US/Canadian Lumber Tax Dispute No Nearer Resolution

by Mike Godfrey, Tax-News.com, Washington

23 January 2002

Robert Zoellick, the US Trade Representative, met with the Canadian Minister for International Trade Pierre Pettigrew in Geneva yesterday, and told him the US industry is not in the mood to make a deal over the question of Canadian lumber exports to the US.

The US government imposed duties on Canadian softwood lumber imports last year after the expiry of a five-year pact to limit them voluntarily, saying that Canadian exporters were subsidising export prices against WTO and NAFTA. At the end of October, the Commerce Department issued a preliminary ruling imposing average anti-dumping duties of 12.6% which, when added to the 19.3% countervailing duty the Department imposed in August, amounts to a 31.9% tax.

Consumer lobbies in the Congress say that the US action does more harm to consumers than good to US lumber producers, but this cuts little ice with the powerful producer lobby.

The Canadian side has been pressing for a negotiated settlement, but under US trade law only the American industry can call a halt to the investigations that sparked the duties, and they have no incentive to do so since the border tax has slowed the flow of Canadian lumber.

Canadian lumber companies, especially in British Columbia, which has admitted to a degree of subsidy in its pricing, have idled plants and sent thousands of workers home in the months since the dispute flared.

US lumber producers are to forward suggestions for breaking the impasse this week to Marc Racicot, the US special envoy on softwood, but the proposals are unlikely to provide the basis for a deal, Mr. Zoellick told Mr. Pettigrew, according to an aide to Mr. Pettigrew.

"He told us not to have high expectations about what the industry is going to say," said Sebastien Theberge, press secretary to Mr. Pettigrew.

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