Has anyone ever won a tradewar?
U.S. wood fee 'absolutely obscene'
Outraged Pettigrew plans legal challenges as new 29% duty imperils thousands of jobs
Peter Morton, with files from Luiza Chwialkowska, Ian Jack and John Greenwood
National Post
WASHINGTON - The United States will hit Canadian softwood lumber with massive
import duties, a decision that Pierre Pettigrew, Canada's Minister of International
Trade, called "absolutely obscene."
The U.S. Commerce Department yesterday imposed duties of more than 29%, slightly
modifying temporary duties it imposed late last year on $10-billion in lumber
shipments each year to the United States.
The duties, which could lead to thousands of job losses in Canada, were imposed
soon after talks ordered by the country's two leaders collapsed in acrimony.
Mr. Pettigrew said yesterday that the administration of George W. Bush caved in to
pressure from U.S. lumber producers.
"I am sorry that the American administration did not find the nerve to confront its
protectionist softwood lumber producers," he said in Ottawa, announcing that Canada would immediately challenge the decision
at the World Trade Organization and under the North American Free Trade Agreement.
"I'm sorry for Canadian workers and their communities ... I'm also sorry for American consumers."
The Toronto-Dominion Bank warned yesterday that if the full duties are applied -- something that could not happen before May --
they could badly hurt an industry that employs 100,000 Canadians and represents 1.5% of the national economy.
Jean Chrétien said the tariffs put a "big question mark" over the U.S. President's commitment to free trade.
"We have signed a free trade agreement with them, they want to have our oil and they want to have our gas, and they don't
want to have our wood. They cannot choose and pick," Mr. Chrétien said in Monterrey, Mexico, where he and Mr. Bush attended a
conference on development aid.
"If we were to cut off their gas and their oil they would buy a hell of a lot of softwood to heat their homes," Mr. Chrétien joked.
"But it's not working like that," he added, ruling out retaliatory action. "I will keep trying at the political level if I can, but we are
going to the court."
Mr. Chrétien added, "I think we have a very good case in front of the WTO and NAFTA panels."
U.S. officials say the low fees Canadian mills pay for the right to harvest trees on public land, known as stumpage, amounts to a
subsidy. They also accuse Canada of dumping lumber on the U.S. market below cost, a practice the Canadians deny.
In British Columbia, where the duties will likely hit the hardest, officials reacted bitterly.
"There are a lot of people who have a pretty bad taste in their mouths who I think legitimately feel betrayed, and I'm not sure at
this point whether there is any appetite to deal with the Americans further," said Mike de Jong, the B.C. Forests Minister. He
called Mr. Bush and his administration "gutless wonders" who pretended to be negotiating in good faith.
"Message to Uncle Sam: See you in court."
Both countries said yesterday they were prepared to relaunch negotiations, but no date has been set.
"I would need to have a more positive signal from the United States," Mr. Pettigrew said. "Let the dust settle for a while. They
will have to put something more reasonable on the table."
Even if Canada wins at the WTO or NAFTA, it could take six to 18 months.
Herb Dhaliwal, Minister of Natural Resources and senior minister for British Columbia, said the Americans need to be reminded of
the valuable commodities they get from Canada.
"The Americans depend on us in many areas. We need to make sure they realize that the trade is a benefit to both countries. We
need to make sure we send that message to them loud and clear," he said outside the House of Commons.
Talks collapsed after negotiators could not find a way of closing the wide gaps between the two sides on moving the four major
timber-producing provinces -- British Columbia, Quebec, Ontario and Alberta -- toward a more U.S.-style market system for selling
timber rights.
Max Baucus, the Montana Senator who is also chairman of the powerful Senate finance committee, insisted yesterday Canada
had no interest in seriously negotiating a deal that would end the two-decade long dispute.
"I place the blame squarely on Canada," he said. "Free trade must be a two-way street to be viable and the United States is
tired of being taken advantage of by Canada's forestry policy."
The dispute dates back about a year, when more than 300 U.S. lumber producers filed the complaint after a five-year-old
agreement that managed lumber trade between the two countries expired. Canada had imposed a voluntary export tax of 15%
over certain historical volumes.
The new duties include a countervail duty of 19.34% -- about the same as the existing temporary duty -- to compensate for
government subsidies and an average anti-dumping levy of 9.67%, down from just over 12%. Dumping is exporting products in a
country at prices below production costs.
B.C. accounts for more than half of Canada's $10-billion a year in softwood exports to the United States, and it has suffered
under the existing duties. As many as 15,000 workers have been idled in B.C. as a result of the duties.
That number could double with the new duty, which would cost producers an estimated $1.45-billion a year.
Last night industry representatives appeared determined to push ahead with plans for a possibly lengthy legal battle in the
event negotiations are called off permanently.
"What we were left with was a bad deal that made absolutely no sense for us to accept," said Duncan Davies, co-chairman of the
B.C. Lumber Trade Council and chief executive of International Forest Products.
The U.S. lumber industry apparently felt the same way about the Canadian offer. "I think our government was embarrassed to
show us what they offered," said Rusty Woods, chairman of the U.S. coalition.
The Commerce Department decision does not take effect immediately. Canadian lumber exporters will only have to put a small
part of the duty -- ranging between 14.6% and 2.26% -- in the form of bonds until May.
That is when the U.S. International Trade Commission rules on whether there has been injury to U.S. producers from the illegally
subsidized lumber imports. If it does find an injury, the Canadian exporters would be expected to put up the full 29.01% in cash,
a U.S. trade official said yesterday.
The talks collapsed late Thursday after Canada rejected the latest offer from the United States that would have seen a
temporary export tax imposed while the provinces agreed to reform their timber practices. Washington wanted a temporary tax
of 37% while Ottawa had offered up to 20% depending on lumber prices.
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