Copyright 2001 Reuters
August 13, 2001
Story by Charles Grandmont and Allan Dowd

MONTREAL/VANCOUVER - Canada reacted with outrage last week to a U.S. decision to slap a preliminary 19.3 percent duty on Canadian softwood lumber imports, calling trade ruling "protectionist" with "no basis in fact or in law."

Officials in the Canadian lumber industry, which supplies nearly a third of the softwood lumber used for building in the United States, warned the penalty could lead to sawmill closures and layoffs.

Some timber firms said U.S. consumers would bear the brunt of the extra cost.

Canada vowed to fight the ruling in U.S. courts, and an industry official said it appeared the United States had broken its own trade laws in the way it calculated Canadian lumber production prices to compare them with U.S. prices.

The Commerce Department, reacting to complaints from its lumber producers, said it imposed the duty after a preliminary investigation found the Canadian industry was being unfairly subsidized.

"Canadian softwood lumber exports to the United States are not subsidized by the federal or provincial governments," Trade Minister Pierre Pettigrew said, accusing the U.S. government of ignoring the free trade policy it claims to support.

Pettigrew said the U.S. ruling had "no basis in fact or in law" and warned the action would end up hurting U.S. consumers, who will have to pay more for new homes and home renovations.

Canadian lumber producers, which had expected the United States to impose a duty as part of an ongoing trade spat, estimated the ruling will cost them C$2 billion a year, and suggested Washington set the duty as high as it did as a negotiating tactic.

"This is a record high level for allegations of subsidy, but basically confirms out suspicion that the Americans are pursuing a protectionist trade policy at all costs," said John Allan of the British Columbia Lumber Trade Council.

Canada exports about C$10 billion ($6.5 billion) of softwood lumber to the United States each year, with half of that coming from the West Coast province of British Columbia.

The two countries have battled over lumber trade for more than a century, but this latest spat erupted at the end of March, when a five-year accord that had limited Canadian shipments expired.

Most Canadian forests are owned by provincial governments, and U.S. producers contend they subsidize the industry by charging below-market cutting rates - an argument that has been rejected by international trade panels three times.

Friday's U.S. ruling does not cover softwood shipments from Canada's Atlantic provinces, where forests are largely privately owned, as are those in the southern United States, where opposition to Canadian imports is the strongest.

Canada is a major oil and natural gas supplier to the United States, and there have been calls to use the threat of cutting supply as pressure in the lumber fight, although Ottawa has so far rejected that idea.

"You wonder if the decision would have been different if Americans heated their homes with wood products," said B.C. Forestry Minister Mike de Jong.

Environmentalists, who have accused Canada of destroying its forests to promote exports, said the new duties should force Canada to toughen its logging regulations.

"Although biting the bullet on forestry reform carries short-term costs, in the long run it is better for the forests, the Canadian public, and the forest industry in Canada," the Environmental Defense Council said. Error: Unable to read footer file.