U.S. winner in latest ruling on softwood

The latest round in the longrunning battle between Canada and the United States over softwood lumber goes to the U. S., thanks to the World Trade Organization.

In a 102- page report published yesterday on the trade group’s website, WTO arbitrators rejected Canada’s argument against U. S. tariffs on its lumber exports, closing the door for now on this country’s claim for as much as $ 4.25 billion in sanctions.

Federal Trade Minister Jim Peterson said immediately that Ottawa would appeal the decision.

“ We strongly disagree with this panel’s conclusion,” he said in a news conference yesterday. “ We are quite confident that we can win this appeal.” WTO arbitrators found U.S. duties illegal in March 2004. The U. S. has now implemented that ruling, the WTO decided yesterday, saying Canada failed to prove its case that the U. S. violated international trade rules when it decided that Canada’s $ 10 billion a year in softwood sales were undermining its industry. A senior Canadian trade official said yesterday the appeal would be based on addressing the WTO’s perceived deficiencies in Canada’s case so far. The official said the dispute has been identified as a primary concern for the government. The fight, however, is being

waaged in two arenas, with Canada having found more success at the continental level through the North American Free Trade Agreement. Peterson said that’s where Canada will continue to focus much of its efforts.

“ The WTO report provides no justification, legal or otherwise, for the U. S.’ s failure to comply with its NAFTA obligations,” Peterson said, adding that while the WTO bases its decisions on the U.S.’s international treaty obligations, NAFTA rulings are based on U. S. domestic law.

In August, a dispute panel under the NAFTA ruled that the 20.4 per cent countervailing and anti- dumping duties levied on softwood lumber exported to the U. S. should be returned to Canada.

“ Canada is not making this up. This is what is enshrined in U. S. law,” Peterson said. The U. S. has refused to abide by the NAFTA ruling, prompting a war of words with Canadian officials that has at times strained relations between the two countries.

Yesterday’s ruling did nothing to ease tensions.

“ Those who preach the rules of free trade must practise the rules of free trade, and not just when it’s convenient,” Peterson said at the news conference.

Ottawa has hired a legal team to force the U. S. to comply with the NAFTA ruling, while seeking allies in the fight among business leaders and the U.S. Congress. Peterson said yesterday Canada is also looking to boost softwood lumber sales outside the U. S.

Including appeals, Canada has challenged U. S. dumping calculations on lumber at least five times at the WTO since 2002 and at least seven times under NAFTA. The U. S. fully addressed the WTO’s concerns, the panel report released yesterday found. “ Canada’s assertions to the contrary simply are incorrect.”

U. S. Trade Representative Rob Portman urged Canada to avoid further litigation and negotiate a settlement.

“ We hope that today’s report will encourage Canada to resume efforts to reach a mutually acceptable negotiated solution.” The U. S. says Canadian provinces give sawmills unfair subsidies by not charging market rates to harvest timber on government land.

Peterson said decisions on both the WTO appeal and the NAFTA court challenge could be reached by the middle of next year, but conceded that the fight could continue for “another couple of years” if the U. S. keeps appealing any decision it doesn’t like.