NEWS RELEASES
July 26, 2002 (4:00 p.m. EDT) No.
86
CANADA WINS KEY WTO LUMBER
DISPUTE
International Trade Minister Pierre Pettigrew today welcomed the
World Trade Organization (WTO) finding that U.S. duties on Canadian
softwood lumber violate international trade rules.
"The WTO Panel finding is a fundamental win for Canada," said
Minister Pettigrew. "The U.S. Department of Commerce, which had been
petitioned by the U.S. lumber coalition to impose a duty on Canadian
lumber, must now realize the extent to which their protectionist
actions are harmful to both Canadians and Americans."
The WTO agreed with Canada that the United States was wrong in
finding that Canadian provincial stumpage programs are subsidies.The
final WTO report on Canada's challenge of the U.S. Department of
Commerce's preliminary determination of subsidy is expected in
September.
"We have known all along that our industry is not subsidized,"
Minister Pettigrew added. "This decision reinforces our strategy to
defend our industry by challenging U.S. trade actions in every venue
available. The Government of Canada will continue to defend the
interests of our industry, workers and communities."
Canada is also pursuing a WTO challenge of the final U.S.
determination of subsidy, and is preparing challenges of the final
determinations of dumping and injury. The Government of Canada, the
provinces and industry have also initiated three NAFTA cases
regarding the U.S. final subsidy, dumping and injury determinations.
Those decisions are expected in 2003.
For more information on the softwood lumber dispute please visit
http://www.dfait-maeci.gc.ca/~eicb/softwood/lumber-e.htm
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A backgrounder is attached.
For further information, media representatives may contact:
Sébastien Théberge
Office of the Minister for International Trade
(613) 992-7332
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
http://www.dfait-maeci.gc.ca/
BACKGROUNDER
Chronology
In April 2001, the United States Department of Commerce initiated
its fourth countervailing duty investigation of Canadian softwood
lumber in 20 years.
On August 9, 2001, the U.S. made a preliminary countervailing
duty determination and imposed a 19.31 percent provisional duty on
Canadian softwood lumber imports. The U.S. Department of Commerce
also made a preliminary critical circumstances determination on
August 9 that resulted in the 19.31 percent finding of subsidy being
applied retroactively to May 2001.
On September 17, 2001, Canada held World Trade Organization (WTO)
consultations with the United States to raise its concerns about
these two determinations. The consultations failed to resolve the
dispute. As a result, Canada requested the establishment of a panel
to hear this challenge at the November 5 meeting of the WTO Dispute
Settlement Body. The U.S. blocked the establishment of a panel at
that meeting. Following WTO procedure, Canada repeated its request
at the December 5 meeting of the Dispute Settlement Body and the
panel was formally established.
In order to establish that a program is a subsidy the WTO
requires a financial contribution that confers a benefit.
1. Benefit
Canada argues that the United States used cross-border, rather
than in-country, benchmarks to determine whether stumpage confers a
"benefit" (i.e. it based its benefit finding on U.S. prices, rather
than on the prevailing market conditions in Canada). Canada
maintains that the use of a cross-border methodology by the United
States to measure benefit is inconsistent with WTO rules.
2. Financial Contribution
Canada maintains that provincial forest management regimes and
stumpage are not subsidies as claimed by the U.S. industry and
administration. Canada believes that the Department of Commerce is
wrong to treat provincial forest management regimes generally, and
stumpage, in particular, as financial contributions on the basis
that provinces are providing a good. Under provincial forest
management regimes, provinces grant a licence or right of access to
cut timber, which is not a "financial contribution" as defined under
the WTO Agreement.
3. Pass Through
Canada argues that the United States erroneously presumed that
the alleged benefits from harvesting timber under stumpage programs
are passed through in sales of logs or lumber for use as an input in
the production of subject merchandise. The U.S. claims that loggers,
lumber producers and remanufacturers are integrated producers and
that stumpage is a direct subsidy to all such producers. Canada
maintains this claim is unwarranted.
4. Calculation of Subsidy (First Mill)
Canada argues that the United States erroneously calculated the
duties by assuming that "value-added" products were included in the
information provided to the United States. The United States ignored
Canada's attempts to clarify this. The effect was a higher duty
rate.
5. Preliminary Critical Circumstances
Determination
Canada maintains that the duty imposed by the Department of
Commerce due to a finding of critical circumstances (i.e. increased
imports) cannot be enforced on an interim basis. Canada also
maintains that the determination was based on an alleged export
subsidy that was found to be de minimis--conferring a
subsidy rate of less than 1 percent.
6. Expedited Review/Administrative Review
Canada argued that there is an obligation to provide for
individual expedited company reviews where investigations are
conducted on a country-wide basis. The United States has
subsequently provided Canadian exporters with expedited review upon
request.
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