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<html> <head> <meta name="Generator" content="Corel WordPerfect 8"> <title>PETTIGREW WELCOMES POSITIVE INTERIM WTO DECISION ONSOFTWOOD LUMBER</title> </head> <body text="#000000" link="#0000ff" vlink="#551a8b" alink="#ff0000" bgcolor="#c0c0c0"> May 27, 2003 (12:10 p.m. EDT) No. 70 PETTIGREW WELCOMES POSITIVE INTERIM WTO DECISION ON SOFTWOOD LUMBER International Trade Minister Pierre Pettigrew today welcomed the news that a World Trade Organization (WTO) panel's interim decision supports Canada's claim that Canadian provincial stumpage programs are not subsidies. "Yet again, it appears that the U.S. is being told that its attempts to prove that our softwood industry is subsidized are flawed. We expect more results from our WTO and NAFTA challenges to U.S. harassment of our exports in the summer and fall," said Minister Pettigrew. "In the meantime, we remain open to resuming negotiations with the U.S. on the basis of a fair and reasonable settlement of the dispute." The WTO panel is expected to issue its final report on the U.S. subsidy determination in July 2003. Canada is also pursuing NAFTA and WTO challenges of the dumping and threat of injury determinations as well as a NAFTA review of the subsidy determination. For a summary of the status of Canada's legal challenges at the WTO and NAFTA, please consult the following Web site: <a href="https://bac-lac.wayback.archive-it.org/web/20061209062555/http://www.dfait-maeci.gc.ca/eicb/softwood/english.htm">www.dfait-maeci.gc.ca/eicb/softwood/english.htm</a> - 30 - Backgrounders are attached. For further information, media representatives may contact: Sébastien Théberge Director of Communications Office of the Minister for International Trade (613) 992-7332 <a href="https://bac-lac.wayback.archive-it.org/web/20061209062555/mailto:sebastien.theberge@dfait-maeci.gc.ca">sebastien.theberge@dfait-maeci.gc.ca</a> Media Relations Office Department of Foreign Affairs and International Trade (613) 995-1874 <a href="https://bac-lac.wayback.archive-it.org/web/20061209062555/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a> Backgrounder CHRONOLOGY OF KEY EVENTS April 2, 2001: The United States Department of Commerce (DOC) initiated its fourth countervailing duty investigation of Canadian softwood lumber in 20 years. August 9, 2001: The DOC made a preliminary countervailing duty determination and imposed a 19.31 percent provisional duty on Canadian softwood lumber imports. Canada challenged this determination at the WTO, and on September 27, 2002, the WTO ruled that the United States' preliminary finding of subsidy was inconsistent with its WTO obligations. For more information, see <a href="https://bac-lac.wayback.archive-it.org/web/20061209062555/http://www.softwoodlumber.gc.ca/">http://www.softwoodlumber.gc.ca</a> March 22, 2002: The DOC made a final affirmative countervailing duty determination and imposed an 18.79 percent duty on Canadian softwood lumber imports. May 3, 2002: Canada initiated its WTO challenge of the final determination. June 18, 2002: Canada and the United States 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. July 2003: The panel is expected to issue its final report. Backgrounder ISSUES RAISED IN CANADA'S WTO CHALLENGE OF THE U.S. DEPARTMENT OF COMMERCE'S FINAL COUNTERVAILING DUTY DETERMINATION Among the issues raised were: Subsidy To determine whether a program is a subsidy, WTO rules require that it be established that the program is a financial contribution by a government that confers a benefit. a) Subsidy--Benefit The DOC used cross-border benchmarks to determine whether provincial stumpage programs confer a "benefit." That is, the U.S. based its benefit finding on U.S. stumpage prices rather than on the prevailing market conditions in Canada, a practice that Canada argues, and the previous WTO lumber panel found, is inconsistent with WTO rules. b) Subsidy--Financial Contribution The DOC determined that provinces make a financial contribution to their softwood lumber industries through provincial stumpage programs that it alleges provide a good: standing timber. Canada disagrees, arguing that provinces, through stumpage programs, grant a licence or right of access to cut timber; as such, stumpage programs do not constitute a "provision of goods" within the WTO's definition of that term. The DOC therefore erred in finding that stumpage programs involve a financial contribution. Pass Through The DOC presumed that the alleged benefits from harvesting timber under stumpage programs are passed through in arm's-length sales of logs or lumber used. It claimed that loggers, lumber producers and remanufacturers are integrated producers and that stumpage is therefore a direct subsidy to all of them. Canada disagrees, arguing that the DOC's presumption is illegal, just as the previous WTO lumber panel found. Specificity WTO rules allow members to impose countervailing duties only against subsidies that are targeted to an industry or a group of industries. Canada maintains that the U.S. failed to meet this standard, since stumpage programs are not targeted at lumber producers. Canada also argues that the DOC interpreted "industry" too broadly and failed to consider the evidence indicating that many varied industries use stumpage programs. </body> </html>

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