| Subject: Lumber talks break off again |
Author:
JOE HUEGLIN
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Date Posted: 12:06:45 02/26/03 Wed
Author Host/IP: d150-99-156.home.cgocable.net/24.150.99.156
Lumber talks break off again:'Excessive demands' of U.S. coalition forced closure to latest round of discussions, writes forestry reporter Gordon Hamilton
Gordon Hamilton
Vancouver Sun
Softwood lumber talks broke off unexpectedly Tuesday after Canadian and American negotiators decided they are too far apart to meet any more this week.
The talks broke down over a border-tax proposal that would replace current duties averaging 27.2 per cent.
Negotiators didn't have a chance to get to an equally contentious issue: the fate of more than $1 billion in duties already collected from Canadian forest companies by U.S. Customs since the duty went into effect last May 22.
"For the time being, we have broken off those discussions, but we will continue to talk," said International Trade Minister Pierre Pettigrew, clearly disappointed that the negotiations had ended.
He said the U.S. Coalition for Fair Lumber Imports was making "excessive demands."
"At this time, the two sides were too far apart to make further talks useful," said John Allan, president of the B.C. Lumber Trade Council. "To be perfectly frank, there is a huge gap."
The $1 billion in duties is not going to be dropped, said B.C. Forests Minister Mike de Jong. The U.S. coalition, which represents lumber interests in the U.S., is fighting to keep the money in the U.S. in the event a deal is reached. Canadians want it returned.
A third option, diverting it to a yet-to-be-formed North American wood products council, is attracting attention from some industry leaders.
"It's a billion-dollar issue," said de Jong. "I don't know about you, but that resonates with me. That's a big issue and it's not one that has been addressed conclusively yet. There's a healthy debate to take place around that."
No date has been set for the two sides to resume negotiations to settle differences over Canada's $10-billion-a-year lumber business with the U.S., but Allan said both sides have too much invested in the process to give up now.
He said both sides agreed to take a "time out."
Sticking points are the amount of the tax and the prices at which it would kick in. The Americans want a high rate -- 25 per cent --that would decline somewhat when prices are high. The Canadians want a rate of about 18 per cent that would drop to zero when prices are high.
"Both sides have strongly felt positions at this time," Allan said.
The breakdown in the current round of talks, which began last Wednesday, came after the first full day of negotiations on a border tax. Until then, talks had revolved around a plan by U.S. Department of Commerce Undersecretary Grant Aldonas to issue a policy bulletin outlining the benchmarks of a market-based timber pricing system.
Talks on the policy bulletin are now essentially completed, said U.S. commerce department representative Julie Cram. The department is expected to release its bulletin within the next week or two.
By issuing a bulletin, the department can act unilaterally, a feature that makes it impossible for U.S. lumber companies to launch further complaints. But it also commits Canada's provinces to adopting policies set in the U.S. or being indefinitely saddled with a duty or tax.
"Significant progress has been made," Cram said of the policy bulletin. "There are some elements that still need to be discussed, but we are confident it will be out shortly."
It will be up to Canada's provinces to either meet the benchmarks by changing forest policies or to continue to seek redress through the World Trade Organization or the North American Free Trade Agreement. The next WTO ruling is coming this May, but Allan said he expects the two sides to get back to the table long before that deadline.
Some Canadian industry leaders believe as the WTO decision date gets closer, Canada's hand strengthens. Allan said WTO rulings can be appealed and it could take until 2007 for the Americans to exhaust their appeals should Canada win in May.
De Jong said informal exchanges are continuing over the policy bulletin despite the recess in talks over a border tax.
He acknowledged there are similarities between what the U.S. wants and the policy changes B.C. intends to introduce this March.
"I think there are some obvious similarities there but we will have to make a decision in the weeks ahead once we have seen the final policy bulletin, which I have not seen yet," he said.
"Until I see the final one, I am a bit reluctant to commit to anything."
Although de Jong was noncommittal on B.C.'s ability to change policies sufficiently to get out of the countervailing duty, he said if B.C. can meet the standards, it will expose the hypocrisy of some U.S. lumber interests.
"There are certain members of the [U.S. Coalition for Fair Lumber Imports] who are a little bit concerned that we are actually proceeding with a market-based agenda that will remove their ability to level those criticisms. What that will probably reveal is that for those individual members of the coalition, this has been nothing but an exercise in trying to limit competition and limit the entry of B.C. softwood products into their market."
De Jong said negotiations over a border tax are linked to the policy bulletin. Canada's provinces need to know clearly how their sawmillers could get out of the border tax if provincial policies are changed.
Negotiations over a border tax are perilous because of the complexities of calculating how much money companies are actually paying.
The U.S. levies the 27.2-per-cent duties on the price the manufacturer receives, and B.C. calculates timber prices on the same price. As a result, the actual cash deposit lumber companies pay amounts to about 18 per cent of the selling price, not 27.2 per cent. The difference has been misinterpreted and misunderstood in both countries.
ghamilton@png.canwest.com
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