U.S. wins trade case, Canada must stop subsidizing lumber mills

Published: Friday, January 21, 2011, 6:02 PM     Updated: Friday, January 21, 2011, 6:09 PM

 By Richard Read, The Oregonian 
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Ontario and Quebec must stop subsidizing lumber manufacturers or levy nearly $60 million in tariffs on Canadian exports to level the playing field for U.S. producers, a trade tribunal ruled Friday. 

Steve Swanson, chairman of the U.S. Coalition for Fair Lumber Imports, welcomed the ruling. "By providing new subsidies, Canada knowingly violated the terms of the lumber trade agreement to provide an unfair advantage to Canadian producers in this very challenging market," said Swanson, president of Swanson Group mills in Glendale. 

The tribunal of the London Court of International Arbitration found that the provincial subsidies violated a U.S.-Canada softwood lumber trade agreement reached in 2006. Under the agreement -- effective for seven years -- Canada collects export taxes on shipments of softwood lumber to the United States when lumber prices fall below certain levels. The agreement prohibits Canadian federal and provincial governments from circumventing these tariffs by increasing subsidies beyond those in effect in 2006. 

The U.S. coalition began dispute proceedings in 2008, citing plans by Quebec and Ontario to provide hundreds of millions of dollars in grants, subsidized loans and loan guarantees. The decision issued Friday requires Canada to end the illegal subsidies or levy additional tariffs. If Canada doesn't act within 30 days, the United States can slap import duties on Canadian lumber. 

U.S. Trade Representative Ron Kirk applauded the ruling, saying the result is "important for U.S. workers, firms and our softwood lumber industry." 

Peter Van Loan, Canada's international trade minister, said the ruling could have been much worse for Canada. He noted the tribunal dismissed 97 percent of the initial U.S. claim of $1.86 billion. 

The decision is the second consecutive win for the U.S. at an arbitration tribunal. The court previously ruled against Canada over the calculation of export quotas in 2007. 

Canada's lumber industry faces a bigger threat from a third U.S. case, filed Tuesday. The United States claims British Columbia has been misgrading and underpricing publicly owned timber in the province's interior region, hurting U.S. producers. Canada denies the allegations, saying trees damaged by a mountain pine beetle infestation are being graded and sold correctly. 

If the United States wins the next case, Canada's bill could reach nearly $500 million. 



--Richard Read