Zilos

Softwood conflict could cost consumers

Zilos-note: Bout time Canada stood up for itself!

B.C. Forests Minister Mike de Jong braced the Vancouver Board of Trade Wednesday for potential doubling in the price of U.S.-produced food and liquor on Canadian store shelves, saying Ottawa has decided the imposition of punitive duties on American goods is the only way to recover billions of dollars that have been "stolen" in the softwood lumber dispute.

Earlier in the day Ottawa announced it intends to ask the World Trade Organization for authority to impose $4.1 billion in retaliatory duties against the U.S., the largest amount ever sought by Canada, in an unprecedented move designed to strike hard against the Americans.

"The time has come for the government of Canada to exercise its rights fully and introduce retaliatory tariffs on a range of products, things like fish, fruit, vegetables, foodstuffs, alcohol, to the tune of $5 billion," de Jong told the board of trade luncheon.

"We need to return the monies, re-acquire the monies, that were unlawfully collected, and bring those monies back to Canada.

"Sadly if the U.S. won't do it voluntarily in compliance with NAFTA [the North American Free Trade Agreement] then Ottawa, I would suggest, needs to do it at the border.

"And I can tell you that just before getting up to speak today I learned that [International Trade] Minister [Jim] Peterson has just initiated the process that would see that happen."

In Ottawa Peterson said he consulted closely with de Jong and other provincial ministers in advance of Wednesday's decision to threaten the Americans with a $4.1-billion trade assault.

"B.C. has been hit very badly [and] I continue to have a great deal of sympathy for the hardships that have been caused there," Peterson told reporters.

"We'll work very closely with the industry and my counterparts in that province [and] right across Canada to find a solution that's in the interests of all Canadians."

Federal officials indicated cabinet approval to actually impose the punitive measures could take roughly a year, and WTO approval for the retaliatory measures will likely take six to nine months. The Canadian government would then list the various major goods imported from the U.S. to Canada that could be subjected to a punitive tariff.

Industry groups would then have the right to submit their concerns to the federal cabinet about the potential impact of the Canadian tariffs on the cost, or access to, U.S. goods.

"We are very, very far away from any implementation of retaliation or even the receipt of authority to retaliate," said one Canadian official, who spoke to reporters in a briefing on condition of anonymity.

"We have targeted no industries at this point. That kind of analysis has not been undertaken with respect to this case."

Escalating the trade war won swift approval from lumber producers, who have paid $4.1 billion in duties to the end of 2004.

"It's nice to take a stand eh?" said Russ Cameron, of the Independent Lumber Remanufacturers Association, whose 84 B.C. members have paid about $400 million in duties so far.

"This is a big deal. Ottawa is going to retaliate to collect the entire amount of the duties," Cameron said. "It's hard to say where this is going to go now."

Cameron applauded both the provincial and federal governments for finally recognizing American intransigence over the softwood issue for what it is: a blow aimed directly at the North American Free Trade Agreement.

NAFTA dispute settlement panels have already determined that Canadian lumber imports do not injure the U.S. industry, but the U.S. has refused to comply.

In his speech, de Jong said that Canada already has the authority, through the WTO, to impose 100-per-cent duties on 128 distinct U.S. products. The WTO authority extends to only a small portion of the duties -- $17 million already distributed to the U.S. lumber producers under a piece of protectionist U.S. legislation called the Byrd amendment. Other nations affected by the Byrd amendment are also in the process of imposing retaliatory duties.

However, the federal government has escalated the dispute beyond the limitations of the Byrd amendment, saying it intends to go after the entire $4.1 billion by seeking a ruling from the WTO that the U.S. has not complied with an earlier ruling that Canadian lumber imports pose no threat of injury to the U.S.

De Jong said Peterson agrees that a confrontational approach is the only way to get back the money taken by the U.S. Commerce Department from Canadian lumber producers in violation of the North American Free Trade Agreement.

