Canada talks of "energy card" in lumber spat
Copyright 2001 Reuters
August 22, 2001
By David Ljunggren, Reuters
EDMONTON, Alberta — Canada gave mixed signals Tuesday on whether it was considering playing the powerful card of energy exports to the United States in the trade fight over softwood lumber that is now headed to the World Trade Organization.
Prime Minister Jean Chretien denied Ottawa had formally decided to link the two trade issues but acknowledged to reporters during a stop in Yellowknife, Northwest Territories, that he had discussed softwood and energy during a "long discussion" with President George W. Bush via telephone Monday.
Chretien said it was inconsistent for the United States to want a free flow of Canadian oil and natural gas while denying it for lumber. "If you've got free trade, you have free trade. I explained it very clearly; you know me," Chretien said of his conversation with Bush.
Canadian International Trade Minister Pierre Pettigrew said Ottawa had asked the WTO Tuesday to rule against the U.S. Commerce Department's decision this month to impose a 19.3 percent countervailing duty on Canadian softwood. Washington acted on complaints from U.S. lumber companies that some Canadian provinces were indirectly subsidizing lumber firms by charging them low stumpage fees to cut timber, a charge Ottawa fiercely denies.
"The government of Canada believes that the United States' action is unwarranted and punitive," Pettigrew said in a speech to Canadian manufacturers and exporters. Washington acted following the expiration March 31 of a five-year deal limiting Canadian lumber exports to the United States.
Canada exports C$10 billion (US$6.5 billion) of softwood lumber, such as pine, fir, spruce, and cedar, to the United States annually, and western Canadian companies have already begun to lay off thousands of workers because of the duty.
THE ENERGY CARD
The lumber dispute has triggered calls for Canada to strike back at Washington, either by slapping duties on much-needed energy exports (Canada is the single largest supplier of energy to the United States) or by blocking plans to allow Alaskan natural gas to be piped through Canadian territory.
"It can be said that Canadians would want to help Americans on the energy front, but Canadians will probably feel more like helping on the energy front if Canadians are happy in general," Pettigrew said, as his business audience applauded. "Basically, you don't hit a guy on the forehead with a two-by-four before asking him to help on the energy front."
Pettigrew denied afterwards that Ottawa was making any formal link between softwood lumber and energy. But he added with a smile, "It is up to (the Americans) to realize that keeping us in a good mood is a good idea."
Pettigrew's comments came a day after Canada's federal Fisheries Minister, Herb Dhaliwal, also suggested that Ottawa might not allow an Alaska pipeline until it was given free access to the U.S. lumber market.
The Coalition for Fair Lumber Imports, which represents U.S. lumber companies and timber landholders, said the WTO challenge was merely "bluster" in response to accusations from some in Canada that Ottawa was being too soft on Washington.
A senior Canadian oil industry official said it would be unfair to single out energy as the weapon to use in a trade war. "The trade relationship depends on a number of different factors, so I don't think they should be playing any kind of linkage there," said Greg Stringham, vice president of the Canadian Association of Petroleum Producers, the industry's main lobby group.
U.S. METHOD SAID FLAWED
There is considerable frustration in Ottawa about what it sees as an inconsistent U.S. approach to free trade. Pettigrew stressed that WTO members had to stick to the rules.
In addition to denying the subsidy charge, Canada contends that the U.S. erred in the way it calculated the 19.3 percent duty, using cross-border rather than in-country benchmarks, such as prices and market conditions, in determining whether stumpage fees create an unfair advantage for Canadian producers.
Canada has requested accelerated WTO consultations with the United States within the next 10 days. This is a first formal step toward reaching a dispute settlement. The countries are scheduled to meet Aug. 30.
Canadian officials said the goal will be to have this matter resolved before Dec. 8, when the U.S. Commerce Department is scheduled to make its final determination on the affair.
(Additional reporting by Jeffrey Jones in Calgary, Randall Palmer in Ottawa, Allan Dowd in Vancouver, and Rick Cowan in Washington)