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WTO rules largely for U.S. in lumber tariff fight

By SAM CAGE
The Associated Press

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Canada and the United States had both appealed the earlier decision by a WTO panel, but a 63-page final ruling rejected both countries' challenges.

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 prices below the cost of production — a practice known as dumping.

Rejecting the U.S. appeal, the panel also upheld an earlier ruling that the U.S. government's calculations were wrong because Washington used a method called "zeroing," in which sales at above-market prices are ignored.

The panel said the WTO should order the U.S. government to change its calculation methods to conform with WTO rules. The U.S. will have to recalculate the level of the duties. It was unclear what the new figure would be.

In a slight change to the earlier ruling, however, the appeals panel found that the U.S. had miscalculated the price of lumber from one of the Canadian companies involved, Abitibi Consolidated.

"Though we're disappointed that the panel sided with Canada on this technical issue, we're pleased overall," said Richard Mills, spokesman for U.S. Trade Representative Robert Zoellick. "Canadian companies are competing unfairly in dumping lumber."

Canadian authorities also welcomed the decision.

"We are pleased that the WTO appellate body affirmed that the U.S. practice of zeroing in this case breaches WTO anti-dumping rules," Minister of International Trade Jim Peterson said. "We are also very pleased that the appellate body ruled in Canada's favor on Abitibi."

The anti-dumping duties, ranging from 2.18 percent to 12.44 percent, were imposed in May 2002 following an investigation by the U.S. Department of Commerce. U.S. producers accuse the Canadian government of subsidizing its lumber industry.

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 a third of the American market.
 
The complaint about anti-dumping tariffs is one of three lumber cases that Canada has brought to the WTO. Two other rulings in recent months have largely favored Canada. The Canadian government also is pursuing the issue under the North American Free Trade Agreement.

Both countries are now awaiting a key ruling by a NAFTA panel on whether the U.S. lumber industry actually is threatened with injury from Canadian imports. The final decision could come within a few weeks.

If the NAFTA ruling again goes against the United States, the Bush administration could be forced to drop all duties against Canadian wood after appeals are exhausted.

The conflict between the U.S. and Canada over lumber has been escalating since the expiration of their Softwood Lumber Agreement in March 2001.

Information from Reuters is included in this report.