Copyright 2001 Reuters
August 10, 2001
By Steve James

NEW YORK, Aug 10 (Reuters) - Canada vowed Friday to fight in court over the U.S. government decision to slap a 19.31 percent duty on Canadian softwood lumber imports, but Wall Street was almost blase about the issue dividing the giant trading partners.

Stocks of big U.S. wood and paper companies rose slightly on the news, but there was no forest fire and a wait-and-see attitude prevailed.

International Paper Co. (NYSE:IP - news) was up 62 cents at $39.91, Georgia-Pacific (NYSE:GP - news) rose 88 cents to $35.87, Louisiana Pacific was up 42 cents at $10.85 and Weyerhaeuser Inc. (NYSE:WY - news) rose 31 cents to $58.06 on the New York Stock Exchange three hours after the Commerce Department announcement.

Even the do-it-yourself chain, Home Depot Inc. (NYSE:HD - news), which could be hurt by higher lumber prices, was up 11 cents at $48.59 on the word out of Washington.

But across the border, there was anger. In Montreal, Canada's trade minister, Pierre Pettigrew, lashed out at what he called Washington's ``protectionist approach'' to trade and said Canada was ready for a fight in U.S. courts.

``The United States Department of Commerce has no basis in fact or in law'' for imposing the preliminary duties, Pettigrew told reporters.

And one of Canada's biggest softwood exporters, Domtar Inc. (Toronto:DTC.TO - news) was also predictably unhappy. ``We are disappointed , but not surprised,'' said spokesman William George. ``It's clear we won't let our revenue pull back 20 percent. It's the U.S. consumer who will foot the bill.''

U.S. companies, many of whom have forestry operations on both sides of the border, mostly withheld comment, but Portland, Ore.-based Louisiana Pacific said the company was not seriously affected by the import duty as LP had only two small softwood sawmills in Canada.

``We are glad some of the uncertainty has been removed, so we can plan our business,'' said spokeswoman Kelly Stoner. ``We believe there should be free trade between the United States and Canada but this is a step away from that.''

Matt Berler, a Morgan Stanley analyst in San Francisco, said the import duty was unlikely to have much effect on U.S. wood and paper companies' stock price. ``This was widely anticipated, maybe there will be a blip (on Wall Street).''

Sean Steuart, an analyst at TD Securities in Toronto, said: "It's not going to kill the Canadian industry. It's definitely not a great thing but it's not disastrous either.

``It's still going to be a while before we can find how this thing settles out. It will be probably at the end of the year before we figure the final tally on how these duties are going to stock up,'' said Steuart.

Mark Wilde, an analyst with Deutsche Banc Alex Brown, said the decision would not really resolve the issue of lumber imports from Canada. ``It's a short-term resolution, but the wrangling will continue for another six to nine months.''

In its announcement, the Commerce Department said the new tariff was a result of a preliminary investigation of provincial Canadian governments' alleged subsidies of their domestic industries.

It also found evidence Canada's shipments of softwood lumber into the United States surged during April-June, thus allowing for retroactive duties. But the agency did not give details on the exact retroactive duty date.

Morgan Stanley's Berler said the 19.31 percent duty was at the high end of the range, which had been expected to be between 10 and 20 percent.

``What this does is raises the production cost of lumber for Canadian producers, so the cost of lumber coming into the United States from Canada will be higher,'' he said.

"It means there will be a higher floor under lumber prices, but it does not guarantee they will go up from here. I think prices are unlikely to go down to the level they were at during the winter.

``For U.S. companies, it means there will be less competition when prices are depressed, but more competition when prices are higher,'' Berler added. Error: Unable to read footer file.