June 1, 2017 / 5:21 PM / 2 years ago

Canada helps firms hit by U.S. lumber tax, American lobby fumes

OTTAWA (Reuters) - Canada will give C$867 million (US$642.22 million) in aid to the softwood lumber industry after the United States imposed duties on exports and is prepared to offer more help in future, the government said on Thursday.

Canada's Foreign Affairs Minister Chrystia Freeland speaks during a news conference with Natural Resources Minister Jim Carr in Ottawa, Ontario, Canada June 1, 2017. REUTERS/Chris Wattie

Washington in April imposed preliminary anti-subsidy duties averaging 20 percent on imports of Canadian softwood lumber. U.S. producers say the exports are unfairly subsidized, a charge Canada strongly denies.

“Canadian workers are under pressure because of duties which are unfair and punitive... we’re not going to let those Canadian workers, those Canadian families, be hurt and stand idly by. We’re going to help,” said Foreign Minister Chrystia Freeland.

The dispute has increased tensions between Canada and the United States ahead of talks on renegotiating the North American Free Trade Agreement. Mexico is also a member of the pact.

Most of the aid - up to C$605 million - will be in the form of loans, loan guarantees and commercial financing. Reuters revealed the outlines of the package on Wednesday. [L1N1IX23K]

The government stresses the package is trade compliant. Any hint Ottawa is offering a subsidy to the industry could provoke a U.S. challenge.

“We are prepared to take further action, including additional loan guarantees, to address changing market conditions,” Natural Resources Minister Jim Carr told a news conference, flanked by Freeland.

The U.S. Lumber Coalition, a vocal alliance of lumber producers, attacked what it called a subsidy that “only further tilts the trade scale in Canada’s favor.”

In a separate statement, the Canadian government said it would continue “to forcefully press our American counterparts to rescind this unfair and unwarranted trade action.”

Washington’s move to impose tariffs triggered the fifth formal bilateral dispute over timber in less than 40 years. Although the two sides continue to talk, Freeland said a deal was not yet close.

The Canadian aid package includes C$260 million to expand overseas markets for lumber, help affected workers learn new skills and provide support for work-sharing agreements and thereby avoid layoffs.

The Forest Products Association of Canada welcomed the aid, describing it as “a critical step as we work to secure a strong forest sector”.

Canada and the United States are also arguing over Canadian exports of airliners as well as the system of tariffs and duties that protect Canadian dairy farmers.

Reporting by David Ljunggren; Editing by Lisa Von Ahn and Andrew Hay

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