Canada wins another NAFTA challenge.

It's all forest fires and tough talk in the region's lumber industry these days.

As one of the hottest, driest and most fire-infested summers in recent memory wraps up, the sabre-rattling between parties engaged in the softwood lumber dispute on both sides of the border is heating up.

Bear with us here, but in early August an Extraordinary Challenge Committee (ECC) of the North American Free Trade Agreement (NAFTA) ruled that a previous ruling in Canada's favour did not violate NAFTA rules per Washington's allegations.

It said the U.S. has no right to impose the duties it has on Canadian softwood lumber.

Mark Holmes is the Ontario Forestry Industry Association's (OFIA) manager of public affairs.

"The OFIA supports the resolution of the Free Trade Lumber Council, which states there should be no more negotiation undertaken until the U.S. recognizes and complies with the ruling of the ECC of the NAFTA panel," he says. "We are encouraged by the similarly strong language coming from the federal government. It is fair to say the rule of law should be followed so we can get back to doing good commerce on both sides of the border.

"What's the point of negotiating if they won't listen to the rules?"

The Bush administration, encouraged by what has been described as a powerful and cash-flush lobby of forest landowners and lumber industry brass in Washington, claims that Canada's "subsidized" softwood lumber imports pose a material threat to American producers of same.

It has collected over $5 billion in anti-dumping and countervailing duties of up to 27 percent since May 2002, despite several NAFTA panel and World Trade organization (WTO) rulings condemning the charges.

Canada has appealed to the WTO for permission to levy retaliatory duties on American imports. A decision should come next year. In the meantime, International Trade Minister Jim Peterson cancelled talks with the Americans, scheduled for late August.

The ECC decision was dismissed outright and almost immediately by U.S. Trade Representative Rob Portman, whose press secretary told Canadian media the ruling is disappointing, but "will have no impact on the anti-dumping and countervailing duty orders."

The Americans insist that, despite the above-mentioned rulings, a negotiated settlement is the only way to end the dispute.

This comes as an insult to many architects of NAFTA and its 1988 predecessor, the Free Trade Agreement (FTA), according to an article that appeared in the Aug. 20 edition of The Globe and Mail.

The ECC was set up at the insistence of the Americans in the first place as a last resort to dispute resolution, seasoned political and international writer John Ibbitson wrote.

"In 1987, the free-trade negotiations between Canada and the United States almost collapsed because the Americans refused to accept a binding dispute resolution mechanism, while Canada insisted on one. At almost literally the last possible moment, the Americans accepted the Canadian demand, on the condition that an Extraordinary Challenge Committee, as they called it, be able to review the decisions of all lower panels."

The Bush administration's behaviour in the matter amounts to bullying, plain and simple, according to some of the architects of the FTA and NAFTA.

"It's the tactic of the schoolyard bully," Derek Burney told The Globe. He was chief of staff to then-prime minister Brian Mulroney, and a key player in the talks. "Which was exactly what we were trying to prevent when we negotiated the free-trade agreement. It's beyond the pale."

These words come amid warnings from the U.S. ambassador to Canada, David Wilkins, to "keep the rhetoric down."

But not all of the talk is coming from the Great White North.

The National Association of Home Builders (NAHB) has been very vocal in their beliefs that the coalition spearheading the dispute for the Americans is not representative of the broader interests of the United States or its economy.

David Wilson is the president of NAHB and a custom builder from Ketchum, Idaho.

"We urge the Administration to allow this final verdict to be implemented without further delay," he says in a release, "and to immediately rescind the tariffs and return to Canada more than $4 billion in deposits that have been collected."

Nearly 50 members of Congress have signed a letter to President George W. Bush, calling on the Administration to implement the NAFTA ECC ruling and to adhere to the international agreements that the U.S. has signed.

The letter states that the "current duties, which have been found illegal under both the WTO and NAFTA, deprive Americans of affordable housing, the first step in the American dream. The border taxes should be stopped at once and past payments given back."

www.nahb.org

www.nafta-sec-alena.org

By CRAIG GILBERT

Northern Ontario Business