
The WTO decision relates only to a minor aspect of the dispute, concerning only preliminary duties slapped on lumber exports late last year.
But the implications are far wider because Friday's ruling cuts down several U.S. arguments used to justify permanent anti-dumping and countervailing duties on Canadian softwood, said federal Trade Department officials.
The biggest is the longstanding American claim that because Canadian fees for logging are cheaper than U.S. fees, Ottawa and the provinces must be subsidizing their lumber industry.
Trade officials say the WTO didn't accept that. The trade body said the U.S. can't use "in-country benchmarks," that is, apply its own fee schedule to Canada which is a resource-rich nation with cheap timber.
"From our perspective in B.C. and Canada, it is about as strong a decision as we could hope to achieve," said B.C. Forests Minister Mike de Jong.
But the office of U.S. Trade Representative Robert Zoellick called it "a victory for both the U.S. lumber industry and the environment."
The findings "were mixed but favoured the United States in the most important respect," spokesman Richard Mills said. "The panel agreed with the United States that the provincial governments' sale to lumber producers of timber from public lands constitutes a financial contribution by the government that can give rise to a subsidy.
"The panel also agreed with the United States that U.S. laws governing reviews of countervailing duty orders are consistent with the WTO subsidies agreement."
While conceding the WTO ruled against the United States "in other areas," Mills said, "it's important to remember this decision has no practical effect on the final countervailing duties and the entire case has been bypassed by events, because the preliminary duties have already been refunded, and those were almost $1 billion."
U.S. consumer and business groups, who face much higher building prices because of the duties, called it a "significant victory" for American homeowners and urged Washington to accept the WTO decision.
"The duties are totally unfair to consumers and painful for homebuyers," said Susan Petniunas of the American Consumers for Affordable Homes, a Canadian ally.
This decision is also important symbolically for an industry that has been devastated by the long-running dispute.
Washington's duties have dealt a body blow to the softwood industry in Canada, which is big in British Columbia and Quebec but also operates in Ontario and Alberta.
Several firms have been forced to shut down and thousands of jobs have been lost.
In Quebec alone, 6,000 jobs have been lost and exports are down about 40 per cent this year, the industry says.
"(The win) is a piece of good news and we'll take all of these that we can," said Jacques Gauvin, president of the Quebec Lumber Manufacturers' Association.
Still, Friday's ruling by the Geneva-based WTO is far from the end of the dispute.
A final ruling isn't expected until fall on this first case which Washington, facing mid-term elections in November, is certain to appeal before year-end.
But this ruling should prod the U.S. into resuming negotiations to end the dispute, said John Allan, president of the B.C. Lumber Trade Council.
"I would hope the combination of political events, this WTO ruling and industry economics will surely dictate that we'll be back at the table in the not-too-distant future."
Pettigrew said he also hopes talks will resume - but only if the Americans drop demands for certain trade barriers, such as quotas, as well as changes to Canada's lumber practices.
"We want to resume talks but the talks we're interested in are for providing free trade in softwood lumber," said Pettigrew.
Washington slapped on the punitive levies last spring after negotiations broke down.
"The WTO decision ... is further proof that American softwood duties have little to do with cross-border trade rules, but more to do with power politics," said Alberta Forest Products Association president Wayne Thorp.
Meanwhile, as the litigation continues, Ottawa is still considering possible aid to hard-hit lumber-producing communities, Pettigrew said.
They need as much as $3 billion in aid to ride out this lengthy case, said John Duncan, Canadian Alliance trade critic.
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