- The Washington Times - Tuesday, April 3, 2001

U.S. lumber mills yesterday asked the Bush administration to slap lumber imports from Canada with a 70 percent to 80 percent surcharge to combat what they say are unfair trading practices north of the border.

The request opened a critical new phase in a long-simmering dispute over logging between the United States and Canada that topped the agenda when President Bush met with Canadian Prime Minister Jean Chretien shortly after taking office.

"The U.S. softwood lumber industry is reeling under record imports dumped into our market that are fueled by subsidies that Canada gives to our competitors," said W.J. Wood, chairman of the Coalition for Fair Lumber Imports, a group representing most of the industry.

The coalition filed its petition with the Department of Commerce yesterday, one day after the expiration of a five-year agreement between the two countries. That agreement, which limited Canadian imports, created a temporary truce in the nearly 20-year-old lumber dispute.

The trade flap over lumber, a key building material for houses, could cloud commercial relations between the United States and its largest trading partner in the months ahead. Canadian Minister for International Trade Pierre Pettigrew rejected proposals for a negotiated solution to the dispute and promised to fight the United States at every turn.

"We demand free trade, we want free trade and we deserve free trade," Mr. Pettigrew said. "I am convinced that, in the end, we will fight off American protectionism."

The lumber fight comes at an inopportune time for the Bush administration, which wants Canada's help in jump-starting negotiations over the proposed Free Trade Area of the Americas (FTAA), which would create a single open market from Alaska to Argentina. At the same time, Mr. Bush must woo lawmakers who support the American lumber industry, but whose votes he needs to pass major trade legislation later this year.

Mr. Bush will attend a summit in Quebec of leaders from North and South America on April 20-21, where he will try to smooth the way for the FTAA.

U.S. mills charge that the Canadian government unfairly subsidizes its industry through a variety of methods resulting in a flood of lumber into the United States at prices below the cost of production.

They blame Canada for the closure of 160 U.S. lumber mills and say that trade conditions now threaten the livelihood of 700,000 Americans in the timber industry.

U.S. timber advocates also charge that Canadian provinces keep the fee that Canadian mills pay to harvest logs from public land artificially low, boosting their profit margins.

Canadian authorities, U.S. producers say, also force mills to harvest a minimum amount each year in order to maintain high employment, production that is then dumped into the U.S. market.

"They keep churning it out, regardless of what market conditions are," said Sen. Olympia J. Snowe, a Maine Republican who supports the American mills.

Canada insists that its producers have been been able to sell into the U.S. market at record low prices because they have a comparative advantage in this industry.

"We are productive because we have modernized our industry, not because we subsidize," Mr. Pettigrew said.

The U.S. industry has asked the government to slap virtually all Canadian imports of softwoods such as pine and cedar with two types of tariffs. The first, at 40 percent, would offset the subsidies it believes the Canadian government provides.

A second would penalize Canadian mills with a 30 percent to 40 percent surcharge for selling their products in the United States for less than the cost of production.

The administrative procedures for imposing the duties could take more than 10 months, trade sources said. In addition, Canada could challenge any surcharges under complex international arbitration procedures, something it has done successfully in the past.

As a result, U.S. Trade Representative Robert Zoellick has tried to interest Canada in a negotiated settlement of the spat, so far unsuccessfully. Mr. Pettigrew said there is no interest in the ideas Mr. Zoellick has floated. Canada, whose lumber industry is divided over how to resolve the fight, has suggested the two sides appoint a group of "eminent persons" to study the issue.

Meanwhile, consumer groups, home builders and building materials dealers have argued that lumber trade restrictions boost the cost of new homes. They have united to stop any new attempt to curtail trade.

"We must be watchful that pressures from U.S. protectionist lumber producers on the Bush administration and Congress do not result in re-imposing yet another hidden tax on home buyers," said Susan Petniunas, spokeswoman for American Consumers for Affordable homes.

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