July 2, 2006

New warning about US-Canada lumber trade deal

By Allan Dowd

VANCOUVER, British Columbia (Reuters) - A major Canadian
lumber industry group warned on Sunday that some producers may
not be satisfied with the softwood trade deal agreed upon this
weekend by U.S. and Canadian officials.

Some Canadian companies could try to block the agreement
from being implemented by refusing to drop lawsuits they filed
against the United States during the trade dispute, the BC
Lumber Trade Council warned.

The council represents most of the major lumber producers
in the western province of British Columbia, which supplies
more than half of the more than $7 billion in Canadian softwood
exported to the United States for construction.

Canadian Trade Minister David Emerson and U.S. Trade
Representative Susan Schwab on Saturday initialed what
officials said was the final wording of the deal to end the
fight over U.S. duties on Canadian lumber.

The seven-year trade deal -- first agreed to in principle
in late April -- now needs to be formally approved by both
sides. Emerson told reporters Saturday he expected the
agreement would take effect by the beginning of October.

Implementing the deal will also require that companies
representing at least 95 percent of the $5 billion in duties
that have been paid to the United States agree to drop any
trade lawsuits they filed during the dispute.

The BC lumber group warned that companies representing more
than 5 percent of the duties have concerns about the deal
initialed Saturday, including provisions to allow either
country to back out of it early.

"The federal and provincial governments must take the
opportunity to resolve these outstanding issues in a way that
will give all parties the comfort needed to give final
sign-off," said John Allan, president of the lumber group.

The countries have argued for decades over U.S. allegations
that Canada subsidizes lumber firms by charging below-market
rates to log in its vast public forests.

Canadian firms say their U.S. rivals have repeatedly used
duties to protect less efficient American mills, and then
ignored international rulings in Canada's favor.

This deal would end the current duties in return for Canada
limiting its exports when lumber prices fall, using a system of
taxes and quotas. Washington would also return 80 percent of
the duties paid -- about $4 billion.

Canadian firms that do not agree to drop their lawsuits
would not receive a duty refund, and critics of the deal have
accused the federal Conservative Government of using that to
force the deal through quickly.