Bridges Weekly Trade News Digest • Volume 5 • Number 38 • 6th November 2001
Canada - US Softwood Lumber Dispute Continues
Following US opposition, the Dispute Settlement Body (DSB) at its meeting on 5 November rejected Canada’s request to establish a WTO dispute settlement panel to examine US countervailing duties imposed in the context of the ongoing US-Canada softwood lumber dispute. If Canada persists in its request, however, a panel will be automatically established at the next DSB meeting, scheduled for 18 December 2001.
In its request filed on 25 October, Canada argued that a US Department of Commerce’s 9 August preliminary countervailing duty determination imposing 19.3 percent countervailing duties on Canadian wood products violated a series of provisions in the WTO Agreement on Subsidies and Countervailing Measures (SCM) and in the GATT. The US decision was based on allegations from US lumber producers that Canadian exporters were subsidised through low provincial cutting fees for Crown timber - known as stumpage. According to US officials, the request was "premature", given the fact that the determination of the US Department of Commerce is only preliminary; a final determination is expected in late March 2002.
The Canada-US lumber dispute has been going on for almost 20 years, during which time US softwood lumber producers have repeatedly alleged that the stumpage fees — a tax on each harvested tree — levied by provincial governments were below market value and therefore constituted a subsidy to Canadian lumber producers. After a temporary truce in the form of a 1996 Softwood Lumber Agreement between the two parties, Canada has already brought the case once before a dispute settlement panel in an attempt to pre-empt a US imposition of countervailing duties (see BRIDGES Weekly, 10 July 2001).Albeit for different reasons, US environmentalists, joined by indigenous tribes, have also petitioned the US Commerce Department for countervailing duties on lumber from British Colombia (BC) and Quebec, arguing that the BC provincial government and logging industry have refused to implement federal law protecting fish habitat and land use (see BRIDGES Weekly, 15 May 2001).
In the meantime, government-to-government talks aimed at finding a solution to the conflict outside WTO litigation have stalled after the US Department of Commerce on 31 October announced another preliminary determination to impose an average of 12.6 percent antidumping (AD) duties on Canadian lumber. The dumping duty would be added on top of the 19.3 percent countervailing duty if confirmed by the Department of Commerce’s final determination in March 2002.
The US announcement triggered widespread anger in Canada. "We’re up to 32 percent in tariffs … this is outrageous, this is punitive," said Pierre Pettigrew, Canadian International Trade Minister. He furthermore echoed US critics who warn the duties will boost housing costs and harm the US economy. Some also fear that the duties will lead to mill closures in Canada, a move that would cost hundreds of jobs.
Talks, however, resumed in Washington this week despite the AD determination, and BC industry representatives speculated that a negotiated solution to the dispute could be found in four to six weeks if senior-level negotiators were brought into the talks.
"US adds 12.5 percent duty on lumber as BC groups claim talks stall," INSIDE US TRADE, 2 November 2001; "New US lumber duty triggers anger in Canada," COMTEX, 1 November 2001.