NAFTA timber ruling called ‘devastating’

The U.S. government has failed to show that Canadian lumber imports pose a threat to domestic producers, a North American Free Trade Agreement panel ruled this week.

The unanimous ruling – made Tuesday by a panel of three American judges and two Canadians – could have significant ramifications for Inland Northwest mills.

“If it were to stand, it would be devastating for the U.S. industry,” said Dick Bennett, chairman of Bennett Forest Products, which has mills in Clarkston, Wash., and Princeton, Idaho. “Over time, the Canadians would wipe us out. They would increase their volume and just bury us.”

Bennett said he expects a speedy appeal from the U.S. government. Canadians, however, hailed the ruling as a significant victory in the long-running trade dispute.

“This is our home-run argument, this is as good as it gets for Canadians,” said John Allan, chairman of the BC Lumber Council. “This, in my view, means that the U.S. should end the case against us.”

The National Association of Homebuilders also applauded the ruling, calling it a victory for American homebuyers squeezed by record high lumber prices.

Both countries are large producers of softwood lumber – species such as fir, spruce and pine, which are used in home building and commercial construction. Canada supplies about one-third of all lumber used in the United States.

In May 2002, the U.S. levied taxes averaging 27 percent on lumber shipments from Canada. The government contends that Canada subsidizes its mills by selling low-cost logs from provincial lands, creating an unequal playing field for U.S. producers. Nearly all of Canada’s forestland is owned by the provinces.

Tuesday’s ruling was the third time the panel said the U.S. failed to prove its case.

The panel directed the U.S. International Trade Commission to revoke its justification for the tariffs. In strongly worded language, the panel wrote that the ITC presented no new evidence during the latest review. ITC “is simply unwilling to accept this panel’s review authority,” the NAFTA panel said.

But the ruling is just one more step in a long, political process, said Scott Shotwell, executive director of the U.S.-based Coalition for Fair Lumber Imports.

“This is not something we’d call a fatal blow,” Shotwell said. “We think we’ll win.”

Bennett, who serves as the coalition’s western chairman, said the panel ignored U.S. law and muddled the facts. The panel determined that the U.S. industry wasn’t hurt by Canadian imports, because lumber production increased between 2000 and 2002.

Those were dismal years for the industry, Bennett said. Faced with record low prices and pressure from Canadian producers, U.S. mills made more lumber in an effort to lower per-unit costs and retain market share, he said.

Bennett also said the record lumber prices homeowners are complaining about won’t last long. Last year, analysts predicted that home construction would decline in 2004. As a result, many retail lumber yards lowered their inventories. When home construction beat expectations, there wasn’t enough lumber to meet immediate demands. Price skyrocketed, but mills also upped their production, Bennett said.

“Now, we’re making record profits,” he said, “but this isn’t going to last.”

The Associated Press contributed to this report.