Softwood 'biggest trade dispute in the world': end is near for U.S. trade battle, says OFIA.

Canada's softwood producers are near the end of the precedent-setting trade fight, Ontario Forest Industries Association (OFIA) president Jamie Lim says.

"This is not just a softwood lumber fight, this is the biggest trade dispute going on in the world right now," says Lim.

The United States Coalition for Fair Lumber Imports, comprised of powerful, well-organized American industry officials and the Department of Commerce (DOC) will have exhausted their avenues under the North American Free Trade Agreement (NAFTA) in trying to avoid paying back $4 billion in duty refunds, says Lim.

Canadian softwood lumber organizations are not letting up.

"If we don't get the duty refunds back, why would any manufacturer in Canada want to do business with the United States?"

Canada will never protect its interests, at least as far as the United States is concerned, without strong institutional laws and rules, according to Elliot Feldman and Carl Grenier, authors of A Broader View of Canada-U.S. Relations and the Battle Over Softwood Lumber. Institutionalized partnerships like the Free Trade Agreement (FTA) and NAFTA have brought a certain degree of partnership. However, when it comes to being America's confidante, rarely have there been concrete benefits.

"In the quest since 1971 to restore the privileged space, Canada often has accepted the role of mistress without marriage, and the United States has been able to avoid the threatened price of divorce," the authors state.

Therefore, Canada must enforce rules and laws already negotiated in the NAFTA and FTA. These aren't new rules or agreements, just the deal in to which they already entered, says Grenier, who is also executive vice-president of the Free Trade Lumber Council. Based on the NAFTA dispute process "(The American bodies) clearly see that they are losing the case and little by little we are (pushing them)," he says.

Reluctantly, they are conceding.

The Extraordinary Challenge Committee (ECC) heard final arguments from both Canadian and American industry counsel in early June and are expected to render a decision by late summer. It is supposed to be the body that will end the continuous cycle of disputes. But if this fails to satisfy the American counterpart, then Track II will be instituted. This would provide Canadian industry with protection from trade sanctions for a minimum of five years, the Canadian Industry Softwood Lumber Negotiating Position states. It then becomes a political issue. Grenier expects the federal government to step in.

Rumour has it the DOC and Coalition are prepared to challenge their own country's constitution, Lim says. If that is the case, it means a key economic sector will be taking on its own government.

Some White House senators promised no return on cash tariff deposits without negotiations, a statement consistent with the United States Trade Representative and the DOC, according to the Minister's Report on Forest Sector Competitiveness.

Ontario members are open to a settlement, but the negotiated settlement would have to be as good as, or better than, what they could achieve through litigation, which is an outright victory.

Forest plant managers contacted by Northern Ontario Business either refused comment or declined to return phone calls. Lim understands why - many are barely "hanging on by their fingernails."

In 2002, the fair imports coalition complained to the U.S. government that they could not compete with cheap Canadian lumber. In essence, this is one of the strongest lobbying groups in Washington, Lim says. They are huge, with a lot of money behind them. As a result, the government, under the Byrd Amendment, imposed tariffs averaging 27 percent on Canadian lumber. The law allows the White House to redistribute tariffs to private forestry companies.

But Canadian lawyers found Canada should not fall under the Byrd Amendment. Moreover, the World Trade Organization (WTO) has ruled it to be illegal, instructing the U.S. to repeal it.

But "surprise, surprise, they have been dragging their feet," Lim says.

Recognizing this, the WTO granted retaliatory sanctions. Canada has now put American swine and specialty fish imports on a list with more than 100 other items that could see sanctions.

This is not typical of Canada's trade actions with the United States. In the past three trade disputes admittedly "Canada folded like a cheap fan," Lim says, but there is a new attitude fuelling the industry and government. The Ontario industry is determined they will not settle for a bad deal.

www.wto.org

www.ofia.com

www.dfait-maeci.gc.ca/nafta-alena/

By KELLY LOUISEIZE

Northern Ontario Business