New WTO panel to rule on lumber compliance

GENEVA — The World Trade Organization set up a panel Friday to decide if the United States has complied with the global commerce body’s rulings in a long-running lumber dispute with Canada.

The compliance panel will rule within three months and if it finds the United States has failed to comply with WTO rules, that will open the way for Canada to retaliate, trade officials said.

But the WTO held off on authorizing Ottawa’s request to punish the United States with immediate retaliatory duties worth $166.45 million. That makes little immediate difference to the dispute, however, because Ottawa already had agreed with Washington not to apply any penalties until a final WTO decision on U.S. compliance.

In 2002, the United States slapped import duties on Canadian softwood lumber, which is used by house builders, accusing Ottawa of hurting U.S. manufacturers by subsidizing its lumber industry. Canada denied this.

Canada claims the United States failed to respect decisions made by the WTO last spring, but Washington says it has adopted them.

In rulings in February and March 2004, a WTO dispute panel said the United States had the right to impose duties on Canadian lumber, but that some breached international trade rules because the U.S. Department of Commerce had miscalculated them.

Most U.S. timber is harvested from private land at market prices, while in Canada the government owns 90 percent of timberlands and charges fees — called stumpage — for logging. The fee is based on the cost of maintaining and restoring the forest.

U.S. timber companies contend that Canada’s stumpage fees are artificially low and amount to subsidies that allow Canadian mills to sell wood below market value.

The United States says it complied with the WTO rulings because it trimmed its tariffs last month, but Canada has protested that the cut is too small and fails to respect the WTO decision.

On Thursday, Canada’s International Trade Minister Jim Peterson said Ottawa also would launch a renewed challenge to U.S. duties under the North American Free Trade Agreement, or NAFTA.

The trade battle between the neighbors built up steam after the expiration of their Softwood Lumber Agreement in March 2001.