WTO Allows US To Continue Taxing Canadian Lumber Imports

by Leroy Baker, Tax-News.com, New York

01 September 2005

The World Trade Organisation has ruled that retaliatory tariffs imposed by the United States government on Canadian lumber imports are not in violation of global trade rules.

In a decision released to both governments on Monday, the WTO stated that the US was within its rights to impose the duties in order to protect domestic producers from imports which are subsidized by the Canadian authorities. The WTO report, which is still confidential, is not due to be released publicly until later in the year.

According to the US, Canadian provinces give sawmills an unfair subsidy by not charging market rates to harvest timber on government land. In response, in May 2002 the US applied tariffs at an average rate of 27.2% on annual exports worth some $4.6 billion.

The WTO decision contradicts a ruling by a North American Free Trade Agreement (NAFTA) panel earlier in the month, which dismissed the US claims. The Canadian government originally filed its complaints to both the WTO and NAFTA in 2002 in protest at the International Trade Commission's determination that American producers are harmed by cheap Canadian products. Whilst the WTO initially disagreed with the ITC's verdict, a reworked ITC ruling was issued in November, which Monday's report has upheld.

The decision means that Canada cannot reclaim some $4.1 billion in tariffs levied against Canadian lumber exporters since 2002. The Canadian government has pledged to appeal the WTO ruling.

"We want the United States to live up to and respect the NAFTA," Canadian Trade Minister Jim Peterson stated on Tuesday.

"In the grand scheme of things, however, really our position does not change," he added.

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