Published: Friday, January 21, 2011, 6:02 PM Updated: Friday, January 21, 2011, 6:09 PM
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
Published: Tuesday, January 18, 2011, 8:11 PM Updated: Tuesday, January 18, 2011, 8:11 PM
Randy L. Rasmussen, The OregonianThe United States contends Canadian timber policies violate a 2006 agreement and harm Pacific Northwest mills like Seneca Sawmill Co. in Eugene, which processes Douglas fir into lumber.
U.S. Trade Representative Ron Kirksaid Tuesday the Justice Department would file for arbitration under a softwood lumber agreement signed in 2006 after years of disputes. Kirk said British Columbia was selling timber harvested from public lands for prices below amounts set by the agreement, undercutting mills in the Pacific Northwest and other regions.
"This type of benefit harms U.S. workers and firms in the lumber industry and is inconsistent with Canada's obligations," Kirk said. "Canada is in breach of its commitments."
Canadian government and industry officials rebutted the claims.
"There's no substance to this," said Pat Bell, British Columbia's minister of forests, mines and lands. "We should be working on developing other markets together, like Korea, like China, like India."
Disputes over U.S.-Canadian lumber trade are as old as the hills. But in this round, the United States contends British Columbia resorts to a new tactic, improperly grading timber as beetle-killed salvage material and selling it for pennies per cubic meter to Canadian mills. The mills turn the timber into lumber sold cheap in America, hurting U.S. businesses and workers, said Steve Swanson, an Oregon lumber producer who chairs the U.S. Coalition for Fair Lumber Imports.
Swanson, chief executive of Glendale-based Swanson Group, said British Columbia should reverse its practices, charge proper timber fees and levy export taxes to even the playing field.
"North American lumber producers have curtailed production, closed mills and been forced to let go thousands of workers," Swanson said.
The Justice Department is requesting a judgment by a tribunal of the London Court of International Arbitration.
John Allan, president of the BC Lumber Trade Council, said U.S. officials brought the latest action in response to political pressure.
"It seems to be an attack on how we manage our forests with respect to the mountain pine beetle," Allan said. "They're basically saying, 'You should have left those trees to die on the stump.'"
Bell, the forests minister, said British Columbia grades timber just as it did before the 2006 agreement. Lumber prices are higher than expected, proving the agreement works, he said. China is also buying lumber, he said, due in part to Canadian marketing.
Chinese purchases also helped sustain a Swanson mill in Glendale that would have closed as unfair Canadian competition intensified, said Zoltan van Heyningen, the U.S. lumber coalition's executive director in Washington, D.C.
"Hopefully this case will help enable it to keep open," van Heyningen said.
--Richard Read
