US are looking for WTO ruling in lumber dispute with Canada

The U.S. Tuesday appealed a World Trade Organization panel report which found that Washington has failed to comply with the global commerce body's rulings in a long-running lumber dispute with Canada, trade officials said. The appellate panel will rule within three months and if it upholds the assessment that Washington has failed to comply with WTO rules, the door will be opened for Canada to retaliate. Ottawa is seeking CAD$200 million in retaliatory duties. The dispute centers on Canadian claims that the U.S. failed to respect decisions made by the WTO last year, when U.S. import duties on Canadian lumber were judged to be too high. Washington says it has adopted the WTO's recommendations.

The dispute is separate from last month's North American Free Trade Agreement ruling, which dismissed U.S. claims that its lumber tariffs against Canada were justified. In 2002, the U.S. slapped import duties on Canadian softwood lumber, which is used by house builders, accusing Ottawa of hurting U.S. manufacturers by subsidizing its lumber industry. Canada denied this. But in rulings in February and March 2004, a WTO dispute panel said that while the U.S. had the right to impose duties on Canadian lumber, some breached international trade rules because the U.S. department of commerce had miscalculated them. Canada already has agreed with the U.S. not to apply any penalties until a final WTO decision on U.S. compliance is issued. Most U.S. timber is harvested from private land at market prices, while in Canada the government owns 90% of timberlands and charges fees - called stumpage - for logging. The fee is based on the cost of maintaining and restoring the forest.

U.S. timber companies contend that Canada's stumpage fees are artificially low and amount to subsidies that allow Canadian mills to sell wood below market value. The trade battle between the neighbors built up steam after the expiration of their softwood lumber agreement in 2001. Under that agreement, Canada had been allowed to ship a certain amount of lumber to the U.S. without duties, with tariffs set for shipments beyond that level. In return, the U.S. agreed not to launch any trade action, including the imposition of protective duties. When the agreement ran out, the U.S., under pressure from domestic producers, moved quickly to impose extra duties on Canadian imports. While the U.S. timber industry generally applauded the tariffs, home builders on both sides of the border say they have driven up the cost of new homes in the U.S. and hurt Canadian lumber exporters and communities that depend on them.