NEWS RELEASES

December 5, 2005 (12:40 p.m. EST)
No. 241

WTO SUPPORTS CANADA’S POSITION ON SOFTWOOD LUMBER

Canada is pleased with today’s World Trade Organization (WTO) Appellate Body decision, which supports Canada’s position that U.S. procedures used to establish countervailing duties (CVD) on Canadian softwood lumber imports are inconsistent with WTO rules.

As a result of the Appellate Body decision, the case will now be sent to arbitration to determine the amount of retaliation Canada is entitled to in the event the United States does not bring itself into conformity with its WTO obligations. Canada is requesting authorization to retaliate against the United States in the amount of C$200 million. Arbitration will begin in early 2006, following WTO adoption of the Appellate Body report. The Government of Canada would seek the views of Canadians before any retaliatory measures were imposed.

Today’s decision, along with the August 1, 2005, WTO compliance panel decision, concluded that the U.S. Department of Commerce (DOC) failed to demonstrate that a subsidy existed in certain arm’s-length purchases of logs by Canadian softwood lumber producers. The Appellate Body also rejected U.S. arguments that the DOC’s annual administrative review of countervailing duties on softwood lumber falls outside the scope of the WTO compliance proceedings.

To bring itself into conformity with the Appellate Body decision, the United States must conduct a WTO-consistent analysis to demonstrate whether a subsidy exists in certain arm’s-length log purchases by Canadian softwood lumber producers, both in its original investigation and in its annual administrative review.

The Appellate Body decision does not affect the DOC’s November 22, 2005, de minimis (less than one percent) subsidy finding issued in the NAFTA proceedings. Once affirmed by the NAFTA CVD panel, the DOC’s finding that Canadian softwood lumber production is not subsidized should result in the revocation of the countervailing duty order and a refund of deposits paid.

Moreover, as a result of Canada’s Extraordinary Challenge Committee (ECC) win in the NAFTA threat of injury case, the United States has an obligation under its own law to revoke both countervailing and anti-dumping duty orders and to refund all deposits paid. Canada is challenging the U.S. failure to comply with the ECC decision in the injury case before the U.S. Court of International Trade.

The WTO and NAFTA processes are separate. The U.S. must comply with both sets of obligations.

For more information regarding softwood lumber issues in general, please visit http://www.softwoodlumber.gc.ca.

The report is available at www.wto.org.

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A backgrounder is attached.

For further information, media representatives may contact:

Media Relations Office
International Trade Canada
(613) 995-1874
http://www.international.gc.ca

Backgrounder

CHRONOLOGY OF KEY EVENTS

April 2, 2001: The United States Department of Commerce (DOC) initiated its fourth countervailing duty (CVD) investigation of Canadian softwood lumber in 20 years.

August 9, 2001: The DOC made a preliminary CVD determination and imposed a 19.31 percent provisional duty on Canadian softwood lumber imports.

March 22, 2002: The DOC made a final affirmative CVD determination.

May 3, 2002: Canada initiated its WTO challenge of the final determination.

May 22, 2002: The DOC imposed an 18.79 percent duty on Canadian softwood lumber imports.

June 18, 2002: Canada and the U.S. held WTO consultations, which failed to resolve the dispute.

October 1, 2002: At Canada’s request, the WTO established a panel to resolve the dispute.

August 29, 2003: The panel’s final report was made public.

October 21, 2003: The U.S. filed an appeal.

January 19, 2004: The WTO Appellate Body issued its report finding that the U.S. failure to conduct a proper pass-through analysis violated U.S. WTO obligations.

December 6, 2004: The DOC issued a revised determination in response to the Appellate Body’s January 2004 ruling but again failed to properly demonstrate the existence of a subsidy in such log transactions.

December 30, 2004: Canada requested that the WTO review the DOC’s December 6 determination as well as the results of the DOC’s first countervailing duty administrative review, which also did not contain any pass-through analyses.

August 1, 2005: The WTO compliance panel agreed with Canada and found that the United States’ imposition of countervailing duties continues to be inconsistent with WTO obligations. The panel concluded that the DOC failed to conduct proper pass-through analyses in the December 6 revised determination and in the first administrative review.

December 5, 2005: The Appellate Body reviewing U.S. implementation of a WTO ruling in the softwood lumber subsidy case issued its report upholding the compliance panel’s decision and finding that the United States again failed to comply with its WTO obligations with respect to pass-through.