July 31, 2006

Canada bids to save softwood deal with US

OTTAWA (Reuters) - Canada will be forced to declare a
contentious softwood lumber trade deal with the United States
"dead before arrival" unless it gets more companies on board in
the next few weeks, Trade Minister David Emerson said on

Emerson suggested there was room to amend the July 1 accord
by consent of both governments but denied there were any talks
underway to that effect.

Previously, the Conservative government has stressed that
negotiations were closed and there was no chance of improving
the deal.

The minister will make one last push to sell the deal,
wrapping up talks "shortly" with top executives of the softwood
industry, which last year exported $7.4 billion worth of lumber
to the U.S. market.

"I think it's fair to say that if we do not have sufficient
buy-in from industry, there really isn't an agreement to bring
before parliament," Emerson told reporters after appearing
before a parliamentary trade committee.

"So the first bridge we have to cross is to get the
agreement supported by the appropriate number of players in the
industry, otherwise you're dead before arrival," he said.

The trade deal would return $4 billion to Canada, but give
$1 billion to the U.S. lumber producers whose complaint in 2001
sparked the five-year trade battle.

Critics of the agreement in Canada have argued that Ottawa
has given away too much. The CEO of Canfor, a key supporter and
Canada's largest softwood firm, said on Friday he doubted the
deal would actually be implemented without some of the changes
urged by critics.

As it stands, the deal cannot be implemented unless Ottawa
persuades Canadian lumber companies that have paid 95 percent
of the duties to sign on to the deal, and all litigation must
be dropped.

Emerson declined to say what might happen if that threshold
of approval wasn't reached.

"We'll cross that bridge when we get to it," he said when
asked about the consequences of just one firm refusing to drop

"It is technically possible for both parties to agree to
changes to the agreement," Emerson said. "Our position is that
we have to get 95 percent of the deposit recipients for this to

With an expected slump in the lumber market as U.S. housing
construction slows, Emerson said the bilateral deal would
protect Canada from further protectionist action by embattled
U.S. firms.

"Think of a world where the markets are going into the
ditch, which is what we're experiencing today," said Emerson.
"If you think the U.S. industry is not going to take this
opportunity to take trade action, think again."

(Additional reporting by Allan Dowd in Vancouver)