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<title>CANADA WINS KEY WTO LUMBER DECISION</title>
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<p><font size="+1"><strong>September 27, 2002 <em>(1:30 p.m. EDT)</em> No. 111</strong></font></p>
<p><font size="+1"><strong>CANADA WINS KEY WTO LUMBER DECISION</strong></font></p>
<p>International Trade Minister Pierre Pettigrew today welcomed the World Trade Organization (WTO) ruling that U.S. duties
on Canadian softwood lumber exports violate international trade rules.</p>
<p>"The WTO has found in favour of our position that the U.S. preliminary subsidy determination was flawed and disproves
the methods of calculation. Today, the WTO is telling Canadians: you were right," Minister Pettigrew said. "This decision
reinforces our position and injects increased optimism in our unified approach."</p>
<p>The WTO agreed with Canada that the United States' finding that Canadian provincial stumpage programs are
countervailable subsidies was not made in accordance with WTO rules.</p>
<p>Canada remains open to working with the United States to find a long-term solution to the softwood lumber dispute.
Canada is also continuing to follow legal processes available including, pursuing WTO challenges of the final U.S.
determinations of subsidy, dumping and injury. The Government of Canada, the provinces and industry have initiated three
reviews under the NAFTA dispute settlement process regarding the U.S. final subsidy, dumping and injury determinations.
Those decisions are expected in 2003.</p>
<p>For more information on the softwood lumber dispute, visit: <a href="www.softwoodlumber.gc.ca">www.softwoodlumber.gc.ca</a></p>
<p align="CENTER">- 30 -</p>
<p>A backgrounder is attached.</p>
<p>For further information, media representatives may contact:</p>
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<p>Sébastien Théberge</p>
<p>Director of Communications</p>
<p>Office of the Minister for International Trade</p>
<p>(613) 992-7332</p>
<p>Media Relations Office</p>
<p>Department of Foreign Affairs and International Trade</p>
<p>(613) 995-1874</p>
<p><a href="https://bac-lac.wayback.archive-it.org/web/20061209062926/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a></p>
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<p align="CENTER"><font size="+1"><strong>Backgrounder</strong></font></p>
<p align="CENTER"><font size="+1"><strong>WTO PANEL FINAL REPORT: CHRONOLOGY AND FINDINGS</strong></font></p>
<p>In April 2001, the U.S. Department of Commerce (DOC) initiated its fourth countervailing duty investigation of Canadian
softwood lumber in 20 years. </p>
<p>On August 9, 2001, the DOC made a preliminary countervailing duty determination and imposed a 19.31 percent
provisional duty on Canadian softwood lumber imports. Also, the DOC made a preliminary critical circumstances
determination that resulted in the 19.31 percent finding of subsidy being applied retroactively to May 2001.</p>
<p>On September 17, 2001, Canada held World Trade Organization (WTO) consultations with the United States to raise its
concerns about these two determinations. The consultations failed to resolve the dispute. On November 5, 2001, the U.S.
blocked Canada's first request for the establishment of a panel to hear this challenge. On December 5, 2001, Canada made
its second request, one that the U.S. could not block, and the Dispute Settlement Body established a panel.</p>
<p>On September 27, 2002, the WTO Panel issued its final report on Canada's challenge to the DOC's preliminary
determination of subsidy. Its findings are summarized below:</p>
<p><strong>1. Financial Contribution and Benefit </strong></p>
<p>A subsidy exists if there is a "financial contribution" that confers a benefit. The WTO Panel concluded that stumpage
programs are a financial contribution but that the U.S. incorrectly assessed whether stumpage confers a benefit when it used
U.S. benchmarks rather than prevailing market conditions in Canada. Consequently, there was no basis for the U.S. to
conclude that stumpage is a countervailable subsidy. </p>
<p><strong>2. Pass Through</strong></p>
<p>The WTO Panel agreed with Canada that the United States erroneously presumed that the alleged benefits from harvesting
timber under stumpage programs are passed through in sales from upstream producers of log or lumber input to all
downstream producers of the subject merchandise. </p>
<p><strong>3. Calculation of Subsidy (First Mill)</strong></p>
<p>As the WTO Panel found that Canadian provincial stumpage programs were not subsidies, the WTO did not investigate
certain calculation issues raised by Canada. Canada had argued that the United States erroneously calculated the duties by
assuming that "value added" products were included in the information provided to the United States.</p>
<p><strong>4. Preliminary Critical Circumstances Determination</strong></p>
<p>The WTO Panel agreed with Canada that the DOC breached WTO rules in applying provisional measures retroactively
pursuant to a preliminary critical circumstances determination; any such measures may only be applied in respect of a final
determination.</p>
<p><strong>5. Expedited Review/Administrative Review</strong></p>
<p>The WTO Panel confirmed that the United States has an obligation to provide expedited reviews. The United States is now
conducting expedited reviews for those Canadian producers that have requested one.</p>
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