Bridges Weekly Trade News Digest • Volume 6 • Number 17 • 7th May 2002
Canada To Review ITC Ruling And Indigenous Brief In Lumber Dispute
Canada indicated last week that it would conduct a review of a 2 May decision by the US International Trade Commission (ITC), which ruled that US industry "is threatened with material injury" by subsidised softwood lumber imported from Canada and sold in the US "at less than fair value". Canada is also expected this week to comment on the "amicus curiae" brief submitted by the Interior Alliance, a grouping of Canadian First Nations peoples, to the WTO panel that is currently considering a Canadian complaint against US duties on softwood lumber (see BRIDGES Weekly, 2 May 2002).
Canada dismayed with ITC decision, claims partial victory
Canada reacted angrily to the ITC’s decision, which will allow the US Department of Commerce to issue countervailing duties averaging 27 percent on imports of softwood lumber products from Canada. "The decision was not unexpected [...] but that doesn’t make it less damaging," said Canada’s International Trade Minster Pierre Pettigrew. After 23 May, Canadian firms exporting lumber such as pine, spruce and cedar from all provinces except those in Atlantic Canada will be required to make cash payments with each load of lumber crossing the border. Atlantic provinces were exempted, as most of their forests are privately owned.
While Canadian timber producers expressed their dismay with the decision, they said it was not a complete loss as the ITC had only concluded that there existed a "threat of material injury", but that US sawmills had not actually been harmed yet. Also, the ITC ruled that the preliminary average duty of 32 percent, which the US Department of Commerce had imposed last year as an interim measure, was not justified. As a result, Canadian producers will receive a rebate of around $US1 billion in bonds already posted for wood shipments to the US between August 2001 and April 2002.
Canada asked to comment on Interior Alliance brief
As reported last week, the WTO softwood panel — which was established at Canada’s request to rule in the US-Canadian dispute over softwood lumber — agreed on 30 April to receive an "amicus curiae" brief by the Canadian First Nations group Interior Alliance (see BRIDGES Weekly, 2 May 2002). Also, in an unprecedented move, the panel has asked state parties — including the US, Canada, the EU, Japan and India — to comment on the brief by this week. While WTO panels are not obliged to take into account "amicus curiae" briefs, i.e. unsolicited submissions by non- parties of the dispute at issue, they can do so if they consider it appropriate.
While Interior Alliance backs the US claim that Canadian lumber is heavily subsidised, the group goes further, alleging that the non- recognition of Aboriginal land rights constitutes a subsidy under international trade law. That is, the group argues that the Canadian government’s refusal to redistribute part of the revenue collected from the forest exploitation to indigenous peoples allows Canadian forest companies to sell their timber under market value and thereby provides a subsidy in addition to the artificially low stumpage rates. In its submission, the groups calls on the WTO panel to "maintain the present trade remedies necessary to restore fair competition and ensure that fundamental conditions for fair trade such as environmental protection and the recognition of indigenous rights, especially Aboriginal Title, be respected and met by the Canadian government and Canadian forest companies in the future."
Background on the softwood lumber dispute
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 Canada’s provincial governments are below market value and therefore constitute a subsidy to Canadian lumber producers. The US furthermore alleges that Canada allows its industry to illegally "dump" lumber in the US at artificially low prices. As a result, the US Department of Commerce on 9 August 2001 imposed preliminary countervailing duties amounting to 19.3 percent. Following a Canadian request filed on 25 October in which Canada alleges that the duty violates a series of provisions in the WTO Agreement on Subsidies and Countervailing Measures (SCM) and in the GATT, a WTO panel was set up on 5 December last year to resolve the dispute (see BRIDGES Weekly, 12 December 2001). The panel is expected to report by 30 August this year. Canada has furthermore requested a binding panel to be established under the North American Free Trade Agreement (NAFTA) to review the US’ countervailing duty determination. A final panel report is expected by 31 December 2002. Canada supplies about one third of the US market for construction lumber, with 75 percent of lumber produced in British Colombia and Quebec.
Copies of the ITC report will be available after 6 June from the ITC by calling (1-202) 205-1209.
"Trade panel OKs lumber tariffs," AP, 2 May 2002; "Canadian firms say lumber ruling not total loss," REUTERS, 2 May 2002; Softwood lumber from Canada threatens U.S. industry with injury says, ITC," ITC PRESS RELEASE, 2 May 2002; ICTSD Internal Files.