Canada slaps rare sanctions on millions in U.S. imports over trade dispute
11:20 AM EDT Apr 03
International Trade Minister Jim Peterson speaks in Toronto Thursday. (CP PHOTO/Aaron Harris) SANDRA CORDON
OTTAWA (CP) - Canada has turned up the pressure on its largest trading partner, slapping rarely used sanctions on the United States to force an end to an internationally condemned trade law. The stakes are high: if Ottawa fails in this fight against the U.S. law known as the Byrd amendment, Canadian softwood lumber producers stand to lose more than $4 billion in duties paid so far in the longrunning trade dispute. Even worse, the Byrd amendment would then hand all those Canadian payments over to their American lumber competitors. To pressure Washington, Ottawa announced Thursday it will slap a 15 per cent surtax on cigarettes, oysters, live swine and some fish imports from the U.S., effective May 1. Similar action is coming from the 25-member European Union, which - along with several other countries including Japan, India and Brazil - are fighting the U.S. law. In Whistler, B.C., Prime Minister Paul Martin said Canada had no other options. "The Byrd amendment is just simply the ultimate in protectionism and runs counter to everything that the various rounds have built up and we're not going to accept it," Martin said. Canada's sanctions will hit about $14 million in imports - a tiny sum compared with the billions in softwood duties that Washington has been collecting for four years. But trade watchers applauded the move as sending a powerful signal, especially since Canada so seldom slaps sanctions on its largest trading partner. "It's a rare thing and I think it will be seen as a significant event on the other side of the border," said Carl Grenier, president of the Quebec-based Free Trade Lumber Council, representing hard-hit softwood producers. "So this is a very useful announcement for the federal government to make." After years of fruitless lobbying the U.S. to revoke the Byrd amendment, first passed in 2000, Canada has no other choice, said Trade Minister Jim Peterson. "I think this is a strong message that we're all sending to the United States that the international rules, those of the WTO (World Trade Organization), must be respected," Peterson told reporters in Toronto. Ottawa particularly targeted states that have been strong supporters of the Byrd amendment, such as North Carolina and its tobacco industry, Peterson added. The sanctions don't signal any kind of breakdown in the close relationship with the U.S., destination for 85 per cent of Canada's exports, said Perrin Beatty, chief executive of Canadian Manufacturers and Exporters. "I don't think Canada was left with any choice, we have to find a means of convincing (U.S.) Congress to respect the rulings of the WTO," Beatty said in an interview. Trade department officials couldn't recall the last time Canada retaliated against the U.S., but said it was likely in the early 1990s in a dispute over beer. An American official said Washington was "disappointed" by the sanctions, but in a defiant note, said it will continue to fight to protect Americans in the trade arena. "The United States will continue to vigorously implement our trade laws to make sure Americans are treated fairly," said Richard Mills, a spokesman for the U.S. Trade Representative. Yet Ottawa was essentially acting on the advice of Paul Cellucci, U.S. ambassador to Canada, who said last December that Canada would likely have to hit Congress hard with sanctions before it would repeal the American law. "I suspect that it will take the imposition of sanctions by Canada and other countries to get the Congress to act - and I think eventually they will act," said Cellucci, who has since retired from his diplomatic post. While Canada's case isn't only about the softwood duties, a dispute over $4 billion in countervail and antidumping duties provides a dramatic example of the risks posed by the Byrd amendment. The WTO ruled against Byrd because it was seen as a double penalty: not just imposing duties, which are essentially a trade barrier, but then giving the proceeds to American rivals. Critics say it has also provided a huge incentive for U.S. industries to launch trade tiffs, then reap the rewards. Mike de Jong - forestry minister in British Columbia, where about half of Canada's softwood exports are produced - said Ottawa had no other means left to fight the U.S. trade law. "It's a big move, but it's also an appropriate move. The U.S. is increasingly going to be confronted with this kind of retaliatory action, not just by Canada but . . . by countries around the world." Who gets to keep the softwood duties has become a key sticking point in negotiations that resumed last week to end the lumber trade war. Grenier predicted the new sanctions won't affect softwood talks, since ample warning had been given. The 25-member European Union's sanctions also take effect May 1, when the EU will slap 15 per cent duties on such American imports as paper, textiles, machinery and farm produce. Canadian and EU duties will total about $150 million. Both Canada and the EU have long asked Washington to repeal the Byrd amendment. Last November, the WTO gave Canada and the other co-complainants the authority to retaliate. Also fighting the U.S. trade law are Mexico, Japan, India, Brazil, Chile and South Korea.
© The Canadian Press, 2005
The European Union (EU) and Canada announced they will impose a 15% tariff on some United States (U.S.) imports. Permission for the sanctions was granted by the World Trade Organization (WTO) due to the U.S. maintaining a law known as the Byrd Amendment, which gives its companies billions of dollars collected from foreign rivals.

U.S. Congress failed to repeal the four-year-old Byrd Amendment ruled illegal by the WTO in September 2002. The WTO gave the EU and Canada, in addition to Brazil, Japan, India, South Korea and Mexico the right to impose retaliatory tariffs on November 27. The tariffs will take effect May 1.

The retaliatory tariffs will largely affect U.S. paper, clothing and machinery for the EU and live swine, cigarettes and oysters for Canada.

In the 2004 fiscal year, U.S. based Timken received $40 million, and Lancaster Colony Corp. received about $26 million. The EU says that total payouts will rise as high as $1.6 billion in the fiscal year of 2005 unless the law is repealed. The U.S. Congressional Budget Office estimated that payouts for the fiscal year of 2006 will reach $1.15 billion.

The European tariffs will collect near $26 million, while the Canadian tariffs will amount to near $11.6 million.

The European Commission, in a statement, said the tariffs were caused by "the continuing failure of the U.S. to bring its legislation into conformity with its international obligations."

According to Canadian Trade Minister Jim Peterson, the tariffs are "a strong message that we are all sending to the U.S. that international rule, those of the WTO, must be respected. We just cannot allow the U.S. to illegally disburse funds that are collected."

A spokesman for the U.S. Trade Representative, Richard Mills, said "We're disappointed that this step is being taken. The U.S. is working to comply with the WTO decision."

Other countries such as Japan and Mexico are considering a similar move.

President Bush has called for congress to repeal the Byrd Amendment since February.