April 6, 2009 / 8:34 PM / 9 years ago

Canada sticks to plan to fix US lumber trade breach

OTTAWA (Reuters) - Despite U.S. misgivings, Canada remains confident its offer to resolve its latest fight with the United States over softwood lumber trade is adequate, Trade Minister Stockwell Day said on Monday.

The United States complained on Friday that Canada’s plan to pay C$46.7 million ($37.6 million) to fix a breach of the 2006 softwood lumber trade agreement would not resolve the issue. Washington said it was considering its next step.

“It’s straightforward. We disagree with the United States’ perspective. We believe that our offer of C$46.7 million cures the breach,” Day said in a statement issued by his office.

The countries are at odds over a February ruling by the LCIA (London Court of International Arbitration) that said Canada had erred in calculating the export tax on lumber produced by companies in four provinces in the first half of 2007.

Canada announced last week it had decided to pay the United States directly in a lump sum rather than levy a 10 percent surcharge on lumber exported by companies in the provinces of Ontario, Quebec, Saskatchewan and Manitoba.

The arbitration panel had suggested the surcharge and said Canada should keep it in place until it had collected a total of C$68.26 million, although the 2006 treaty gives Ottawa some flexibility in how to pay for breaching the trade deal.

Canada said it had asked the LCIA to rule on whether its offer was adequate, and would pay more if ordered to do so. The panel is supposed to make its decision within two months, according to the trade treaty.

Day said it was not uncommon for countries to disagree over complex trade issues.

“The purpose of a dispute settlement mechanism is to offer an independent decision when two sides disagree. We will wait, and accept, the Tribunal’s decision,” he said.

The LCIA’s February decision gave Washington the option of imposing its own 10 percent tax if Ottawa failed to act on the surcharge, and a U.S. trade official said last week that was an option that Washington was considering.

Canada said it did not want to impose a levy at a time when lumber producers were already struggling with a weak economy, but a U.S. lumber trade group has complained that the lump-sum payment plan is a form of subsidy.

The seven-year trade deal that began in 2006 was intended to resolve a long-standing fight over U.S. allegations that Canada’s subsidizes its lumber producers, which supply about 30 percent of the softwood lumber used in the United States.

($1=$1.24 Canadian)

Reporting Louise Egan, Writing Allan Dowd, editing by Peter Galloway

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