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<p><font face="Arial"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1"><strong>March 22, 2004 <em>(2:00 p.m. EST)</em> No. 45</strong></font></p>
<p align="CENTER"><font face="Arial" size="+1"><strong>WTO RULES IN CANADA'S FAVOUR ON SOFTWOOD LUMBER</strong></font></p>
<p><font face="Arial">International Trade Minister Jim Peterson welcomed a World Trade Organization
(WTO) panel report released today that found the U.S. International Trade Commission
(ITC) threat of injury determination to be inconsistent with the United States' WTO
obligations. </font></p>
<p><font face="Arial">"This is a major victory for Canada. The WTO panel's message is clear: the
countervailing and anti-dumping duties imposed by the U.S. on Canadian softwood
lumber exports are baseless," said Minister Peterson.</font></p>
<p><font face="Arial">The panel found that the key factor on which the U.S. relied to make its threat of injury
determination--an imminent and likely surge in imports of softwood lumber products
from Canada--was not a determination "that could have been reached by an objective
and unbiased investigating authority."</font></p>
<p><font face="Arial">On May 22, 2002, the ITC determined that the U.S. softwood lumber industry was
"threatened" with material injury by reason of alleged subsidized and dumped imports of
softwood lumber from Canada.</font></p>
<p><font face="Arial">Canada challenged the ITC threat of injury determination before the WTO and under
the North American Free Trade Agreement (NAFTA).</font></p>
<p><font face="Arial">On September 5, 2003, the NAFTA panel ordered the ITC to issue a new determination
consistent with U.S. law. Canada is confident that the NAFTA panel reviewing the ITC's
new determination will find, in its report to be issued on April 30, 2004, that the ITC has
not substantiated its determination that imports of Canadian softwood lumber threaten
to injure the U.S. domestic industry.</font></p>
<p><font face="Arial">The Government of Canada will continue to work with the provinces and industry on the
two-track strategy of litigation before NAFTA and WTO panels, and negotiations to find
a lasting resolution to this dispute.</font></p>
<p><font face="Arial">For more information regarding Canada's legal challenges against the U.S. at the WTO
and under NAFTA, please visit
<a href="https://bac-lac.wayback.archive-it.org/web/20061209062831/http://www.dfait-maeci.gc.ca/eicb/softwood/legal_action-en.asp">http://www.dfait-maeci.gc.ca/eicb/softwood/legal_action-en.asp</a>.</font></p>
<p><font face="Arial">For more information on softwood lumber issues in general, please visit
<a href="https://bac-lac.wayback.archive-it.org/web/20061209062831/http://www.softwoodlumber.gc.ca/">http://www.softwoodlumber.gc.ca</a>.</font></p>
<p align="CENTER"><font face="Arial">- 30 -</font></p>
<p><font face="Arial">A backgrounder is attached.</font></p>
<p><font face="Arial">For further information, media representatives may contact:</font></p>
<p><font face="Arial">Jacqueline LaRocque<br>
Director of Communications<br>
Office of the Minister of International Trade<br>
(613) 992-7332</font></p>
<p><font face="Arial">Media Relations Office<br>
Department of Foreign Affairs and International Trade<br>
(613) 995-1874<br>
<a href="https://bac-lac.wayback.archive-it.org/web/20061209062831/http://www.dfait-maeci.gc.ca/">http://www.dfait-maeci.gc.ca</a></font></p>
<p align="CENTER"><font face="Arial" size="+1"><strong>Backgrounder</strong></font></p>
<p align="CENTER"><font face="Arial" size="+1"><strong>CANADA'S WTO CHALLENGE OF THE U.S. INTERNATIONAL TRADE
COMMISSION FINAL THREAT OF INJURY DETERMINATION</strong></font><font face="Arial"></font></p>
<p><font face="Arial">Canada argued that the U.S. violated its WTO obligations by imposing anti-dumping
and countervailing duties on imports of Canadian softwood lumber. These duties were
established on the basis of a fundamentally flawed injury investigation and final
determination by the U.S. ITC that does not comply with the provisions of the WTO
Anti-dumping Agreement and Subsidies and Countervailing Measures Agreement and
the GATT 1994.</font></p>
<p><font face="Arial"><strong>The panel's findings include the following:</strong></font></p>
<p><font face="Arial"><strong>Threat of injury</strong></font></p>
<p><font face="Arial">Specifically, Canada argued that the ITC final threat of injury determination is based on
a central finding (a likely substantial increase in imports) that is unsupported by a
reasoned and adequate explanation and positive evidence. <strong>The panel agreed with
Canada's claim and stated that the finding that imports would increase
substantially is not "one that could be reached by an objective and unbiased
investigating authority."</strong></font></p>
<p><font face="Arial"><strong>Causal relationship</strong></font></p>
<p><font face="Arial">Another issue raised by Canada was that the determination fails to establish a causal
link between the predicted increase in subject imports and the alleged threat of injury.
<strong>On this issue, having already determined the ITC finding of a likely substantial
increase in imports is WTO-inconsistent, the panel found that it is clear that the
causal analysis is inconsistent with WTO rules.</strong></font></p>
<p><font face="Arial"><strong>Non-attribution</strong></font></p>
<p><font face="Arial">Finally, Canada argued that the ITC determination fails to separate and distinguish the
injurious effects of other known factors from any injurious effects of the subject imports
on the domestic industry. In Canada's view, there was strong evidence before the ITC
that factors other than imports of softwood lumber products from Canada were having
substantial adverse effects on the U.S. domestic industry (i.e. third-country imports, the
U.S. industry's contribution to oversupply). <strong>The panel indicated that it did not have to
make a formal finding on that issue. Nevertheless, it considered the issue and
agreed with Canada that the U.S. failed to ensure that injuries caused by other
factors were not attributed to imports of Canadian softwood lumber products.</strong></font></p>
<p><font face="Arial"><strong>Chronology of key events:</strong></font></p>
<p><font face="Arial">April 2, 2001: The U.S. International Trade Commission (ITC) initiated its injury
investigation with respect to softwood lumber from Canada.</font></p>
<p><font face="Arial">May 23, 2001: The U.S. ITC published its preliminary determination on the issue of
injury. It determined that the U.S. softwood lumber industry had not been injured by
reason of subject imports, but that there was a reasonable indication that the industry
was "threatened" with material injury by reason of imports of Canadian softwood lumber
subsidized and dumped in the U.S. market.</font></p>
<p><font face="Arial">May 2, 2002: The U.S. ITC voted 4 to 0 that the U.S. softwood lumber industry is
"threatened" with material injury by reason of imports of softwood lumber from Canada
found by the U.S. Department of Commerce to be subsidized and sold in the U.S. at
less than fair value. The threat of injury determination meant that the U.S. industry had
not been injured to that date by Canadian imports of lumber.</font></p>
<p><font face="Arial">May 7, 2003: At Canada's request, the World Trade Organization (WTO) established a
panel to resolve the dispute.</font></p>
<p><font face="Arial">December 19, 2003: The panel issued its interim report to the parties.</font></p>
<p><font face="Arial">March 22, 2004: The panel published its final report.</font></p>
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