Canada Steps Up Fight Over U.S. Lumber Tariffs -- Update

By Paul Vieira Features Dow Jones Newswires

Canada on Tuesday said it intends to escalate its legal fight against the U.S. Commerce Department's decision to slap tariffs of roughly 20% or more on Canadian lumber imports.

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The Canadian government filed a notice to set up a dispute-resolution panel under the terms available through North American Free-Trade Agreement. These expert panels have the power to overturn or sustain tariffs imposed by the U.S., Canada or Mexico on goods from one of its Nafta partners.

The Trump administration wants to largely repeal the dispute-settlement system in talks to renegotiate Nafta, which restart later this week in Mexico.

A spokesman for Canadian Foreign Minister Chrystia Freeland said the U.S. decision to impose duties against Canadian lumber imports is "unfair, unwarranted and deeply troubling." He added Canada "will forcefully defend" its lumber industry, including through litigation.

An official from the U.S. Trade Representative's office wasn't immediately available for comment.

Before this month, U.S. and Canadian officials worked with industry representatives to come to an agreement to avoid the tariffs, first unveiled last April. The tariffs -- at a proposed 20% or more depending on the Canadian mill -- will take full effect if a U.S. trade body confirms the Canadian practices injured the U.S. industry. That decision is expected some time this month.

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In 2016, the U.S. imported about $5 billion of Canadian softwood lumber, used mostly to build homes.

Write to Paul Vieira at paul.vieira@wsj.com

OTTAWA -- Canada on Tuesday said it intends to escalate its legal fight against the U.S. Commerce Department's decision to slap tariffs of roughly 20% or more on Canadian lumber imports.

The Canadian government filed a notice to set up a dispute-resolution panel under the terms available through North American Free-Trade Agreement. These expert panels have the power to overturn or sustain tariffs imposed by the U.S., Canada or Mexico on goods from one of its Nafta partners.

The Trump administration wants to largely repeal the dispute-settlement system in talks to renegotiate Nafta, which restart later this week in Mexico. Canada has repeatedly said it won't budge on its insistence the panel system remain in place, as they are a crucial tool Canadian firms use to fight what they deem unfair tariffs imposed by Commerce.

A spokesman for Canadian Foreign Minister Chrystia Freeland said the U.S. decision to impose duties against Canadian lumber imports is "unfair, unwarranted and deeply troubling." He added Canada "will forcefully defend" its lumber industry, including through litigation.

Tuesday's development "signals the importance to the Canadian government -- and its Nafta negotiators -- of keeping the dispute-settlement provisions in the deal," said Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington. How to deal with the dispute-resolution panels has emerged as a major flashpoint in Nafta renegotiations.

To replace the current system enshrined in Nafta, U.S. Trade Representative Robert Lighthizer has backed a preference for government-to-government consultations and negotiations to resolve disputes rather than binding solutions imposed by an arbitrator or panel. Mr. Lighthizer and other trade skeptics have argued Nafta's dispute-settlement process represents an affront to U.S. sovereignty because it takes away Washington's power to enforce American law.

Commerce slapped the tariffs on Canada softwood lumber, used mostly to build homes, after it concluded Canadian lumber mills have benefited from improper subsidies and dumped lumber at unfairly low prices on the American market, hurting competing U.S. mills.

Before this month, U.S. and Canadian officials worked with industry representatives to come to an agreement to avoid the tariffs, first unveiled last April. The tariffs -- at a proposed 20% or more depending on the Canadian mill -- will take full effect if a U.S. trade body confirms the Canadian practices injured the U.S. industry. That decision is expected some time this month.

The U.S. Lumber Coalition, a lobby group, has supported the tariffs, saying it will allow its members "to compete on a level playing filed" against their Canadian rivals.

In 2016, the U.S. imported about $5 billion of Canadian softwood lumber, used mostly to build homes.

Mark Warner, a Toronto-based trade lawyer, said this marks the latest element in Canada's "aggressive strategy" in dealing with the Trump administration's "America First" outlook on trade. During the Nafta talks, Canada has described U.S. positions on matters such as the auto sector as "troubling." Ottawa has also vowed to shut out Boeing Co. from selling fighter jets to Canada's defense department after Commerce slapped tariffs of about 300% on Bombardier.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

November 14, 2017 17:41 ET (22:41 GMT)