Lumber ruling endorses penalties

Canada upheld in dispute with U.S. Retaliation nears in softwood fight

VANCOUVER— A World Trade Organization softwood-lumber ruling opens the door for Canada to retaliate against the United States, Canada’s international trade department says.

Trade officials said yesterday the world group’s appeal body has upheld Canada’s position that U. S. procedures used to establish countervailing duties on Canadian softwood- lumber imports are not consistent with trade organization’s rules. As a result, the department said in a news release, the case now will go to arbitration to determine the amount of retaliation Canada is entitled to in the event the U. S. does not bring itself into conformity with the trade group’s obligations. Canada is requesting authorization to retaliate against $200 million in U. S. goods. Arbitration is expected to begin early next year. Ottawa would seek the views of Canadians before any retaliatory measures were imposed, the department said. The ruling is the latest in a seesaw battle of trade litigation stretching back three years, since the U. S. commerce department slapped duties on Canadian lumber imports the department said were being subsidized, mainly through low provincial timber- cutting fees. Canada has steadfastly denied the claim. Both sides have claimed victories in the legal battle before World Trade Organization and North American Free Trade Agreement panels.

Attempts to negotiate a longterm settlement to the dispute, which has been going on in one form or another for more than two decades, have been fruitless. Canada walked away from talks last summer after the U. S. signalled it would not comply with a NAFTA ruling that found Canadian lumber posed no threat of injury to American producers. Prime Minister Paul Martin has said there’s no point in trying to negotiate a deal if Washington refuses to live up to its NAFTA obligations. Canada exports about $ 10 billion worth of lumber to the U. S. market annually, mostly for home construction and renovation. Exporters have paid more than $5 billion in duties since May 2002.

Yesterday’s decision reinforced an Aug. 1 compliancepanel decision that concluded the U. S. commerce department failed to demonstrate a subsidy existed in certain arm’s- length purchases of logs by Canadian softwood- lumber producers. The appellate body also rejected U. S. arguments that the commerce department’s annual administrative review of countervailing duties on softwood lumber falls outside the scope of the compliance proceedings, according to Canadian trade officials. The U.S. commerce department is scheduled to issue its latest administrative review of the countervailing and antidumping duties today.