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Canada Vows to Help Out Its Lumber Exporters

The $1.3 billion in aid will help offset punitive duties levied by the United States.

November 25, 2005|From Bloomberg News

Canada will give forest-product companies $1.3 billion in aid to help them cope with U.S. punitive duties on their exports.

About $770 million is for loans and grants for companies hurt by the duties, and the rest is to help companies diversify their production and export markets, the Canadian government said in a statement Thursday.

Tembec Inc. of Montreal and Canfor Corp. of Vancouver are among Canadian forest companies that are seeking to recover from the U.S. more than $4.3 billion in duties they have paid since 2002 on lumber exports.

"If the process drags on for a long time, more money may be needed," Canadian Natural Resources Minister John McCallum said. "The government won't leave this industry to fend for itself."

Forest products companies in Ontario and Quebec, in particular, are struggling with rising costs and a stronger Canadian dollar, which erodes earnings from sales in U.S. dollars. Canada supplies about a third of all softwood lumber consumed in the U.S., industry figures show.

Canadian Prime Minister Paul Martin has pressured the U.S. in recent speeches to scrap the duties after a series of rulings by a panel created under the North American Free Trade Agreement that said the U.S. showed no just cause for implementing the duties to begin with.

The U.S. this week submitted to the NAFTA panel's ruling that the Commerce Department said would largely eliminate duties on $7.6 billion in lumber imports from Canada.

Under the methodology ordered by the panel, a 16.4% import duty would fall to 0.8%. Under U.S. law, duties of less than 1% aren't collected, so if the U.S. doesn't appeal or loses the appeal, the decision would lead to the scrapping of these duties on Canadian lumber.

The U.S., which prevailed in another case at the World Trade Organization, has called for Canada to negotiate an agreement to end the duties.

"Canada now feels no need to hide the fact that its lumber industry is massively subsidized," Barry Cullen, executive director of the Coalition for Fair Lumber Imports, said after hearing about Canada's plans.

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