November 17,2004

Baucus Introduces Bill to Distribute Canadian Softwood Duties to U.S. Industry

Legislation Would Liquidate Duties Collected by Customs

(WASHINGTON, D.C.) Today, U.S. Senator Max Baucus (D-Mont), Ranking Member of theSenate Finance Committee, joined Senator Larry Craig (R-Idaho), to introduce legislation toliquidate funds collected from duties on imports of Canadian softwood and to distribute themoney to U.S. timber industries, as allowed under current U.S. law.

In May 2002, the U.S. Commerce Department and the International Trade Commissiondetermined that Canadian timber policies created unfair subsidies allowing artificially cheapCanadian lumber to flood the U.S. market creating a disadvantage for U.S. lumber producers. Tolevel the playing field, the Commerce Department imposed antidumping and countervailingtariffs of Canadian imports by more than 29%.

“Free trade must be fa ir trade,” Baucus said. “Over two years have passed sincenegotiations began on lumber trade between our two countries, and still no end is in sight. Thisdispute needs to be resolved soon for our U.S. producers. Canadian timber policies areinconsistent with a free and integrated North American market. The timber subsidies provideCanadian timber producers with an unfair advantage, and until this basic issue is resolved, thelitigation and tariffs will continue.”

Under current U.S. law, antidumping and countervailing duties entered into Customs canbe distributed to affected industries that filed for relief. However, the duties collected onCanadian softwood lumber are not accessible for U.S. lumber producers because of on goingdiscussions of the legality of the U.S. duties before North American Free Trade Agreement(NAFTA) and World Trade Organization (WTO) panels. The bill introduced today would directthe Commerce Department to instruct the Bureau of Customs and Border Protection to distributethe funds collected from the antidumping and countervailing duties imposed in May 2002.

“In my judgment, the most effective, durable, and fair resolution to this decades-oldproblem will be found only through a negotiated settlement. This means both parties sittingdown at the table and finding a mutually acceptable solution that provides for timber policies thatare consistent and compatible,” said Baucus. “But until then, U.S. timber producers shouldassert all legal rights available to them. This legislation sends a strong message that Congresswill do what is necessary to defend the rights of the U.S. timber industry.”

Senator Baucus’ floor statement issued today on the Canadian softwood lumber negotiationsfollows:

“Mr. President, I rise today in disappointment, but also with resolve.

After more than two years of negotiations between the U.S. and Canada, there is still noagreement on how to manage softwood lumber trade between our two countries. This isdisappointing, particularly given the importance of the issue. Perhaps what is mostdisappointing, though, is that the negotiations appear to have fallen off, despite the fact thatparties last year seemed close to an agreement.

There might be some who think the recent NAFTA decisions signal an imminent conclusion ofthe litigation, and that deposits collected by U.S. Customs will be returned soon. As one whohas seen this dispute wax and wane for nearly thirty years, this seems to me a naïve expectation.The fact is that the recent NAFTA decisions had more to do with a bitter disagreement betweenthe NAFTA panelists and the U.S. International Trade Commission about investigativemethodologies than whether or not the Canadian timber policies are consistent with NAFTAobligations. The bottom line – and this is the issue at the root of this dispute – is that theCanadian policies are deeply inconsistent with the notion of a free and integrated NorthAmerican market. The timber subsidies provide Canadian mills with a significant, artificialadvantage. Until this basic issue is resolved, this dispute – including this litigation and the dutiesimposed on importers – will continue.

In my judgment, the most effective, durable, and fair resolution to this decades-old problem willbe found only through a negotiated settlement. This means both parties sitting down at the tableand finding a mutually acceptable solution that provides for timber policies that are consistentand compatible. However, pulling away from the negotiating table and relying on litigation isn’tgoing to get us there.

Under current U.S. law, the deposits sitting in escrow will be eligible for liquidation. As I havesaid, I would prefer a negotiated settlement – one that resolves all matters of disagreement,including the dispositio n of these deposits. But some involved in the negotiation appear to havedecided upon litigation as their preferred method of resolution. If it is necessary for me and mycolleagues to assert the legal rights available to the U.S. industry as a way of reminding theparties of the stakes that are still very much on the table, then that is what we will do.

Today, my good friend, Larry Craig and I have introduced a bill that would order the CommerceDepartment to begin the process of liquidating the approximately $3 billion sitting in escrow, asa result of the antidumping and countervailing duties imposed upon imports of Canadiansoftwood lumber since March 2002. Further, these deposits are to be distributed to the U.S.lumber industry, which have been seriously injured by Canada’s timber policies and whichpetitioned for these duties in the first place. If enacted, I expect the U.S. government to defend itto the hilt.

I hope that our action today will spark a return – by both sides – to the negotiating table.However, if it does not, and if a settlement is not reached, I will not hesitate to push forcefullyfor enactment of this legislation.”