U.S. Says WTO Ruling Misfires

U.S. Trade Representative Robert Lighthizer says a World Trade Organization (WTO) panel report applies an “erroneous Appellate Body interpretation” and would shield Canada’s massive lumber subsidies from U.S. action imposing countervailing duties to support the U.S. softwood lumber industry and its workers.  

“This flawed report confirms what the United States has been saying for years: The WTO dispute settlement system is being used to shield non-market practices and harm U.S. interests,” Lighthizer says. “The panel’s findings would prevent the United States from taking legitimate action in response to Canada’s pervasive subsidies for its softwood lumber industry.” 

The U.S. is weighing its options in response to the WTO ruling.

The U.S. has expressed concerns about unfairly dumped and subsidized imports of softwood lumber products from Canada for nearly 40 years, and there is a long history of litigation over the issue at the WTO and in domestic courts. In 2017, the U.S. Dept. of Commerce and the U.S. International Trade Commission (USITC) found, for the third time in three decades, that the Canadian federal and provincial governments are subsidizing Canadian softwood lumber producers mostly through inaccurately determined and depressed stumpage costs, allowing Canadian producers to sell subsidized softwood lumber in the U.S. market and causing material injury to U.S. softwood lumber producers.  

However, a WTO panel said the U.S. Dept. of Commerce had repeatedly acted inconsistently with the Agreement on Subsidies and Countervailing Measures (SCM) and recommended that the U.S. come into conformity with its obligations under SCM.

WTO concluded that the U.S. DOC was flawed multiple times by rejecting proposed private stumpage and log prices in Ontario as a valid stumpage benchmark; by rejecting proposed BCTS auction prices in British Columbia as a valid stumpage benchmark; by rejecting proposed auction stumpage prices in Québec as a valid stumpage benchmark; by rejecting proposed TDA log prices in Alberta as a valid stumpage benchmark; by erroneously finding that the Nova Scotia benchmark price reasonably reflected the prevailing market conditions in Alberta, Ontario and Québec; by not having proper basis to conclude that stand-as-a-whole pricing was not a prevailing market condition in British Columbia; and numerous other calculations by U.S. DOC that WTO said were inconsistent.

British Columbia Lumber Trade Council (BCLTC) applauded the WTO ruling as vindication of Canada in its challenge to the U.S. DOC’s 2017 subsidy determination.

“For more than three years our industry has paid billions of dollars in countervailing duties that today’s decision confirmed should never have been paid in the first place,” says Susan Yurkovich, President and CEO of BCLTC.  

She says the WTO ruling is a scathing indictment of the U.S. Dept. of Commerce’s subsidy findings and the biased process it followed in reaching them.

The U.S. Lumber Coalition stated the WTO panel report represents the latest example of judicial overreach within the WTO seeking to undermine the U.S. trade laws, which makes it harder for U.S. producers to address unfair trade. “Canada’s unfair trade practices in softwood lumber are well documented, and the harm these practices cause to the U.S. forestry industry and workers is undisputed,” says U.S. Lumber Coalition Executive Director Zoltan van Heyningen. “The WTO panel with this report, like other WTO Appellate Body and panel reports, has added to U.S. obligations and diminished U.S. rights, addressing issues it has no authority to address, taking actions it has no authority to take, and interpreting WTO agreements in ways not envisioned by the WTO members who entered into those agreements.”

“While this decision is not binding upon the United States, and thus has no immediate effect on the ongoing Commerce Department proceedings, these deeply flawed WTO panel reports undermine the credibility of the entire WTO system and are harmful to U.S. workers and their communities who depend on the full and effective enforcement of the U.S. trade laws,” adds U.S. Lumber Coalition Co-Chair Jason Brochu. “The U.S. government must reject this blatant attempt by a WTO panel to diminish U.S. rights and the panel’s attempt to deviate and expand from original WTO obligations.”

This past May, a NAFTA panel unanimously affirmed a U.S. International Trade Commission (ITC) finding of harm to U.S. lumber producers caused by unfairly traded Canadian softwood imports.

In November 2016, the Committee Overseeing Action for Lumber International Trade Investigations or Negotiations (COALITION) petitioned the U.S. Dept. of Commerce and the U.S. International Trade Commission to restore fair trade in softwood lumber between Canada and the U.S.

In November 2017, the U.S. Dept. of Commerce determined that Canada subsidizes softwood lumber products and that exporters from Canada have sold softwood lumber in the U.S. at less than fair value, distorting the U.S. softwood lumber market. U.S. DOC promptly placed subsidy and dumping duty rates of varying percentages on several Canadian lumber producers. In December 2017, the U.S. ITC agreed that the U.S. lumber industry is materially injured by the subsidies.