Mr. Speaker, I am pleased to address the House today and to have the opportunity to report the latest developments in the dispute that our government has taken before the WTO and the NAFTA panel to defend the softwood lumber industry.
We all know that the decision made by the United States is unjustified and unfairly punitive. Not only does this duty add $1,500 U.S. to the cost of a new house in the United States, which affects one of the few dynamic sectors of the otherwise lethargic U.S. economy, but it also exacerbates the economic difficulties that many regions in our country are facing right now. Sawmills have already had to shut down, and reports indicate that 22,000 workers have been laid off and that others could follow.
Ironically the softwood lumber production in the United States is not sufficient to meet the demand of the U.S. building sector. This means that, as the imposition of a countervailing duty reduces the supply of Canadian softwood lumber, American buyers will have to turn to other sources. We have already seen rapid increases in exports to the United States from third countries since the Americans have initiated their trade action.
We also know that the U.S. industry has made the same allegations of subsidies in the past, but it was never able to prove its claims conclusively. We all know that this dispute is the result of U.S. protectionism and that the case of the U.S. industry against our softwood lumber producers is weak.
In the latest case, which was settled in 1994, Canada appealed allegations of subsidies before a binational FTA panel and won. Following our successful challenge, the U.S. department of commerce accepted the panel's findings to the effect that provincial stumpage fees and lumber export controls were not countervailable subsidies, and it paid back over $1 billion, for countervailing duties that were improperly collected.
Despite this and the fact that stumpage rights have since been increased in Canada, we find ourselves faced with the exact same allegations. Once again, in close co-operation with the provincial and territorial governments, and with our industry, we are challenging these unfounded allegations.
This fight is being conducted before both the WTO and NAFTA. Allow me to first explain our representations before the WTO.
Our first representations to the WTO were made over a year and a half ago, when we challenged the claim by the United States that the monitoring of our lumber exports was a subsidy.
In June of last year, a WTO panel concluded that a restriction on exports, such as our lumber export controls, did not result in a financial contribution and could therefore not be a countervailable subsidy. This finding weakened the U.S. position and confirmed our lumber export monitoring program.
The second time we went before the WTO, we challenged a section of a U.S. act, on the grounds that it was incompatible with the obligations of the United States towards the WTO. The section in dispute precludes the repayment of certain countervailing and anti-dumping duties, should the WTO dispute settlement panel conclude that the initial decision to impose such duties was incompatible with the obligations of the United States under an international treaty. This challenge is already well underway and the final report is expected by the end of June.
A victory will give back to our industry the countervailing duties collected when, yet again, we successfully challenge the specious U.S. allegations made during the most recent investigation.
Third, we are also challenging the U.S. preliminary determination of subsidies, which led to the imposition of improper and unfair countervailing duties on our softwood lumber exports to the United States.
We contended that the U.S. department of commerce had violated the rules of international trade in its efforts to demonstrate at any cost that our softwood lumber exports were being subsidized.
In arriving at its conclusion, the U.S. Department of Commerce made many errors of law. In particular, the department mistakenly based its analysis on the conditions in the American market rather than those in the Canadian market.
Its analysis is completely incorrect and we are making this case to the WTO.
In the meantime, Canada is laying the groundwork for a fourth challenge to the WTO, this time regarding the final determination of subsidies.
On Friday, Canada filed its request for consultations on the final determination, and we expect the consultations to take place within 30 days. We then intend to formally challenge this American determination with the WTO.
Canada has also challenged the unfounded determinations of dumping. The last such determination, dated March 22, 2002, established a general rate of dumping of 8.6% for Canadian companies which had not been specifically investigated. Companies that had been investigated received individual dumping rates. The final determination of dumping, as well as the preliminary determination which preceded it, are both profoundly distorted.
On April 5, 2002, Canada held consultations with the United States in order to discuss the preliminary determination of dumping. Because this determination has now been replaced by the final determination, we are examining the latter for incompatibilities with WTO principles. To that end, we have corresponded with each of the six Canadian companies being studied by the Department of Commerce in its investigation in order to get their version. When we have received their observations, we intend to make a request for consultation on anti-dumping measures and to then file a formal challenge with the WTO.
Finally, there are two other challenges before the WTO which, although they do not arise from errors in the determination of subsidies and dumping by the Department of Commerce, nonetheless affect the softwood lumber industry. I am referring to the Byrd amendment, which requires that U.S. customs transfer to affected American producers the countervailing duties collected pursuant to a countervailing or anti-dumping duty order.
This is clearly incompatible with WTO principles and incites the U.S. industry to make and pursue claims against all types of imports, including those of Canadian softwood lumber producers.
Canada, in conjunction with the European Union, Japan and several other countries, is presently challenging this American measure, and a final report from the WTO panel is expected for the middle of this summer. Canada is also using the NAFTA framework to challenge unfair allegations by the United States.
On April 2, 2002, Canada filed a request for reviewing the American subsidy and dumping notices. We then lodged a formal complaint with the NAFTA panel that is examining the final determination of the subsidy. Other parties, such as provincial governments and industrial associations, have included Canada's claims in the complaints that they have filed. Submissions will be filed at the beginning of August and we are expecting a decision as soon as February 2003.
Finally, I believe it is worthwhile noting that Tembec, Doman and Canfor have all filed challenges under chapter 11 of NAFTA against the United States about the current dispute. These challenges all suggest that American disregard for fair and free trade principles enshrined in NAFTA boils down to forcing adversely affected businesses out of their market.
That Canadian businesses should be prepared to take such an approach shows that the federal and provincial governments, as well as the industry, are all committed to working closely together to fight the unfair American measures.
Our ultimate goal is free trade for softwood lumber without any threat of harassment. We will continue to work toward that goal and we will make the best use possible of existing and future legal proceedings to reach it.