Retaliation hinted in lumber dispute

REGINA, Saskatchewan — The Canadian government yesterday hinted at an escalating trade war with the United States, with two federal ministers warning of tariffs on U.S. products in retaliation for Washington, D.C.'s policies against Canadian lumber.

Trade Minister Jim Peterson is identifying areas where Canadian tariffs could put pressure on the U.S. economy with minimal damage domestically, two of his Cabinet colleagues told reporters attending a Liberal Party caucus in western Canada.

Industry Minister David Emerson — a former chief executive of Canfor, Canada's largest softwood producer — used a sports analogy to describe the federal government's willingness to retaliate against its North American Free Trade Agreement (NAFTA) partner.

"I have a background from my younger days in hockey. When somebody slammed you into the boards with undue force and aggression, you took their number," Emerson said. "I think we've got to take their number."

The Bush administration imposed the tariffs in 2002 after accusing Canada of subsidizing its lumber industry. Most U.S. timber is harvested from private land at market prices, while in Canada, the government owns 90 percent of timberlands and charges fees for logging.

Neena Moorjani, a spokeswoman for U.S. Trade Rep Robert Portman, said Portman had no immediate comment on the Canadian threat.

The warning from Canada comes one week after the United States announced it would ignore a decision by a NAFTA panel that found Canadian lumber exports did not harm U.S. producers.

Emerson said Ottawa was trying to "identify a number of products where a tariff on U.S. exports into Canada can be applied without serious damage to the Canadian economy and, hopefully, with maximum impact in the U.S."

Canada is already seeking WTO authorization for billions of dollars in punitive tariffs against U.S. imports and is going before the U.S. Court of International Trade to force the refund of duties.

With more than 80 percent of Canadian exports going to the United States, Canada would need to tread carefully to avoid a crippling trade war.

A spokesman for the U.S. lumber industry said any retaliation is a long way off, and dismissed Emerson's comments as "saber rattling," Bloomberg News reported.

"No such retaliation has been authorized, and I don't see how it could be anytime soon," said Harry Clark, a lawyer for the Coalition for Fair Lumber Imports.