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Softwood fight goes to NAFTA
With files from reporter Guy Dixon in Toronto
February 27, 2002


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  • OTTAWA and VANCOUVER -- Ottawa is challenging crippling American softwood duties under NAFTA as a pressure tactic while it continues to seek a negotiated solution during three days of talks starting today in Washington.

    Trade Minister Pierre Pettigrew said he still favours peace through talks but wants to prepare for the chance that Canada does not reach an agreement with the United States by March 21, when the U.S. Commerce Department will make a final ruling on the amount Canadian companies must pay to export lumber into the U.S. market.

    "I am not taking any chances here. I am being very prudent," Mr. Pettigrew said. "We are . . . putting some pressure by using this recourse that is available to us."

    In the long-running dispute, the powerful U.S. lumber industry lobby alleges that Canadian producers benefit from government subsidies -- in the form of artificially low fees for cutting trees on Crown land -- and dump wood south of the border. Washington has slapped temporary duties on Canadian lumber -- one of which has already expired -- as it awaits a March 21 decision on final duties.

    Yesterday, Canada set in motion a challenge of the pending March 21 decision by filing a notice of intent requesting the establishment of a binding panel under Chapter 19 of the North American free-trade agreement. The panel's job would be to review whether the March 21 decision's determination of a subsidy is allowed under U.S. trade remedy law.

    Mr. Pettigrew said the request for the selection of five panel experts is being made now so the body can be ready to examine the matter after March 21. "I want to gain time in case we have to go there."

    Separately, Prime Minister Jean Chrétien told reporters he raised the softwood lumber dispute and steel dispute with U.S. President George W. Bush during a telephone call yesterday.

    "We decided we both wanted to have a solution to these two problems as quickly as possible."

    The Prime Minister said he asked Mr. Bush to consider the impact of the softwood lumber dispute on Canadians as talks resume today.

    "He said that he's looking at the problems and . . . I explained to him that it was extremely important for Canada," Mr. Chrétien said. "And I keep telling him that we have signed a free-trade agreement with the United States."

    Canada's two-track response has been to challenge the Americans at the WTO and separately seek to settle the matter through talks involving lumber-producing provinces and Washington. The NAFTA challenge builds on Canada's WTO challenge to put legal pressure on the United States in the event talks fail.

    Separately, The U.S. ambassador to Canada yesterday said that March 21 should not be a hard and fast deadline for higher tariffs on Canadian lumber if the two countries are making progress on trade talks.

    "If we are heading in the right direction, we don't want March 21st to be some sort of trigger that causes the progress to stop," Ambassador Paul Cellucci told reporters after a luncheon speech in Toronto.

    Despite suggesting that both sides were making headway, Mr. Cellucci indicated that a resolution may not come before the deadline.

    "I don't know if it can be done by March 21, but I think we continue to make progress," Mr. Cellucci said. "Nobody wants to walk away from the table."

    An export tax still looms as the most likely short-term solution to the dispute. For months, Canada and the United States have entertained the possibility of using an interim bridging measure such as a border tax collected by Ottawa to strike a temporary peace while a final solution is hammered out.

    Lumber interests have hoped a deal could be reached before March 21 when it's expected a final duty ruling could make talks harder.

    "Once you are into final duty determinations, the legal process grinds on and it will become much more difficult to have the duties lifted," said David Emerson, chief executive officer of Vancouver-based lumber giant Canfor Corp.

    Mr. Emerson said he believed the U.S. government may still be a long way from agreeing to suspend the existing import duties on Canadian lumber. "I don't think it is a done deal . . . it would be a mistake to say it is."

    British Columbia Forest Minister Mike de Jong said when talks resume today, B.C. trade officials will push for a settlement based on a series of proposals that have already been announced by British Columbia, Quebec and other Canadian provinces.

    However, he warned about the possibility of there not being a deal because British Columbia has already put 21 policy proposals on the table and is "simply not going to cave in to every U.S. demand."

    "We could get a comprehensive, completed deal by March 21 . . . though I have to tell you the likelihood of all of the transitional work and policy changes being in place by then is remote," Mr. de Jong said.

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