Canada says money issues hindering lumber talks

TORONTO – Talks on resolving the U.S.-Canadian trade dispute over softwood lumber have broken down over money issues, Canada’s international trade minister said Tuesday.

Pierre Pettigrew said negotiations stopped after the two sides failed to make progress on two issues in the dispute over punitive U.S. duties imposed on softwood lumber imports from Canada.

He identified the issues as a possible export tax on Canadian lumber until a final deal is reached, and whether the United States will return any of the $1 billion Canadian dollars ($650 million U.S.) in punitive duties collected so far.

Calling demands by the U.S. softwood producers “excessive,” Pettigrew said the formal negotiations were called off but contact would continue.

“We have come to the conclusion that, for the time being, it was not possible to close the gap,” Pettigrew said after a Cabinet meeting. “We’re taking a break. We’ll see where it leads us.”

Last year, the United States imposed tariffs averaging 27 percent on softwood imports from four Canadian provinces, contending that government subsidies kept Canadian lumber prices artificially low and threatened the U.S. industry.

Softwood lumber from pine, spruce, fir and hemlock trees is used to frame houses. The United States imported nearly $6 billion of softwood lumber in 2001, about one-third of the American market.

Canada denies that it subsidizes its lumber industry and has challenged the U.S. tariffs at the World Trade Organization and under the North American Free Trade Agreement. Canadian officials say softwood exports to the United States fell sharply after the tariffs were imposed, forcing mills to lay off thousands of workers.

Talks that began late last year appeared to be making progress, with Pettigrew saying earlier this month that Canada would consider charging an export tax on lumber going to the United States as a temporary step.

He warned then that Canada would need some signal of a final resolution before agreeing to such a step.

Both Pettigrew and U.S. Commerce Secretary Donald Evans have said they want a permanent solution to an issue that has caused repeated disputes between the North American neighbors for decades.

In January, the Bush administration asked Canada to adopt forest practices that could raise timber prices and eliminate the need for the U.S. tariffs.