Canada aid to respect U.S. softwood deal: Harper

Thu Jan 17, 2008 12:39pm EST
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By Mervin Brass

PRINCE ALBERT, Saskatchewan (Reuters) - Canada will not use a $1 billion domestic aid package to bail out forestry firms or in any way violate its softwood lumber deal with the United States, Prime Minister Stephen Harper said on Thursday.

Harper's remarks came after Washington expressed concern that the promised rescue money for towns and workers hit hard by economic downturns could amount to subsidies to the industry that are not allowed under a bilateral trade agreement.

"I think this is pure political posturing in the United States during an election year," Harper told reporters after pledging $36.4 million to the province of Saskatchewan.

"The federal government will be very insistent that the money not be used to violate any of Canada's trade obligations and, frankly, in all my conversations with the provinces, none of them have indicated any intention of using the money in that way," he said.

Harper has made the funding conditional on the next federal budget being passed by Parliament, putting pressure on opposition parties who see the budget bill as possibly their next opportunity to bring down the minority Conservative government and force an election.

Under the plan, each province will receive a base amount of $10 million, with the remainder of the funding allocated on a per capita basis. Harper is expected to announce each province's deal piecemeal over the next few weeks.

Subsidies are a sore point for the U.S. lumber industry, which says they violate a shaky truce struck in 2006 by Canada and the United States, which they hoped would end years of acrimonious lawsuits.

U.S. Trade Representative Susan Schwab sent a letter on Tuesday to Canadian Trade Minister David Emerson seeking assurances that the aid package "will be used in a manner consistent with Canada's obligations under the U.S.-Canada Softwood Lumber Agreement."   Continued...