Bastards!

By BARRIE MCKENNA

Thursday, January 30, 2003 – The Globe and Mail, Print Edition, Page B1

WASHINGTON -- The U.S. Congress has dramatically raised the stakes in the cross-border lumber trade feud by introducing legislation that could nearly double the duties on Canadian exports to the United States.

The proposal, which surfaced a day before a key summit of industry officials in Washington, would push the U.S. duties to as high as 45 per cent from 27 per cent on roughly $10-billion worth of Canadian softwood lumber.

U.S. Senator Larry Craig insisted that the law is desperately needed because Ottawa and Canadian lumber companies are cheating on the duty regime and flooding the U.S. market with cheap wood.

"Recent blatant moves by the Canadian government and timber industry reveal their true desires to continue to flood the U.S. market with softwood lumber and their unwillingness to find a resolution that provides security for both U.S. and Canadian jobs," complained Mr. Craig, of Idaho, co-sponsor of the Senate version of the bill.

A matching bill is also being introduced in the U.S. House of Representatives in what appears to be an orchestrated attempt to ratchet up the pressure on Canada to negotiate a quick end to the long-running dispute.

The bills, which appear to have broad Republican and Democratic support, come as Canadian and U.S. lumber executives are due to meet top Bush administration officials tomorrow in Washington to explore a possible settlement.

Mr. Craig acknowledged that the move is at least partly aimed at getting Canada back to the negotiating table.

"It is time for the Canadian government and their industry leaders to come to the table to negotiate a free and fair market price for both U.S. and Canadian lumber," Mr. Craig said on the Senate floor.

Canadian officials seemed caught off guard by the development.

Sébastien Théberge, Trade Minister Pierre Pettigrew's press secretary, suggested the U.S. lumber industry is worried and is "looking for ways to increase the price of wood because the duties have backfired."

A large chunk of the Canadian industry, including producers in Quebec and Ontario, has so far shown little interest in U.S. calls for sweeping reforms of Canadian forest practices as the price of a deal. They have been pushing Ottawa to continue pursuing World Trade Organization and North American free-trade agreement challenges instead of settling out of court.

The proposed legislation would correct what its sponsors characterized as accounting errors and misinterpretations of trade laws by the U.S. Commerce Department that have allowed Canadian companies to include the cost of countervailing duties in their business expenses. As a result, the Commerce Department is underestimating anti-dumping duties, which are also applied on Canadian lumber, they argue.

Complicating Canada's position is the contention of congressional and U.S. industry officials that the proposed law would merely bring U.S. duty policy into line with those of both Canada and the European Union.

Mr. Théberge said Canadian officials are studying the bill to determine if it mirrors current Canadian policy. "The department is not ready to make that analysis," he said.

The current average duty of 27 per cent is made up of a countervailing duty to counter U.S. charges that Canadian provinces are subsidizing lumber exports, and an anti-dumping duty to offset product sold at below cost in the United States.

The proposed legislation would alter long-standing U.S. government practice. But Commerce Department spokeswoman Julie Cram said Congress has the power to do whatever it wants.

"Congress has the discretion to pass legislation that is in the best interests of the United States," Ms. Cram said. "Ultimately, it's up to them."

Asked why Congress has waited more than 70 years to try to amend the Tariff Act of 1930, Ms. Cram responded: "Obviously, a lot of people are talking about lumber right now."

The fate of the bills in the House and the Senate's cluttered legislative agenda is unclear. But with broad support, legislation could be in place as early as May -- the one-year anniversary of the lumber duties.

John Ragosta, a lawyer and lobbyist for the U.S. lumber industry, predicted the bill would "fly through" the Senate, where it already has the support of 11 Senators.

Mr. Ragosta, who speaks for the Washington-based Coalition for Fair Lumber Imports, said he's been warning his Canadian counterparts for months that the U.S. duties were set too low.

"We've been saying to people for a while that if they don't want to settle, they want to litigate, they are going to have to suffer the consequences," he warned bluntly.

Mr. Ragosta added that the timing of the bills has less to do with this week's lumber summit and more to do with the so-called "administrative review" of the lumber duties launched by the Commerce Department last year. Under that process, any changes to the duty calculation can't take effect until May, a year after the duties were imposed, he said.

The trigger, however, was a series of recent moves by Ottawa and British Columbia that have contributed to a collapse in lumber prices, according to Mr. Craig. He complained that Ottawa has designated a large swath of the B.C. Interior for "bug kill timber," resulting in stands being sold for as little as 1/100th of the market price.

He also accused the B.C. government of lowering "forestry standards" to help save companies money. The U.S. industry had hoped that the 27-per-cent duty would prop up prices in the U.S. market and keep Canadian producers from gaining market share.

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