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<title>CANADA WELCOMES WTO DECISIONSIN SOFTWOOD LUMBER DISPUTE</title>
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<p><font face="Arial"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1"></font><font face="Arial" size="+1"><strong>August 23, 2001 <em>(4:35 p.m. EDT)</em> No. 122</strong></font></p>
<p align="CENTER"><font face="Arial" size="+1"><strong>CANADA WELCOMES WTO DECISIONS</strong></font></p>
<p align="CENTER"><font face="Arial" size="+1"><strong>IN SOFTWOOD LUMBER</strong> <strong>DISPUTE</strong></font></p>
<p><font face="Arial"></font><font face="Arial">International Trade Minister Pierre Pettigrew today welcomed two decisions by the World Trade Organization
(WTO) Dispute Settlement Body concerning the adoption of a Panel report on export restraints, and the
establishment of a panel to hear Canada's challenge of a provision of U.S. legislation that prohibits the United
States from fully implementing WTO rulings in trade remedy cases.</font></p>
<p><font face="Arial">"These decisions by the WTO further strengthen our efforts to defend the interests of our softwood lumber
industry," said Minister Pettigrew. "They also demonstrate our commitment to challenge those U.S. actions we
believe to be inconsistent with WTO rules."</font></p>
<p><font face="Arial">The export restraints report has clarified the rules surrounding the treatment of such restraints under
countervailing duty law. The Panel reviewing the export restraints case upheld the Canadian position that such
restraints do not constitute a "financial contribution" under the definition of "subsidy" in Article 1 of the Subsidies
and Countervailing Measures Agreement and thus are not countervailable subsidies. The Panel was
established in September 2000, after consultations with the United States failed to resolve the issue. The
Panel's final report was delivered on June 29, 2001.</font></p>
<p><font face="Arial">Section 129(c)(1) of the Uruguay Round Agreements Act applies in cases in which the WTO Dispute
Settlement Body has ruled that a U.S. anti-dumping or countervailing duty order is inconsistent with the United
States' obligations under the Anti-dumping Agreement and the Subsidies and Countervailing Measures
Agreement, and the United States Trade Representative directs either the International Trade Commission or
the Department of Commerce to make a new determination. This legislation precludes the United States from
fully implementing an adverse WTO ruling.</font></p>
<p><font face="Arial">"The establishment of the WTO panel to hear Canada's challenge is a significant move forward in dispute
settlement proceedings," noted Mr. Pettigrew. "Furthermore, I am confident that the report on export restraints
will lend support to Canada's position."</font></p>
<p><font face="Arial">These latest actions reinforce other WTO efforts undertaken by Canada with regard to softwood lumber and
other U.S. trade remedy actions. These other actions include Canada's challenges to: the U.S. preliminary
countervailing duty determination on softwood lumber; the U.S. preliminary critical circumstances determination
on softwood lumber; the expedited review provisions of U.S. law; and the so-called U.S. Byrd Amendment.</font></p>
<p><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">Sébastien Théberge</font></p>
<p><font face="Arial">Office of the Minister for International Trade</font></p>
<p><font face="Arial">(613) 992-7332</font></p>
<p><font face="Arial">Media Relations Office</font></p>
<p><font face="Arial">Department of Foreign Affairs and International Trade</font></p>
<p><font face="Arial">(613) 995-1874</font></p>
<p><font face="Arial" size="+1"><strong>Backgrounder</strong></font></p>
<p><font face="Arial">Canada is supporting the following WTO cases in defence of the softwood lumber industry.</font></p>
<p><font face="Arial"><strong>Export Restraints</strong></font></p>
<p><font face="Arial">Established on September 11, 2000, to hear Canada's complaint that the U.S. treatment of export restraints in
countervailing duty investigations is contrary to U.S. obligations under the Subsidies and Countervailing
Measures (SCM) Agreement, the Panel found in its June 29, 2001 final report that export restraints do not
provide a financial contribution, and thus do not confer countervailable subsidies. However, the Panel also
found that U.S. law and regulations respecting the treatment of export restraints did not contravene the United
States' SCM Agreement obligations, since the legislation did not "mandate" that the United States treat export
restraints as a financial contribution. This ruling is positive for Canada, and undermines U.S. claims that log
export controls confer subsidies in the current countervailing duty investigation.</font></p>
<p><font face="Arial"><strong>129(c)(1) of the Uruguay Round Agreements Act</strong></font></p>
