Volume Nine, Number Four   September 2004    www.columbiajournal.ca

NAFTA Panel Rules Against US Injury Claims as Trade War Continues


CPP News Service

The US government’s claims that Canadian softwood lumber exports are damaging wood production companies in the US has been rejected by a trade panel under the North American Free Trade Agreement, but the trade war may not be over, according to a woodworkers’ rep.

Kim Pollock, director of Policy and Land Use for the Industrial, Wood and Allied Workers of Canada, said despite yesterday’s decision, the US government still can appeal—and while it does so, the 27.2 per cent countervailing duties on Canadian softwood products will likely remain in effect.

“Now that their injury case has been rejected, it kicks the legs out from under the US government’s countervailing taxes,” he said. “But the US still has avenues of appeal, and from our experience, they will use every means to get what they want.”

After two years of appeals and negotiation, the panel issued what it said is its final decision on the matter. It claims the US Commerce Department, which had been representing US producers, has failed to provide sufficient evidence to show the US lumber manufacturing firms are being unfairly damaged by Canadian lumber exports.
 
This is the third time the panel has dealt with the US government’s claim. In the first two hearings, the panel sent the case back to the department for clarification and review. It now says the commerce department has “provided no fresh evidence to support its claim.”

The US can now appeal under NAFTA’s special provisions clause. That appeal will be heard sometime next year. It has until September 9 to act and is expected to do so.

According to veteran trade researcher Ellen Gould, this will be the final appeal for the US. If it loses, it will have to comply and remove the tariff.

“They can use the judicial review of this ruling,” she said. “But once that’s exhausted, then that’s it. If they lose, they either have to comply or abrogate NAFTA altogether.”

However, she is urging Canadians not to celebrate prematurely, since this final stage is usually where the US government, through power politics and extensive legal challenges, usually gets its way.

“The US government has yet to lose a NAFTA trade dispute,” she said. “Canada has lost quite a few over the years, and Mexico has lost the most. But the US so far has yet to lose.”

She agrees that Canada’s position has been strengthened in future negotiations now that the US can’t claim injury. But she warns that last year’s unfavourable World Trade Organization ruling, which claimed Canada unfairly subsidizes its lumber industry, could hinder any progress.

“We lost at the WTO,” she said. “We were lucky the (NAFTA) panel ruled there was no injury. If the economic situation had been any worse for the lumber industry in the US, they might have been able to show there was injury. It’s real crap shoot.”

Pollock says for now the next step is to resume negotiations, including how Canadian forestry firms can recover the approximately $2.6 billion they have paid in countervailing tariffs since the US government imposed them in May of 2002.

While he hopes the companies can get this money back, he wants to see at least some of it go into expanding and modernizing the wood products industry, which has been suffering from declining capital investment resulting from a wave of corporate concentration and mergers.

“I hope we can get this money directed at more investment in BC industry, and not being used to just buy each other up,” he said. “Corporate consolidation and down-sizing has been the trend. We need to put some resources back into the industry so the people who work in it can get some return.”