PM’S SPEECH MAY HAVE UPSET BUSH

SOFTWOOD DISPUTE Talks between leaders appear to be on hold

PETERSBURG, ONT.

• Paul Martin may have angered George W. Bush with his blunt talk in New York last week defending Canada’s position in the softwood lumber trade dispute, a senior government official said yesterday.

With Ottawa’s unwillingness to back down on its claim that the Americans are illegally taxing Canadian lumber sold in the United States, it may also take longer still to hold a long-awaited telephone call between the Prime Minister and U. S. President. Although, the official disputed that Mr. Bush is unwilling to talk personally with the Prime Minister about the dispute and said a discussion has been in the works for more than a month.

But when asked about potential dates for the talks, which are expected to kick-start the stalled softwood negotiations, the official, speaking on condition of anonymity, said Mr. Martin’s hard-line stance in an address to the Economic Club of New York, in which he called the U.S. position “nonsense” and mused about selling energy to China, appears to have angered the Bush administration.

“It takes two to talk. We’re ready any time,” the government official said. “Perhaps they didn’t like the speech [to the Economic Club of New York] which is too bad. We’re going to tell it like it is, and there’s no reason we shouldn’t.”

The two countries are at loggerheads over conflicting rulings on the decades-old dispute about whether low fees to farm lumber on Crown land constitute a subsidy by the Canadian government. The first ruling, in Canada’s favour, came down on Aug. 11 from a North American Free Trade Agreement panel. The second came down about a week later from the World Trade Organization, and it found the United States was within its rights to have collected about $5-billion in import duties on Canadian lumber sold south of the border.

The Prime Minister promised British Columbia Premier Gordon Campbell at the time that he would take the concerns of Canadian lumber producers straight to the U. S. President, but that call, which was delayed last month because of Hurricane Katrina, has yet to take place.

David Wilkins, the U.S. ambassador to Canada, had repeatedly implored Ottawa to return to negotiations that might resolve the issue, but International Trade Minister Jim Peterson said he first needs a “good faith gesture” before such talks can resume.

Specifically, Ottawa wants Washington to recognize the legitimacy of the NAFTA extraordinary challenge committee’s decision, which ruled in Canada’s favour, and consent to strengthening NAFTA’s dispute resolution mechanisms so Canada, the United States and Mexico will be bound to follow the rulings.

Officials with both governments are trying to work out a detente that will allow a return to the negotiating table without either being seen to have submitted to the will of the other. That is taking longer than expected.

While the powerbrokers work on potential deals, senior Canadian officials are aggressively trying to open up new markets, not only for Canadian lumber, but for other resources that fall under the purview of NAFTA.

The offensive has received the support of industry and the provinces, but Mr. Martin’s suggestion last week that Canada could tie the trade of Alberta energy to the softwood lumber dispute angered Alberta Premier Ralph Klein, whose province controls the bulk of Canadian oil.

Mr. Klein took issue with Mr. Martin’s suggestion that countries such as China and India would have an easier time than the United States accessing Alberta’s oil sands if it did not consent to the NAFTA ruling on softwood lumber and he warned the Prime Minister not to interfere with a provincial resource.

“ The Prime Minister can talk all he wants, but the fact is the resources ... are owned by the provinces,” Mr. Klein said in an interview published yesterday. “I really think that to impose trade sanctions is not the way to resolve an issue, and to use oil visasoftwood lumber is not the way to go.”

Mr. Martin told reporters yesterday that oil is “obviously a provincial resource.”

“I’m not trying to pick a fight with anybody,” he said. “I’m just trying to get the Americans to live up to the terms of the NAFTA agreement both in letter and in spirit and that’s what I’ve called upon them to do.”