- The Washington Times - Thursday, April 27, 2006

ASSOCIATED PRESS

The Bush administration announced yesterday that it has reached a tentative agreement to settle a 30-year dispute with Canada over softwood lumber.

The initial reaction from the U.S. timber industry was favorable, but some Canadians complained that the proposed settlement represented too much of a victory for American producers.

The Coalition for Fair Lumber Imports, which has led the fight against Canadian imports, said in a statement that it “could support settlement terms that U.S. officials have described.”

But some Canadians expressed unhappiness with a provision that would allow the United States to keep about $1 billion in penalty duties already collected on softwood lumber despite numerous adverse rulings by the World Trade Organization and other hearing panels against the U.S. levies.

“It’s outrageous, it’s a sellout, it’s a crime that the Americans would keep $1 billion of money that seven decisions have now said they shouldn’t have,” said Jack Layton, the leader of the opposition New Democratic Party, referring to the deal negotiated by Prime Minister Stephen Harper.

Bush administration officials said the fate of the proposed deal would depend on industry support in the United States and Canada.

“Given the nature of the agreement and ongoing litigation, it will ultimately be up to our respective industries to decide if they want to embrace a solid market-based agreement,” said Neena Moorjani, a spokeswoman for U.S. Trade Representative Rob Portman.

Ms. Moorjani said the administration thought the deal would bring stability to the North American lumber market. She said the alternative was “many more years of litigation, acrimony and market uncertainty.”

Softwood lumber, which includes pine, is heavily used in the construction of new homes.

The agreement was reached late Tuesday night but was not announced publicly until yesterday to give administration officials time to brief U.S. industry representatives. Ms. Moorjani said that despite some reservations, American lumber producers have “indicated a willingness to accept it.”

The U.S. side did not release details of the tentative agreement, but Canadian provincial politicians and Canadian press reports said the deal involved capping Canada’s share of the U.S. lumber market at 34 percent. The reports said the United States agreed to return 78 percent of the $4.3 billion in penalty tariffs that had been imposed on imports of softwood lumber from Canada.

Canada would impose an export tax starting when North American lumber prices fall below $360 per 1,000 board feet of softwood lumber, the reports said. The levy could go as high as 15 percent when the price goes below $310 per 1,000 board feet. This Canadian tax would serve to drive up the cost of lumber exported to the United States, reducing competitive pressures on U.S. producers while driving up the cost of lumber for U.S. consumers.

The framework also reportedly requires all parties to drop trade litigation and puts a moratorium on future trade complaints.

Ontario Natural Resources Minister David Ramsay told the legislature Wednesday that Ontario would be shortchanged by the deal as it would allow British Columbia to increase the volume of its lumber trade to the United States, but reduce Ontario’s share.

Mr. Ramsay said he would be registering his displeasure with Mr. Harper and Michael Wilson, Canada’s ambassador in Washington.

A similar agreement to resolve the lumber dispute was reached in 2003, but fell apart after some provinces balked. Canada and the United States have been battling over softwood lumber for three decades.

The United States imposed anti-dumping and countervailing duties totaling more than 27 percent in May 2002 after accusing Canada of subsidizing its lumber industry. The reductions since then have cut duties in both categories roughly in half, but Canadian lumber exporters have paid more than $4.3 billion during the period.

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