NEWS RELEASES

August 1, 2005 (2:00 p.m. EDT)

No. 138

WTO COMPLIANCE PANEL FINDS U.S. COUNTERVAILING DUTIES ON CANADIAN SOFTWOOD EXPORTS ILLEGAL

The Government of Canada today welcomed a World Trade Organization (WTO) compliance panel report which found that the United States failed to comply with an earlier WTO ruling in the softwood lumber subsidy case.

“We are pleased that the WTO compliance panel has agreed with Canada on the central issue in this case and found that the U.S. imposition of countervailing duties continues to be in violation of U.S. WTO obligations,” said International Trade Minister Jim Peterson.

In January 2004, the WTO Dispute Settlement Body (DSB) ruled that the U.S. Department of Commerce (DOC) had failed to demonstrate, before imposing countervailing duties, that a subsidy existed in certain arm’s-length purchases of logs by softwood lumber producers.

The United States had until December 17, 2004, to issue a revised subsidy determination consistent with the DSB ruling. The DOC issued a revised determination on December 6, 2004, but this revised determination failed to address the DSB’s ruling. As such, on December 30, 2004, Canada requested that a WTO compliance panel review the DOC’s revised determination as well as the results of the DOC’s first countervailing duty administrative review of December 13, 2004, which also failed to demonstrate the existence of a subsidy in certain log purchases. The WTO compliance panel found both measures were flawed.

The WTO compliance panel sided with the United States on two ancillary issues relating to the use of specific data and benchmarks in the pass-through analysis. These issues have no impact on the panel’s central ruling that the United States remains in violation of its WTO obligations.

Unless the United States files an appeal, the compliance panel report will be adopted by the DSB by September 30, 2005. However, if the United States appeals the decision of the compliance panel, it may take up to an additional three months for the WTO Appellate Body to issue a report.

In order to preserve any future retaliation rights pending the results of the compliance panel process, on December 30, 2004, Canada also filed a request for authorization to retaliate against the United States in the amount of C$200 million. The United States has contested this amount and the issue will be arbitrated after the compliance proceedings have been concluded.

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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