Canadian timber group moves on US duties
markets.ft.com
Tembec, a leading Quebec timber company, has begun a trade action against the US, claiming last week's imposition of countervailing and anti-dumping duties on softwood lumber is "tantamount to expropriation" of markets.
The peculiar phrasing echoes the North American Free Trade Agreement's controversial Chapter 11, which gives companies the right to seek compensation from governments for actions that damage investments.
The US will impose 27 per cent duties on C$10bn (US$6.4bn) worth of softwood imports this month, based on allegations that the Canadian companies were subsidised and dumped wood in US markets. The duties will cripple the Canadian industry, costing as many as 50,000 jobs.
The ruling "was clearly dictated by the US softwood lumber lobby, whose goals are simply to reduce Canadian market share and raise prices", said Frank Dottori, Tembec chief executive. His company will will seek up to C$200m compensation from a Nafta panel, he added.
The Canadian government is fighting the US ruling, and other companies have launched cases against specific aspects of the penalties. But cases such as Tembec's alleging harm to corporate investments, as opposed to claims based on broad principles of free trade, are politically charged.
On both sides of the US-Canada border, these cases have highlighted concerns that corporate "rights" can supplant legislated environmental, planning and economic development measures. Tembec's complaint may feed what many in Congress see as abuses of Chapter 11. For example, Methanex, a Canadian chemical company, is claiming $970m as a result of California's environmental ban on the petrol additive MTBE.
The timber claims, however, are the first time companies have sought damages over a US decision to penalise imports it considered dumped or subsidised. That could raise fears among the powerful congressional supporters of trade laws. The US Senate is expected to consider this week a proposal by Senator John Kerry aimed at limiting the ability of companies to file such actions against the US under any future trade agreements.
John Ragosta, a lawyer representing US timber producers, said Nafta arbitrators were likely to reject the suits, but the consequences could be severe if the cases proceeded. "If you want to have the Nafta torpedoed real fast, then let a panel tell the US that it can't impose anti-dumping and countervailing duties," he said.
Tembec thinks it has a very good case, said Elliot Feldman, its Washington lawyer. Two previous Nafta rulings have found market share and related assets, such as goodwill, to be a property interest, and the US duties will erode that. |
