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WTO rejects most claims by Canada in lumber case

By Naomi Koppel
The Associated Press

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In a 393-page ruling, a panel of three trade experts rejected claims by the Canadian government that the United States had acted illegally in investigating whether lumber from Canada was being sold at below the cost of production, a practice known as dumping.

However, two of the panelists ruled that the U.S. government's calculations were wrong because they used a method called "zeroing," in which sales at above-market prices are ignored. They said the WTO should order the U.S. government to change its measures to conform with WTO rules.

In January, before the report was made public, U.S. officials said the WTO panel had rejected all of Canada's claims and hailed the ruling as a big victory.

"You would have to say it is generally a victory for the United States," one trade source said of yesterday's ruling, "although Canada has got something out of it." The anti-dumping duties, ranging from 2.18 percent to 12.44 percent, were imposed in May 2002 after an investigation by the Department of Commerce. U.S. producers accuse the Canadian government of subsidizing its lumber industry.

Either country has the right to appeal the ruling. U.S. officials in Washington said they had not decided whether to appeal on the issue of how the dumping duties are calculated.

Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, called the decision "an important victory for the United States. They found that in virtually all respects, the United States action was consistent with our international obligations under the WTO."

If the ruling stands, Washington would have to recalculate the duties. It was unclear what the new figure would be.

Canadian Trade Minister Jim Peterson urged the United States to comply with the ruling and said he was "pleased that the WTO ruled in our favor on the key issue in the case."

Meanwhile, lumber companies on both sides of the border are awaiting a separate decision April 30 by a North America Free Trade Agreement panel. That panel has been asked to decide whether the U.S. industry is threatened with injury as a result of Canadian wood exports. A negative finding would end all U.S. duties.

Softwood lumber, from pine, spruce and other trees, is a key product in home construction. In 2002, the United States imported nearly $6 billion of softwood lumber from Canada, about one-third of the U.S. market.

Information from Reuters is included in this report.

Copyright © 2004 The Seattle Times Company