Canada to challenge U.S. softwood lumber duty before WTO

YELLOWKNIFE, the Northwest Territories – If Americans want Canadian oil and gas, they must also open their doors to Canadian lumber, Prime Minister Jean Chretien has told President Bush.

Stepping up moves against a U.S. tariff on Canada’s $10 billion-a-year softwood lumber exports, Chretien’s government announced Tuesday it will challenge the duty before the World Trade Organization.

Chretien spoke with Bush by phone on Monday about the 19-percent U.S. tariff on Canadian lumber imports.

“You want gas, you want oil and you don’t want wood?” Chretien said in Yellowknife. “It’s too bad, but if you have free trade, you have free trade. And I explained it very clearly. You know me.”

It was the first time Chretien has suggested a link between the growing softwood lumber dispute and other areas of Canada-U.S. trade.

A White House spokesman confirmed that Bush talked by telephone from Air Force One with Chretien on Monday. Sean McCormack called it a “good conversation,” but confirmed that the contentious issue of Canadian softwood lumber was raised.

In a sign, perhaps, that the White House was stung by Chretien’s call, aides did not immediately discuss it. The White House, which normally tells reporters about Bush’s telephone calls to foreign leaders, did not mention the call to Chretien until after the Canadian made mention of it.

Chretien has previously dismissed opposition calls to use Canada’s energy wealth as a lever in the lumber dispute, saying it would not be in Canada’s interest to start a tit-for-tat trade battle with the United States.

“I spoke clearly to him and he understands it is a problem that has to be resolved,” Chretien said of his conversation with Bush. “We’re working to solve the problem.”

Announcing the WTO challenge, Canada’s International Trade Minister Pierre Pettigrew said in a speech in Edmonton that the U.S. tariff was unwarranted and punitive.

He said the U.S. Commerce Department had acted against WTO rules by imposing the duty on Canada’s softwood lumber exports. Only the Atlantic provinces are exempt.

Officials say the duty, which takes effect this week, could cost the Canadian industry $2 billion a year and has already forced layoffs at several lumber mills in British Columbia.

The duty was imposed after the U.S. Commerce Department ruled that Canadian lumber was subsidized through low provincial timber-cutting fees, or stumpage.

But Pettigrew said the U.S. interpretation of stumpage as a financial contribution from the government is flawed.

“We fully intend to continue to fight the United States trade action in every legal venue available,” Pettigrew said. “Canada will not bend to unsubstantiated allegations based on protectionism.

“Our industry wants and demands free trade in softwood lumber,” he said.

If the Geneva-based WTO finds in Canada’s favor, Washington would have to rescind the duty or Ottawa would be given permission to impose retaliatory sanctions.

The Canadian challenge will ask that the WTO fast-track the dispute settlement process, which can take months to get started.

Pettigrew plans to discuss the issue with provincial forestry ministers in Montreal on Friday.