<p><font face="Arial">Section 129(c)(1) of the Uruguay Round Agreements Act applies in cases in which the Dispute Settlement Body
has ruled that a U.S. anti-dumping or countervailing duty order is inconsistent with the United States'
obligations under the Anti-dumping Agreement or the Subsidies and Countervailing Measures Agreement, and
the United States Trade Representative (USTR) directs either the U.S. International Trade Commission or the
Department of Commerce to make a new determination. This new anti-dumping or countervailing duty
determination will only apply to entries of imports made on or after the date on which the USTR directs the
Department of Commerce to amend or revoke the original anti-dumping or countervailing duty order.</font></p>
<p><font face="Arial">Consultations were held with the Department of Commerce on March 1, 2001, over the consistency of Section
129(c)(1) with that country's WTO obligations. The U.S. answers were unsubstantive and Canada requested
the establishment of a panel at the July 24, 2001 meeting of the Dispute Settlement Body. The request was
rejected by the United States.</font></p>
<p><font face="Arial"><strong>Preliminary Countervailing Duty Determination</strong></font></p>
<p><font face="Arial">On August 9, 2001, the U.S. Department of Commerce issued its preliminary determination of subsidy in its
countervailing duty investigation of softwood lumber from Canada, and found a subsidy rate of 19.31 percent
for Canadian softwood lumber imports entering the United States. However, Canada considers this finding
inconsistent with the United States' WTO obligations on a number of grounds.</font></p>
<p><font face="Arial">The United States treated stumpage as a "financial contribution" on the basis that it is a provision of a "good"
(rather, it is a licence or right of access to cut timber, which is not covered by the "financial contribution"
definition found within the SCM Agreement). The United States also used cross-border rather than in-country
benchmarks to determine whether stumpage confers a "benefit" (i.e., it based its benefit finding on U.S. prices,
rather than on the prevailing market conditions in Canada). All of these actions are inconsistent with the SCM
Agreement.</font></p>
<p><font face="Arial">Canada has requested accelerated consultations with the United States to discuss these concerns.</font></p>
<p><font face="Arial"><strong>Affirmative Critical Circumstances Determination</strong></font></p>
<p><font face="Arial">An affirmative critical circumstances decision, also made on August 9, will result in the 19.31 percent finding of
subsidy now being applied retroactively to shipments made on or after approximately May 19, 2001.</font></p>
<p><font face="Arial">Canada, however, notes that the affirmative critical circumstances determination was based upon an alleged
export subsidy that was found to be <em>de minimis</em> (i.e., possessing a subsidy rate of less than 1 percent) in the
countervailing duty determination. This application of a <em>de minimis</em> alleged subsidy to justify the retroactive
application of a preliminary duty rate of 19.31 percent is inconsistent with the SCM Agreement.</font></p>
<p><font face="Arial">Canada has requested accelerated consultations with the United States to discuss this action.</font></p>
<p><font face="Arial"><strong>Expedited Review</strong></font></p>
<p><font face="Arial">Under the SCM Agreement, exporters subject to countervailing duty action are entitled to individual expedited
reviews following an investigation in order to calculate company-specific rates. However, the U.S.regulations do
not provide for individual expedited company reviews where subsidy rates are determined on a country-wide
basis, a practice inconsistent with Article 19.3 of the SCM Agreement, in that it denies the right of exporters to
such a review and the determination of an individual rate.</font></p>
<p><font face="Arial">Canada is challenging these measures as WTO-inconsistent and has requested accelerated consultations to
discuss this matter.</font></p>
<p><font face="Arial"><strong>Byrd Amendment</strong></font></p>
<p><font face="Arial">The Byrd Amendment requires U.S. customs authorities to distribute duties assessed pursuant to a
countervailing duty order, or an anti-dumping order or finding, to "affected domestic producers" for "qualifying
expenses." Canada believes that the Byrd Amendment is WTO-inconsistent because the only action a member
may take to offset dumping or subsidization is the imposition of dumping or countervailing duties, as the case
may be. Furthermore, the Amendment creates a clear incentive for U.S. industry to file and support cases
against firms exporting to the United States. Consultations were held June 29, 2001, but proved unsubstantive.
Canada has requested the establishment of a panel during the August 23 meeting of the Dispute Settlement
Body.</font></p>
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