U.S. Puts 15% Retaliatory Duty on Canadian Lumber

Acting on a bitter, long-standing trade dispute between U.S. lumbermen and Canada, the Reagan Administration on Thursday imposed retaliatory duties of 15% on Canadian softwood lumber imports to the United States.

The preliminary decision, by Commerce Secretary Malcolm Baldrige, is subject to final ratification at the end of the year if on-again, off-again negotiations with Canada fail to produce a compromise satisfactory to U.S. industry.

However, the 15% penalty is well below what American lumbermen have been demanding. The Coalition for Fair Lumber Imports claims that Canada has been subsidizing wood exports up to 27% of their value.

Earlier this year, an Administration decision to impose penalty duties on Canadian cedar roofing shingles strained relations at a time when President Reagan and Prime Minister Brian Mulroney were facing domestic opposition to their jointly declared intention to negotiate a free trade pact. The duties imposed on Canadian shingles provoked prompt retaliation by Canada, which imposed stiff tariffs on U.S. computer parts, books and magazines.

Although Thursday’s decision did not lead to such immediate retaliation, Pat Carney, Canada’s minister for international trade, quickly denounced the ruling as illegal under the General Agreement on Tariffs and Trade, and Canadian officials said that a formal complaint is being filed with GATT authorities.

Carney said in a statement that the decision is a “graphic illustration of how protectionist pressures in the United States impact on Canadians and Canadian jobs. . . . Today, it’s lumber. Tomorrow, it could be any number of issues.” Canada and the United States are one another’s largest trading partners and two-way trade last year surpassed $120 billion.

Softwood lumber imports from Canada, which include pine and other woods used in home construction, totaled $2.9 billion last year, accounting for 31.6% of the U.S. market, according to a U.S. International Trade Commission report.

Requires Two Conditions

The 15% duty, which is to be imposed as early as next week, will become final on two conditions: If the Commerce Department ratifies its preliminary decision by Dec. 30 and if the International Trade Commission 45 days later ratifies its own preliminary ruling of last June that Canada has subsidized lumber exports in such a way as to cause injury to the U.S. lumber industry.

Until then, the duties will be collected and held in what amounts to an escrow account, refundable if the decision is overturned.

Thursday’s ruling held that the “stumpage” fees that the Canadian provinces of Alberta, British Columbia, Ontario and Quebec charge Canadian lumbermen to harvest timber on government-owned land are so low they are tantamount to a 15% subsidy on timber exports. The decision reversed a 1983 Commerce Department ruling that dismissed such U.S. lumber industry claims.

U.S. timber interests claim they must pay far higher prices for the right to cut timber on private and public lands in the Pacific Northwest.

Producers Reject Offer

Earlier this month, the coalition of U.S. producers that originally accused Canada of unfair trade practices rejected a Canadian government offer to triple stumpage fees on the condition that the U.S. producers drop their unfair trade practices complaint and stop pushing Congress for legislation imposing import quotas on Canadian lumber.

The U.S. industry has claimed that anything short of a ninefold increase in stumpage fees is equivalent to a 27% subsidy for Canadian producers, enabling them to sell softwood to the United States at below-market prices.