Products to be targeted could include everything from live pigs and dried beans to yachts and perfume. At the extreme end of the scale, luxury yachts like Jimmy Pattison's $20 million US Nova Spirit could double in price to $40 million US.

De Jong said the focus of retaliatory duties would probably be on goods that could be replaced through expanded Canadian output.

Industry Canada data shows B.C. consumers annually purchase U.S. poultry with an import value exceeding $8 million, $5 million worth of eggs, $54 million worth of fish, and $35 million worth of wine and beer.

The duties on U.S. products "will significantly affect their attractiveness to Canadian consumers," de Jong said.

"Retaliation -- ladies and gentlemen we should be clear about this -- is never the preferred course of action. But in the state of trade uncertainty that the U.S. has created I would suggest to you that we are left with very little choice.

If 100-per-cent duties are levied on $4.1 billion in U.S. imports, Canadian consumers will feel the pain regardless of the tactics employed, said Jock Finlayson of the Business Council of B.C.

However, the sheer size of the retaliatory attack will certainly get the attention of the Americans, Finlayson said. Canadians import products from the U.S. worth $200 billion U.S. a year .

"This is a measure of the enormous frustration the federal government and others in Canada feel over the drawn-out nature of the dispute," Finlayson said. "We seem to have largely prevailed at the WTO and NAFTA dispute settlement panels but the Americans have refused to concede any of the points."

He said consumers will quickly shift away from American goods if they are saddled with a 100 per cent tariff. Most other tariffs are in the five-per-cent range, he said.

John Clerides, owner of Marquis Wine Cellar, which sells wines from around the world, said a tariff on American wine will affect sale of wines he has searched out for their price or quality.

"There comes a point in time, because we don't have a powerful lobby group in Washington and the Americans are being bullies, that we resort to their tactics. I can't say whether it is right or wrong. But the U.S. wines that I am bringing in that were great values will no longer be great values. It will hurt me. I will have to find some place else to buy wines."

B.C. forest industry leaders have been urging the federal government for years to take a more aggressive stance with the U.S., and applauded the decision to shrug off NAFTA's ineffectual trade dispute mechanisms in favour of bloodying some noses south of the border.

"The U.S. regrettably has demonstrated over the course of this litigation that it does not respect the rulings of international trade panels, nor the trading relationship between our two countries," said B.C. Lumber Trade Council president John Allan.

De Jong said there is still time for the U.S. to back down and comply with NAFTA. He is to travel to Ottawa next week with Premier Gordon Campbell to urge Prime Minister Paul Martin to seek a meeting with U.S. President George W. Bush and find a way to avert an unprecedented escalation of the long-simmering dispute.

"I hope the prime minister will obtain from the president the assurance that the U.S. will meet its obligations under NAFTA and abide by its rulings when they are in the U.S. favour and when they are not."

A series of NAFTA rulings have ordered the U.S. to return money that was illegally collected from Canadian lumber manufacturers at the behest of protectionist American lumber industry lobbyists, but U.S. authorities have obstinately refused to comply.

De Jong told the board of trade he is now convinced the dispute will never be resolved through NAFTA.

"There is a senator from Idaho by the name of Mike Crapo and he said, to give you a sense of what we are beginning to run into and what some of the sentiments are, said on the floor of the house: 'There is zero likelihood that the countervailing duty order will disappear absenting a negotiated settlement, no matter how often a NAFTA panel tries to achieve this outcome,' " de Jong said.

THREATENED TARGETS AMONG U.S. EXPORTS TO CANADA

(2003 figures, in Canadian dollars):

$1.4 billion

Forest products

$1 billion

Foodstuffs

$372 million

Yachts, pleasure craft

$252 million

Wine, beer, spirits

$224 million

Sporting goods

Source: DFAIT, Strategis

Ran with fact box "Threatened Targets Among U.S. Exports to Canada", which has been appended to the end of the story.

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