Canada Retaliates With Duties on U.S. Products

The brewing trade war between Canada and the United States escalated Monday as Canada announced that it will impose import duties on American books, magazines and some computer components in retaliation for higher U.S. tariffs on British Columbia’s cedar products.

“Our objective is to bring home to the United States the cost of protectionism,” said Canadian Finance Minister Michael Wilson in disclosing the move in the House of Commons in Ottawa. “Nations which resort to unjustified protectionism must be made to realize that trade is a two-way street.”

Last month, the Reagan Administration announced that it would impose stiff tariffs on the Canadian wood products because they are harming the U.S. cedar industry. The American duties, designed to protect the domestic industry against about $200 million a year in imports of cedar roof shingles, would start at 35% for the first 30 months before gradually falling to 8%.

Effective This Week

Wilson said that the new Canadian duties, to go into effect Friday, the same day that the United States begins collecting the new tariffs on red cedar shakes and shingles, would raise about $55 million.

Prime Minister Brian Mulroney, who often boasts of his strong friendship with President Reagan, has called the U.S. decision bizarre and charged the Administration with breaking a longstanding agreement to avoid protectionist moves against Canada.

The Administration, defending its action, insisted that the new tariffs on cedar imports from Canada do not violate any agreements with Ottawa.

“This is not a punitive move,” said Debra Busker, a spokeswoman for Reagan’s trade representative, Clayton K. Yeutter. “It was not a surprise action. We are obviously very disappointed with the Canadian decision.”

No Pleasure Taken

In Ottawa, Wilson accused the United States of imposing the tariffs without notice and said they run counter to recent efforts to liberalize trade between the two nations. “The government takes no pleasure in implementing these actions, but legitimate Canadian interests must be protected,” he said.

The opposition Liberal Party, however, attacked the Canadian government’s move as too weak.

“One can only ridicule and laugh at the measure brought forward today as a so-called tough response,” said Lloyd Axworthy, a Liberal Party leader on trade issues. He told lawmakers in the House of Commons that Mulroney should have protected the jobs of 4,000 Canadian workers by personally calling Reagan and persuading him to reverse the tariff decision.

Earlier, Canadian officials had discussed the possibility of halting exports of raw cedar blocks to American woodworkers in hopes that the resulting shortage would force U.S. officials to relent. They also had considered rewriting a law that would have deprived U.S. pharmaceutical firms of as much as $200 million in profits in the Canadian market.

Demands Rejected

Canadian officials also had been seeking compensation for the cedar industry, which would be all but destroyed, they say, if the tariffs are imposed. The Reagan Administration has rejected those demands. About 75% of the Canadian cedar output is exported to the United States.

The U.S. industry has suffered dramatically in recent years, losing about half the jobs in the domestic production of cedar roofing materials, in part because of the rising imports from Canada and in part because of weak demand from the housing industry.

The dispute over cedar products is part of a larger trade battle. The Administration has been under intense pressure in Congress to defend the U.S. lumber industry against rising imports of several different Canadian wood products. Last year, Canada sold $2.6 billion worth of softwoods to the United States.