FOREST PRODUCTS Canada wins second NAFTA decision on softwood tariffs Ruling could slash rate to 2.1%, but U.S. could take legal action to delay move STEVEN CHASE AND PETER KENNEDY
OTTAWA, VANCOUVER -- Canada has won its second major NAFTA victory in five years of legal battles over U.S. tariffs on softwood, a ruling that undercuts the rationale for the bulk of levies being charged by Washington today. The decision yesterday leaves Canada and the United States at a fork in the road of softwood relations. It could be a catalyst for fresh talks to settle the dispute or spark a new round of bitter litigation. The ruling should chop the tariff rate slapped on Canadian softwood to 2.1 per cent from 10.8 per cent, but the Americans could take legal action to delay this for 12 months. The future of the dispute is now in the hands of U.S. President George W. Bush and his government, which must decide whether to launch a rarely used, last-ditch appeal of the NAFTA decision. Under yesterday's ruling, a dispute settlement panel struck under the North American free-trade agreement confirmed that any Canadian subsidy of softwood that can be calculated is negligible -- and so does not merit being punished with countervailing duties. Mr. Bush's government must decide by April 27 whether to appeal. Canadian Industry officials said they're holding out hope that Mr. Bush might let the NAFTA ruling stand as a gesture that Washington is serious about resuming negotiations to settle the dispute. "It's his call, no question," John Allan, president of the British Columbia Lumber Trade Council. He thinks whether Mr. Bush appeals the decision could depend on NAFTA talks the President is holding shortly with Prime Minister Stephen Harper in Cancun. The late March Cancun meeting is taking on growing importance for the softwood dispute. International Trade Minister David Emerson has already predicted that Ottawa and Washington will return to the bargaining table some time after Cancun. The U.S. timber lobby, which is responsible for triggering the softwood dispute, conceded yesterday that the NAFTA decision threatens the future of anti-subsidy duties on Canadian wood. It is pressing Mr. Bush to appeal. "The NAFTA panel decision issued . . . is gravely flawed, and signifies a potential end to an important antidote in the U.S. lumber industry's efforts to counter the poison that is Canadian lumber industry practices," said Steve Swanson, chairman of the Coalition for Fair Lumber Imports. The latest Canada-U.S. softwood lumber dispute has dragged on for nearly five years and has seen Washington extract $5.2-billion in levies from Canadian producers. One of the thorniest questions in any negotiations will be how much of that cash is returned to Canada. The Bush administration balked at the ruling and called for Canada to return to the bargaining table. "We continue to not agree with the panel's rationale," David Spooner, U.S. Department of Commerce's assistant secretary for import administration, said in a statement. "We will continue to enforce our trade laws to ensure that U.S. industry receives relief from unfair imports and we believe that a durable, negotiated resolution is the best way to resolve this dispute with Canada." Canada quit talks last summer after Washington repudiated Ottawa's first major NAFTA victory, when a panel ruled that the United States had failed to prove Canadian softwood posed a threat of injury. Lumber future prices tumbled yesterday as traders reacted to fears expressed by the U.S. timber lobby. Analysts said prices will continue to drop next week after the May futures contract fell by the daily $10 (U.S.) limit to $326.30 per thousand board feet on the Chicago Mercantile Exchange. Canfor Corp. chief executive officer Jim Shepherd said the ruling only reinforces his view that efforts to litigate an end to the dispute aren't working. "We have ended up with a political nightmare here in terms of the biggest trade dispute that I'm aware of in the world today with two countries not knowing how to come to a conclusion."
