More on softwood

A quick read of Canadian WTO and NAFTA submissions illustrates Canadian duplicity. Like much publicized white-collar criminals with high-priced lawyers, Canadian companies, provinces and federal government have tried to manipulate the technicalities of Canada’s Byzantine forest policies to avoid trade sanctions. They relied on three arguments:

  1. Canada claimed that the provinces’ under-pricing of government timber should not be treated as a subsidy because timber is not a “good” within the meaning of the WTO Subsidies Agreement. Canada misrepresented the various tenure systems in each province in order to Most major media have focused exclusively on the nationalistic aspects of the softwood dispute – the big bad Americans targeting poor little Canadian companies. While clearly American industry and the Bush Administration are protectionist, and certainly not concerned with Canadian workers, communities or our precious forests, Canadian interests are not being well represented by our governments and industry. Distinguish logs acquired from public forests from the WTO and generally accepted understanding of a good“. The Appellate Body affirmed the lower panels and categorically rejected this argument.
  2. Canada argued that stumpage was “a levy on harvesting rights (tenure) akin to a tax”. This definition is not cited in any Canadian text on forestry that anyone was able to uncover. In fact, it directly conflicts with Canadian court decisions defining stumpage as “the price paid for Crown timber“. By comparing stumpage to a tax Canada was in essence claiming that logging companies already own the trees the have under tenure. The Appellate Body appears to have rejected these arguments.
  3. Canada also claimed that the international trade rules forbid the U.S. from quantifying the extent of under-pricing of Canadian timber by comparing provincial “stumpage” rates to prices for comparable timber on the U.S. side of the border, adjusted to reflect Canadian market conditions. The U.S. Dept of Commerce (DOC) used U.S. benchmarks because the enormous volumes of Crown timber depress prices for the small volumes of Canadian private timber and, thus, preclude their use as subsidy-measurement benchmarks (this finding was also affirmed by the NAFTA softwood panel). Prior WTO dispute panels had accepted the Canadian position. However, the final Appellate Body’s decision confirms that the DOC is free to use U.S. timber-price benchmarks if Canadian private timber prices are depressed.

The only matter on which the Appellate Body sided with Canada related to secondary manufactures and the “pass-through” of subsidies in log sales — a matter on which the NAFTA panel has already affirmed the U.S. decision.

In relation to dumping, a WTO panel reportedly rejected every one of Canada’s claims against the DOC dumping determination apart from one technical issue. Reportedly, the only Canadian claim supported by the WTO Appelate Body was a complex computational exercise known as “zeroing” (a particular way of comparing prices from sales made in the United States with those made in the foreign market). The WTO panel was reportedly split on this issue, with one of the WTO panelists taking the unusual step of dissenting. However because of the vagaries of trade and U.S. law, it is unlikely that this minor part of the WTO panel finding will ever affect the dumping margin on softwood lumber from Canada.

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