WTO ruling won't end softwood war: Minister Toronto Star August 30 2005
OTTAWA (CP) - An American victory in the softwood lumber trade dispute is disappointing but not a crippling blow and won't dramatically change Canada's position in the long-running dispute, Trade Minister Jim Peterson vowed today.
An interim ruling from the World Trade Organization late Monday said the United States complied with international law when it imposed billions of dollars in duties on Canadian softwood exports.
That flies in the face of a major ruling Aug. 10 that was strongly in Canada's favour under the North American Free Trade Agreement and was heartily celebrated by Liberal MPs as a clear victory.
And it seems to undermine calls from Liberal cabinet ministers for trade retaliation to bring the U.S. into line under NAFTA and end the crippling softwood dispute, which has cost Canadian lumber producers more than $5 billion in penalties.
Yet because the NAFTA decisions supersede WTO rulings, Canada won't change its demands that Washington back down and return that money, said Peterson.
"We are naturally disappointed. . .We would have liked to have won, but overall our thrust remains: the U.S. has to live up to NAFTA," Peterson said.
Trade experts agree that under the terms of NAFTA - signed by Canada, the United States and Mexico a decade ago - the continental trade pact "trumps" the WTO in disputes.
"NAFTA states very clearly that in the case of a conflict between NAFTA and WTO, NAFTA prevails," said Barry Appleton, a Toronto-based trade lawyer.
The sudden U.S. devotion to WTO rulings contradicts its regular practice, he added.
In most cases, U.S. authorities "tend to ignore, largely, WTO decisions and tend to follow very much domestic decisions, including NAFTA - until today."
But the U.S. lumber industry claimed a clear victory with the interim ruling from the Geneva-based WTO, which Canada will likely appeal.
"This new determination should put to rest any questions about whether duties are justified in this case," said Steve Swanson, chairman of the Coalition for Fair Lumber Imports.
Canada has fought the softwood lumber duties, first imposed by Washington more than two years ago, under both trade pacts in the hopes that any win would shore up their case.
Ottawa has already begun the long process of seeking WTO permission for the right to slap trade sanctions on almost $5 billion in U.S. products in retaliation - but that could take almost another year to resolve.
Appleton noted that Ottawa could also quickly pursue trade retaliation under NAFTA, rather than wait for WTO approval - if Liberal ministers are serious about taking such strong action.
Suggestions are that Ottawa could hit anything from Florida orange juice to California wines and produce with duties in retaliation.
However, that would be unprecedented. No country has yet used NAFTA retaliation, he added, instead preferring the more conventional WTO route.
But Canada may have no choice.
The U.S. win this week at the WTO could undermine Canada's applications there for sanctions if the ruling in Washington's favour ultimately stands, senior Canadian trade officials acknowledged.
Despite its victory, Washington still wants to resume negotiations towards a new softwood lumber pact, said a spokesperson for U.S. Trade Representative Rob Portman, Peterson's counterpart.
"The United States believes that back-and-forth litigation won't solve this 20-year-old issue," said Neena Moorjani.
"The best course of action is to come to a negotiated solution and we look forward to the resumption of talks as soon as possible."
Peterson broke off those talks when Washington brushed off the NAFTA ruling earlier this month.
But British Columbia, Canada's largest softwood producer, called for a quick return to negotiations.
"I think everybody on both sides of the border, including the senior people at the political level, realizes we have to get to a negotiated settlement," said B.C. Forests Minister Rich Coleman.
Officials say Canada is also pursuing its case in another venue, the U.S. Court of International Trade where hearings are expected to begin in September.
U.S. lumber producers have long claimed that Canadian exports are unfairly subsidized by low Crown timber fees, leading to several trade actions over the years.
A five-year trade deal that set quotas on Canadian exports created an uneasy truce in the late 1990s, which evaporated when the agreement expired in 2001.
Resuming negotiations may be the only way to a lasting peace, said Chris Sands, a trade expert at the Center for Strategic and International Studies in Washington.
And rhetoric from MPs about slapping tit-for-tat retaliation won't help, he added.
"This will end up being negotiated. . .this will not be litigated," said Sands.
"I can't imagine any amount of Canadian caterwauling that's going to get American's to say `oh, poor Canada.' "