NEWS RELEASES

February 9, 2005 (6:10 p.m. EST)
No. 29

STATEMENT BY MINISTER PETERSON ON SOFTWOOD LUMBER

International Trade Minister Jim Peterson today issued the following statement:

"On February 14, Canada will challenge, before a World Trade Organization (WTO) compliance panel, the U.S. implementation in the WTO threat-of-injury case regarding softwood lumber imports from Canada. Canada will also file a request for authority to retaliate against the U.S. in an amount exceeding C$4.1 billion. We expect the retaliation authority request to be dealt with after the completion of the compliance panel proceedings.

"The U.S. International Trade Commission's (ITC) threat-of-injury determination of November 24, 2004, relies on the same faulty analysis that was found to be WTO-inconsistent by the original WTO panel.

"In order to comply with the WTO ruling in this case, the ITC should have found no threat of injury. The U.S. Department of Commerce should then have revoked the anti-dumping and countervailing duty orders, and should have instructed U.S. Customs to refund all of the softwood lumber cash deposits.

"The U.S. failure to comply with the WTO ruling has forced Canada to take the steps necessary to protect its rights under the WTO."

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A backgrounder is attached.

For further information, media representatives may contact:

Jacqueline LaRocque
Director of Communications
Office of the Minister of International Trade
(613) 992-7332

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

Backgrounder

SOFTWOOD LUMBER: WTO THREAT OF INJURY
CANADA TO CHALLENGE U.S. IMPLEMENTATION

On March 22, 2004, a World Trade Organization (WTO) panel found the original U.S. International Trade Commission (ITC) determination that Canadian softwood lumber imports threaten to injure the U.S. industry to be inconsistent with U.S. WTO obligations.

Following the adoption of the panel report on April 26, 2004, Canada and the U.S. agreed that the U.S. would have until January 26, 2005, to implement the WTO ruling. To comply with the WTO ruling, the ITC was instructed by the U.S. Trade Representative to issue a new determination as to whether Canadian softwood lumber imports threaten to injure the U.S. industry.

On November 24, 2004, the ITC issued a new positive threat-of-injury determination to implement the panel ruling. The U.S. also published amended anti-dumping and countervailing duty orders to reflect the ITC's new determination. The November 24 ITC threat-of-injury determination relies on the same faulty analysis that was found to be WTO-inconsistent by the original WTO panel. Therefore, on February 14, 2005, Canada will request that a WTO compliance panel be established to review U.S. implementation. Under WTO rules, the compliance panel is to issue its report within 90 days of the request. However, it is not uncommon for the process to be subject to delays.

While the issue of retaliation will only be considered after the results of the WTO compliance panel and any subsequent appellate body review are released and adopted (late 2005), at this stage in the WTO process and in order to preserve any future retaliatory rights, Canada is also required to file, on February 14, a request for authorization to retaliate against the U.S.

Canada will file a request for authority to retaliate in the amount of softwood lumber cash deposits currently held with the U.S. Treasury (over C$4.1 billion), plus the amount of cash deposits that the U.S. continues to collect illegally (over C$1 billion annually), until such time as the U.S. complies with its WTO obligations.