Madam Chairman, I am delighted to participate in the debate this afternoon. I am sure some of my colleagues will be wondering why a member of parliament from Parkdale--High Park, a Toronto urban riding, is interested in these issues because obviously I do not have any softwood lumber industries in my riding.
However I would like to advise my colleagues that as a lawyer who practised law for 18 years I have a very special interest in international trade law issues. I also had the opportunity to be a chair of the House Subcommittee on International Trade, Trade Disputes and Investments. I was a member of the committee that travelled across Canada a few years ago consulting Canadians from coast to coast on our position with respect to the WTO and where we should go from there. I must say that at that time, certainly in British Columbia but all across Canada, the issue of the softwood lumber agreement was prominent well before its expiry came up.
I would like to use my time to actually talk about the concrete steps that the Government of Canada is taking before the World Trade Organization to defend the rights of our softwood lumber industry and to guarantee the protection under law that it deserves.
While this is the fourth round of trade action taken by the U.S. industry in 20 years, the U.S. industry allegations do not merit a worthy response since they have not been sustained time and time again.
I would like to outline Canada's challenge to the five U.S. measures before the WTO in defence of our softwood industry and of one related measure that directly impacts on our lumber producers.
On August 9, 2001, the United States department of commerce made a preliminary determination that Canada's softwood lumber industry was subsidized by federal and provincial programs and furthermore, that our exports to the U.S. exceeded a 15% increase in exports to warrant a “massive importations” or critical circumstances determination.
Although these findings by the U.S. were only preliminary, they were made in a politically charged environment due to intensive lobbying by protectionist U.S. lumber interests. As a result, the U.S. department of commerce will impose a 19.3% duty on Canadian lumber exports to the United States.
To add insult to injury, as the Minister for International Trade stated earlier, the U.S. department of commerce will impose duties on our lumber, not only on what is first milled but also on its increased value when it enters the United States. In essence, the United States will reap duties on the higher remanufactured lumber rather than the so-called mill rate value. This is contrary to any previous decision we have ever seen before.
This decision follows an earlier preliminary determination by another United States body. The United States international trade commission found that although our industry is not injuring United States producers,our industry “may” injure U.S. producers in the future.
Although the U.S. allegations of subsidy have never been sustained in previous cases and our export monitoring data from Statistics Canada found that our exports from this year compared to a similar period last year increased by only 11.3% and not the 15% increase as the U.S. alleges, regrettably, the U.S. department of commerce is intent on finding against our industry, whatever the circumstances may be.
While these rulings have no basis in fact or law, we nonetheless must respond accordingly.
In response to the U.S. trade action, the Government of Canada has taken the following steps before the World Trade Organization.
Under the first measure, Canada requested that a WTO panel be established to hear our complaint that the U.S. treatment of our log exports restraints or controls is contrary to U.S. obligations under the subsidies and countervailing measures agreement, which is also known as the SCM.
As the Minister for International Trade noted at the beginning of this debate, the WTO panel in its final report on June 29 found that our export restraints do not provide a financial contribution and thus do not confer countervailable subsidies. This ruling is very positive for Canada and actually undermines the U.S. claims that log export controls confer subsidies in the current countervailing duty investigation.
Under the second measure before the WTO, Canada also requested a WTO panel to hear Canada's complaint that when the dispute settlement body has ruled that the U.S. anti-dumping or countervailing duty order is inconsistent with United States international obligations the U.S. must refund all duties collected. Those members who were in the House earlier will have heard that the Minister for International Trade said that in 1996 in fact the Americans had to pay back over $1 billion to our producers.
Our third action follows the U.S. department of commerce preliminary determination of subsidy in its countervailing duty investigation and the imposition of a 19.31% duty for Canadian softwood lumber imports entering the United States. Canada finds this ruling inconsistent with United States WTO obligations on a number of grounds.
First, the United States treated stumpage as a financial contribution on the basis that it is a provision of a so-called good. Rather, stumpage is a licence or right of access to cut timber, which is not covered by the financial contribution definition found within the subsidies and countervailing measures agreement. Second, the United States also wrongly determined that stumpage is a benefit and it based its findings on U.S. prices rather than on the prevailing market conditions in Canada. All of these actions are inconsistent with the subsidies and countervailing measures agreement and accordingly we will challenge these findings.
Our fourth action before the WTO concerns the U.S. department of commerce critical circumstances decision that resulted in the 19.31% duty now being applied retroactively to Canadian shipments made on or after May 19, 2001. This determination was based upon an alleged subsidy that was found to be de minimis, or less than 1% subsidy rate. This application of an alleged subsidy of less than 1% to justify the retroactive application of a preliminary duty rate of 19.31% is also inconsistent with the subsidies and countervailing measures agreement.
The fifth action we are taking before the WTO concerns the entitlement of Canadian exporters to seek a review of their circumstances when trade action is taken before them. Exporters subject to countervailing duty action are entitled to individual expedited reviews following an investigation in order to calculate company specific duty rates.
However, once again the U.S. regulations do not provide for individual expedited company reviews where subsidy rates are determined on a countrywide basis. Once again, this practice is inconsistent with the subsidies and countervailing measures agreement in that it denies exporters to such a review and the determination of an individual duty rate.
Canada is challenging these measures as WTO inconsistent and has requested accelerated consultations to discuss this matter. Those of my colleagues who were here earlier would have heard the Minister for International Trade talk about those consultations that are going on, up to today until 2.30, I believe, and they will continue to go on.
Canada is also challenging the United States on another measure. The sixth measure relates to softwood lumber and it includes a review of a certain piece of U.S. legislation known as the Byrd amendment. This amendment requires U.S. customs to distribute Canadian duties assessed to affected U.S. producers directly. This amendment creates a clear incentive for U.S. industry to file and support cases against Canadian firms exporting to the United States. In challenging this measure, Canada is joined by over a dozen other countries that also find the U.S. actions WTO inconsistent.
To conclude, I think it is important to remember that this is the fourth time that the United States industry has taken action against our softwood lumber industry in the last 20 years. Our actions and indeed, we are saying, U.S. actions must be based on a rules based system whereby everyone is treated fairly, impartially and without the ability to pick and choose which rules they want to abide by.
I want to assure members of the House that we will continue to take action that best defends our industry and that best supports the international agreements that we are all party to.