NEWS RELEASESMarch 22, 2004 (2:00 p.m. EST) No. 45 WTO RULES IN CANADA'S FAVOUR ON SOFTWOOD LUMBER 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. "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. 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." 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. Canada challenged the ITC threat of injury determination before the WTO and under the North American Free Trade Agreement (NAFTA). 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. 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. For more information regarding Canada's legal challenges against the U.S. at the WTO and under NAFTA, please visit http://www.dfait-maeci.gc.ca/eicb/softwood/legal_action-en.asp. For more information on softwood lumber issues in general, please visit http://www.softwoodlumber.gc.ca. - 30 - A backgrounder is attached. For further information, media representatives may contact: Jacqueline LaRocque Media Relations Office Backgrounder CANADA'S WTO CHALLENGE OF THE U.S. INTERNATIONAL TRADE COMMISSION FINAL THREAT OF INJURY DETERMINATION 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. The panel's findings include the following: Threat of injury 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. 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." Causal relationship 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. 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. Non-attribution 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). 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. Chronology of key events: April 2, 2001: The U.S. International Trade Commission (ITC) initiated its injury investigation with respect to softwood lumber from Canada. 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. 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. May 7, 2003: At Canada's request, the World Trade Organization (WTO) established a panel to resolve the dispute. December 19, 2003: The panel issued its interim report to the parties. March 22, 2004: The panel published its final report. |