Tuesday, August 30, 2005

Update on Canada / USA softwood lumber dispute

I have continued to dig for information on this issue, because I do like to get both points of view on any conflict. 49erdweet said he couldn't find anything explaining the American perspective, and I thought we should try to rectify that. In the interests of fair play, here's what I know now.

The USA is relying on a 2004 ruling by the U.S. International Trade Commission (ITC). This is a less authoritative body than the Extraordinary Challenge Committee that inspired my previous post. But it supported the American position, so at least the US Government can honestly say that there is one ruling in the USA's favour.

The decision of the Extraordinary Challenge Committee was on a technical matter that didn't touch on the 2004 ITC ruling. So the ITC ruling hasn't been struck down by a higher court.

Further developments are reported in today's Globe and Mail:
The World Trade Organization has ruled that the United States complied with international law when it imposed billions of dollars of duties on Canadian lumber — a decision that the United States calls vindication and Canada says is a setback.

The WTO panel ruled yesterday that the United States adhered to international law when it issued a revised finding in late 2004 that Canadian softwood lumber imports threatened its mills, said a U.S. trade official, speaking on the condition of anonymity.

The confidential ruling, confirmed by Canadian officials, further complicates an already tangled web of legal decisions in the long-running trade feud.

Canada has trumpeted a seemingly contradictory North American free trade panel ruling earlier this month as the end of the dispute.

That panel found the U.S. duties, which now total more than $4-billion, illegal under U.S. law, prompting Ottawa to call for their immediate removal.

At a meeting of New England governors and Eastern Canadian premiers yesterday, Frank McKenna, Canada's ambassador to the United States, pointed out that one NAFTA panel after another has ruled in Canada's favour. …

Toronto trade lawyer Lawrence Herman said the WTO and NAFTA rulings aren't so much contradictory as "mutually exclusive." NAFTA panels determine whether a country is complying with its own laws, while WTO panels check adherence to international trade laws, he said.
If I understand the last paragraph correctly, the USA is in violation of its domestic laws, but is relying on international law to justify the decision to maintain the duties.

That's got to be the first time that the USA showed such enthusiasm for international law. Meantime, the duties cost Canada approximately $80 million per month.


At 4:08 PM, August 30, 2005, Blogger The Misanthrope said...

The USA is a bully and a hypocrite. If I could earn a living in your fair country I would be very inclined to go.

At 4:32 PM, August 30, 2005, Blogger aaron said...

If I understand the last paragraph correctly, the USA is in violation of its domestic laws, but is relying on international law to justify the decision to maintain the duties.

I would say it a little differently. It would appear that the US is not in violation of its obligations as a member of the WTO. Whether it is violating its obligations under NAFTA is a separate matter, and one which the WTO lacks authority to decide.

At 4:40 PM, August 30, 2005, Blogger Stephen (aka Q) said...


NAFTA has already ruled, repeatedly, right up through the Extraordinary Challenge Committee, that the US is in violation of its domestic laws.

The USA is using the (international law) ITC / WTO rulings to defy the (domestic law) NAFTA rulings.

Or is there something here that I'm not grasping? I don't pretend to have any expertise on trade law or free trade. I just know that, for the rest of us, when the top court rules that's the end of the matter.

At 5:33 PM, August 30, 2005, Blogger aaron said...

You misunderstand me (but maybe that's because I could have misunderstood the language I quoted) -- all I'm saying is that the US is wrong if it points to the WTO in support of its actions, as the WTO lacks the authority to rule on whether the US is violating its obligations under NAFTA. In my post, I didn't speak to whether the US is in fact violating NAFTA, but I do so here -- if the highest body that can rule on NAFTA says the US is violating NAFTA, that should be the end of it.

At 9:25 PM, August 30, 2005, Blogger 49erDweet said...

So the misanthrope is joining Alec Baldwin as a member of the "Wish We Could Be Canadian" Club?. Interesting. Maybe they should host their own weblog.

Good work, Q. So far all I've received from my own 'source' has been electronic 'form' mail.

It seems to me your information reflects the existence of a contrary official point of view for the US side, rather than the rude bully picture we were getting last week. I continue to doubt very much the US's legal basis for maintaining this duty, and am interested in getting this issue resolved, no matter in whose favor.

Query. Have you any thoughts as to possible one-sideness of the statements by some Canadian officials in the first flurry of news stories? Wouldn't they be expected to be privvy to the US's position, and have prepared a counter-argument against it, too, (unless the facts weren't so much in their favor)?

Not accusing, just wondering. Sometimes we use rhetoric rather than reason to make our points.

Thanks for the good work.

At 11:02 AM, August 31, 2005, Blogger Stephen (aka Q) said...

Thanks for the clarification. I thought your opinion would be at least somewhere in the vicinity of mine.

You ask, Have you any thoughts as to possible one-sideness of the statements by some Canadian officials in the first flurry of news stories?

Whether the Canadian officials were being one-sided depends on the merit and relevance of the ITC ruling. The Canadian officials see the ITC ruling as meaningless over against the NAFTA rulings. They weren't being one-sided if the ITC ruling is, in fact, irrelevant.

I'm not able to evaluate the significance of one tribunal against another, because I just don't know enough about it.

But I will say this. When Canada debated the original free trade agreement, its proponents argued that it would deliver us from endless cross-border tariff disputes. And the softwood lumber issue was explictly mentioned as an example. In a comment on my earlier post, John the Mad wrote:

This has been going on since 1982 when the US slapped an import tax on Canadian softwood lumber.

Arguably, Canadian officials aren't being one-sided. They're saying, "You Americans have appealed the earlier rulings all the way up through the Extraordinary Challenge Committee, and you're still saying you haven't exhausted all your legal options. Free trade was supposed to put a stop to this sort of endless legal wrangling."

And the rhetoric hasn't ended. Canada is appealing to the WTO for approval to slap duties on some US imports (e.g. Californian wine) in retaliation for the softwood duties. And people are making headlines, calling for an all-out trade war.

Which would probably hurt Canadians more than Americans, but you can bet consumers in both countries would suffer for it.

At 8:06 PM, August 31, 2005, Blogger 49erDweet said...

Yup, your points are good. Why have NAFTA if we're only gonna use it when it suits us? I can totally understand the frustration.

I guess the last part of this I'm wondering about, since this goes back so many years - and through so many adminstrations - is, is this an "administration" thing or a Department of Commerce or State Department thing? In other words is this politically dependent on the current party in power in the White House, or just an ingrown attitude amongst our career bureaucrats?

At 7:26 PM, September 03, 2005, Blogger Stephen (aka Q) said...

I understand the issue is more at the state level, where softwood lumber producers bring pressure to bear on their representatives. And it probably doesn't matter whether the representative is Republican or Democrat; both confront the same softwood lumber lobby.


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