Canada Wins Softwood Lumber Case at WTO
The World Trade Organization largely sided with Canada in finding that the Commerce Department miscalculated government support for softwood lumber exporters, both by using Nova Scotia benchmarks to apply to companies in Alberta, British Columbia, Ontario and Québec, and by deciding that the sawmills were being sold electricity at below-market rates.
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The panel report, released Aug. 24 in Geneva, was criticized by the U.S. softwood lumber industry and by the Office of the U.S. Trade Representative. But because there is no appellate body, and because the U.S. has not agreed to join Canada and other countries in a mediation system, there is no way to get the ruling overturned. It could be put in limbo, however, if the U.S. says it wants to appeal, even if there is no one to appeal to.
U.S. Trade Representative Robert Lighthizer said the panel should have deferred “to the reasoned judgment” of the Commerce Department. “This flawed report confirms what the United States has been saying for years: the WTO dispute settlement system is being used to shield non-market practices and harm U.S. interests,” he said. “The panel’s findings would prevent the United States from taking legitimate action in response to Canada’s pervasive subsidies for its softwood lumber industry.”
Countervailing duty remedies are essential for U.S. industries, and Canada’s unfair trade practices in softwood lumber are well documented, the U.S. Lumber Coalition said. “While this decision is not binding upon the United States, and thus has no immediate effect on the ongoing Commerce Department proceedings, these deeply flawed WTO panel reports undermine the credibility of the entire WTO system and are harmful to U.S. workers and their communities who depend on the full and effective enforcement of the U.S. trade laws,” U.S. Lumber Coalition Co-Chair Jason Brochu said in a press release.
A Canadian embassy spokesperson said, “The Panel Report confirms what Canada has consistently said: U.S. duties on softwood lumber are unwarranted and unfair. Canada does not subsidize its softwood lumber industry.” The WTO panel said that an accelerated capital cost under the Canadian tax policy was a trade distorting subsidy that Commerce was within its rights to target. Canada noted that the U.S. can appeal the report, but said it expects the U.S. to drop the CV duties. Canada said the tariffs are hurting both U.S. consumers and Canadian exporters.