For the second time in less than a week, Canada has apparently won another round in the longstanding softwood lumber trade dispute with the United States.
A North American Free Trade Agreement panel ruled Monday that the U.S. Commerce Department must review its subsidy calculations on Canadian lumber imports, which a B.C. lumber industry spokesman said will likely erase the perceived subsidy altogether.
Commerce has until July 30 to redo its calculations, said John Allan, president of the B.C. Lumber Trade Council.
"Our analysis would indicate that if the Department of Commerce faithfully implements what the panel is telling them to do, then there will be a finding of no subsidy for B.C. and quite likely for every province in the country," Allan said in a conference call.
British Columbia accounts for about half the softwood lumber Canada exports to the U.S.
Alberta forest industry officials welcomed the decision, but remained cautious about the overall outcome.
"Every one of these interim decisions need to be taken with a grain of salt," said Parker Hogan, a spokesman for the Alberta Forest Products Association.
"But all in all, they continue to be part of that mounting body of evidence that is good for the Canadian position in the long term."
Alberta's forest industry saw a significant gain in the first three months of the year, boosted by higher prices for lumber and panelboard thanks to a booming housing market in Canada and the U.S.
The total value of the province's forest products rose 37 per cent to $1.06 billion during the quarter, the association said Monday.
Canada's $10-billion annual softwood export business currently is subject to an average 18 per cent countervailing duty, plus anti-dumping duties that bring the total tariff up to around 27 per cent.
If the U.S. Commerce Department revises its methodology according to the NAFTA panel's guidelines, Allan said, B.C. subsidy rates would fall below one per cent.
Under trade law conventions, that means the rate would go to zero, eliminating the countervailing duty, he said. However, the lower anti-dumping duty would still apply.
Last Thursday, a Commerce Department administrative review cut the countervailing and anti-dumping rates on lumber exported between May 2002 and March 31, 2003, to a total 13.2 per cent -- nine per cent of that coming from countervailible subsidy. The final rate does not take effect until December.
Later this week, a separate NAFTA panel is expected to report on the threat of injury poised by allegedly subsidized Canadian lumber to American competitors.
Canadian officials believe that too will go in Canada's favour, effectively killing the U.S. lumber industry's case for duties.
For the fourth time in two decades, the U.S. Coalition for Fair Lumber Imports succeeded in 2001 in having punishing duties slapped on Canadian lumber, which supplies about one-third of the U.S. home-building and renovation market.
The duties were confirmed the following year and have cost Canadian producers more than $2 billion US so far. The money is held in trust while the complex appeals proceed.
The coalition's member companies argue Canadian exports are subsidized through provincial forestry policies, especially artificially low stumpage or Crown timber-cutting fees.
The NAFTA ruling Monday stems from its rejection last August of Commerce's decision to use cross-border timber-pricing comparisons to determine if Canadian logs were being sold below market value.
The NAFTA panel rejected that approach, so Commerce derived a different methodology using Canada-only price comparisons.
Now, said Allan, the panel has nixed that approach too, agreeing with Canadian submissions that Commerce's calculations contain critical errors and don't reflect the way Crown timber is actually priced.
The federal International Trade Department is also pleased with the report, a spokesman said from Ottawa.
"Today is the second time that the NAFTA panel's asked the U.S. to get their act together," said Andre Lemay. "It's our position that if the U.S. does a proper determination under U.S. law, it will find that Canadian softwood lumber exports are not subsidized."
Commerce's administrative review report last Thursday used a different methodology based on auction-based prices from private woodlots in the Maritime provinces.
Allan said Monday's NAFTA report will likely force Commerce to revisit those calculations too before issuing its final figures in December and effectively zeroing the countervailing portion.
The NAFTA rulings could be subject to further appeals.
The U.S. lumber coalition has already alleged bias on the NAFTA threat-of-injury panel but Allan said he does not see a basis for questioning the U.S.-dominated subsidy panel's report.
However, he said the Canadian lumber industry is still interested in a negotiated settlement.
"We're winning the litigation but the dispute won't go away," he said.
A tentative deal last December to end the dispute stumbled over questions of quotas and market share during any interim period before duties are removed, as well as how much of the duties already collected would remain in American hands.
Allan said the strategy now will be to press ahead with reforms to make provincial forest policies more market oriented -- furthest advanced in B.C. -- to test whether the Americans are serious about free trade or are simply trying to protect their market.Calgary Herald (Alberta, Canada):
