U.S. says it wins again in Canada lumber dispute

By Roberta Rampton and Doug Palmer

WASHINGTON | Fri Jan 21, 2011 5:04pm EST

(Reuters) - A binding arbitration panel has ruled Canada has again breached its softwood lumber deal with the United States, this time with aid offered by provincial governments in Quebec and Ontario, the U.S. trade representative said on Friday.

It marks the second recent win for the United States at the London Court of International Arbitration on the perennially thorny trade issue. It won a similar case at the tribunal in 2009, and last week launched a third case.

"This result is important for U.S. workers, firms and our softwood lumber industry. We look forward to Canada working quickly to implement the decision of the tribunal," U.S. Trade Representative Ron Kirk said in a statement.

The Canadian government said it was reviewing the decision and its impact on Canadian industry.

"I note that the tribunal rejected 97 percent of the United States' $1.86-billion claim as having no basis," Canadian International Trade Minister Peter Van Loan said in a statement.

Lumber producers in the United States have complained for decades that Canada unfairly subsidizes its producers.

In 2006, the two countries agreed to stop fighting about lumber in the courts, and signed a seven-year deal that allowed for binding arbitration of any issues.

In the arbitration result announced on Friday, the London tribunal ruled that provincial grants, loans, tax credits and other programs in Ontario and Quebec did not comply with the terms of the deal, according to the USTR.

Canada now must impose additional charges on lumber exports to the United States from the two provinces, collecting an estimated $59.4 million, the USTR said.

If Canada does not comply within 30 days, the United States can impose additional import duties on Canadian lumber, the USTR said.

A U.S. industry group said the victory boded well for the recently filed case against Canada for allegedly underpricing lumber harvested in British Columbia.

"We encounter just too many compliance issues with Canada," said Zoltan van Heyningen, spokesman for the Coalition for Fair Lumber Imports.

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Washington accuses canada of breaking trade agreement

US Trade Representative Ambassador Ron Kirk

Washington accused Canada on Tuesday of breaking a five-year-old agreement on lumber exports to the United States, and demanded arbitration.

Ottawa rejected the charge as "unfounded."

US Trade Representative Ron Kirk said Canada has sold softwood timber from public lands to Canadian lumber exporters for prices below those agreed in a 2006 pact.

The Canadian province of British Columbia is said to have sold exporters timber felled from public lands for a low price of 25 cents per cubic meter.

"Canada is in breach of its commitments," said Kirk. "When we believe our trading partners are not living up to their obligations, we will not hesitate to enforce our rights under our trade agreements."

Washington said talks to resolve the matter without arbitration had failed.

But Canadian Trade Minister Peter Van Loan shot back, saying the US complaint "deals with a pricing system that is no longer in place" and relies "on unfounded allegations."

Van Loan said he was "disappointed" that Washington has "rejected cooperative dialogue on this matter in favor of formal dispute settlement."

"There is no justification for arbitration, and Canada will vigorously defend the interests of its softwood lumber industry," he added.

Van Loan pointed to an "unprecedented infestation of the mountain pine beetle" in British Columbia for an increased proportion of low-value logs in the province's timber harvest, sold at auction.

The dispute is the third between the two countries over the 2006 agreement, which was designed to regulate the multi-billion-dollar" class="inform">dollar trade.

In the first case, Canada was ordered to pay over CAN$68 million (US$68.8 million) in export duties after failing to correctly calculate quotas.

The second case, involving provincial subsidies, has not yet been resolved.

The arbitration process in this latest case could last for two or more years before a decision is made.

While it is ongoing, British Columbia Forestry Minister Pat Bell said there would be no change in how the province's lumber is shipped to the United States.

Copyright 2011 AFP American Edition

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