Canadian Lumber Producers To Sue US

by Mike Godfrey, Tax-News.com, New York

07 May 2002

Now that the US International Trade Commission has approved 'anti-dumping' (= protectionist) tariffs of 27.2% on Canadian lumber imports, two Canadian lumber producers said yesterday they will sue the US government for damages.

The US will impose the duties on C$10bn worth of softwood imports this month, following allegations from US lumber producers that Canadian companies were subsidising and dumping the timber in US markets.

Tembec Inc. of Montreal said it plans to seek damages of at least $200m under Chapter 11 of the North American Free Trade Agreement, while Doman Industries Ltd., one of British Columbia's largest producers, said yesterday it had filed a notice of intent to sue under Chapter 11, claiming $513m in damages.

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 (a position which is also held by the US construction industry, which says it will heavily impact house prices).

Doman said it will specifically target a controversial piece of US trade law that allows antidumping and countervailing duties collected by US Customs to be funneled back to the US producers.

The lumber industry has petitioned the Government for assistance, but Pierre Pettigrew, the Minister for International Trade, refused the pleas for help, saying: "There have not necessarily been any job losses directly linked to the situation with the United States. There have been jobs lost as a result of the market. The government can't necessarily intervene every time there is a natural restructuring."

Thursday's decision by the United States means that as of mid-May, producers must begin paying the 27.2% duties in cash - an impossible situation for many producers, they say.

The legal actions against the US Government will constitute the first occasion that foreign companies have used NAFTA legislation to attack US countervailing or anti-dumping duties, and if successful would likely bring a hostile reaction from Congress, which might then attempt to limit the freedom of companies to take action under future trade agreements.

Taken together with the steel anti-dumping duties imposed by President Bush last month, the Canadian lumber case puts the Bush administration's actions on trade in sharp contrast with its free-trading rhetoric, and bodes ill for hoped-for expansion of Nafta. But in the US, as in other countries, elections are more important than principles. Things may improve after Congressional voting in the fall.

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