Canadian, U.S. representatives aim to reopen talks

By SIMON TUCK
With files from Reuters and Bloomberg
Thursday, June 26, 2003 - Page B11

OTTAWA -- Top trade officials from Canada and the United States will meet Monday in Washington as the two countries try to break the logjam over softwood lumber.

Officials from both sides said yesterday that the "exploratory" one-day meeting could lead to a resumption of negotiations over the two-year-old dispute.

Sébastien Théberge, a spokesman for Canadian Trade Minister Pierre Pettigrew, said the meeting could lead to full negotiations.

"It's a meeting to explore and exchange on the next steps before we resume negotiations in a more formal way."

The scheduled meeting was prompted by the latest U.S. counterproposal that called for an export tax of at least 15 per cent on softwood lumber exports from Canada.

Industry sources said last week that the U.S. proposal calls for an export tax that would escalate once Canadian lumber grabs the equivalent of 29 per cent of the $10-billion-a-year (U.S.) market.

The U.S. lumber industry, meanwhile, has asked Washington to raise the tariffs on up to $7-billion a year in Canadian timber imports.

The U.S. team will be led on Monday by Grant Aldonas, undersecretary of commerce for international trade. Canada will be led by Doug Waddell, Ottawa's senior official in the softwood negotiations.

As a prelude to the meeting, Canadian officials met yesterday in Ottawa with industry representatives following discussions a few days earlier with the provinces.

The B.C. Lumber Trade Council, one of the key industry bodies, wouldn't comment on the talks.

The United States, believing the provinces unfairly subsidize their softwood lumber producers, has imposed duties averaging more than 27 per cent on Canadian softwood.

Canada denies that charge. A North American free-trade agreement dispute panel is scheduled to rule July 3 on the legality of U.S. antidumping duties, which average 8.43 per cent on Canada's softwood lumber.

A separate NAFTA panel decision on the legality of 18.79-per-cent countervailing duties could come later this summer.

Canada ships about $6-billion worth of spruce, pine and fir to the United States each year.

It is not yet clear whether a downturn in Canada's lumber industry, which has resulted in layoffs, would add urgency for a U.S.-Canada lumber trade deal. That downturn is due in part to a domestic oversupply of lumber and a rising Canadian dollar.

Recently, the United States proposed substituting a quota aimed at keeping Canadian market share in the United States below 30 per cent.

But one source close to the industry side in the Ottawa meetings, who asked not to be identified, said there were serious industry concerns with the plan, such as the provision that all wood coming across the border would be taxed, including below-quota shipments.

The U.S. industry has apparently accepted the Canadian idea of a volume-based deal, similar to one that was in effect between 1996 and 2001. The U.S. counteroffer applies roughly the same structure as a Canadian proposal -- imposing a so-called tariff-rate quota that varies depending on the volume of shipments to the U.S. market.

Ottawa had proposed collecting an export tax of $25 (Canadian) per 1,000 board feet on shipments between 17 billion board feet and 18 billion board feet; with the tax rising to $50 between 18 billion and 19 billion board feet, and climbing further to $100 after 19 billion board feet.

A government source believes the United States would like to settle the dispute within weeks, which Ottawa attributes to its belief that Washington is concerned about losing an upcoming binding NAFTA ruling on the softwood battle.

John Ragosta, a lawyer and lobbyist for the Washington-based Coalition for Fair Lumber Imports, called that "ridiculous."

Mr. Ragosta also said that the success of the upcoming bilateral talks will depend on Ottawa's willingness to allow market forces to dictate prices.

"Some of the proposals have just not been realistic," he said. "It's up to Canada."