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Initial Trade Ruling Goes Against U.S.; Both Sides Claim Win

Update on the softwood lumber dispute between the United States and Canada as WTO announces preliminary ruling.

By TimberLine Staff
Date Posted: 9/10/2002

The World Trade Organization (WTO) made a preliminary ruling in the dispute between the U.S. and Canada over softwood lumber. The WTO ruled against the U.S. on eight of nine issues. Both sides claimed victory in the initial ruling.

A final ruling is not expected until fall. The U.S. likely would appeal before year’s end if the final decision is unfavorable.

The preliminary ruling related only to minor aspects of the dispute concerning only initial duties that were imposed late last year. However, the implications loomed much larger because the WTO
rebuffed several arguments used by the U.S. to justify the permanent anti-dumping and countervailing duties that were imposed in May.

The most important argument was the longstanding U.S. claim that since Canadian fees for logging are cheaper than the U.S., the Canadian federal and provincial governments must be subsidizing the lumber industry. The WTO did not accept that claim, noted Canadian trade officials.

Canadian softwood lumber producers and government officials exulted. "Clearly, this decision goes the way Canada had hoped for," said Canadian Trade Minister Pierre Pettigrew.

The ruling, though preliminary, will make it much harder for the U.S. to continue to justify duties that now average 27% against Canada’s $10 billion softwood lumber industry, he said.

Jacques Gauvin, president of the Quebec Lumber Manufacturers Assn., called the ruling "a piece of good news, and we’ll take all of these that we can."

The office of U.S. Trade Representative Robert Zoellick found more than a silver lining in the WTO ruling, describing it as a "victory for both the U.S. lumber industry and the environment." The WTO panel agreed with the U.S. that timber sales from Canadian public lands amounted to a government financial contribution to lumber producers that could give rise to a subsidy, said spokesman Richard Mills.


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