October 20,2005

Baucus Urges Commerce Department to Keep Duties on Subsidized Canadian Lumber

(WASHINGTON, D.C.) Senator Max Baucus (D-MT), ranking member of the Senate Finance Committee, and Senator Larry Craig (R-Idaho) led the effort to send a letter today to Secretary ofCommerce Carlos Gutierrez urging him to implement a recent NAFTA panel decision in amanner that keeps duties on subsidized Canadian lumber. The Commerce Department is due toissue a decision in the case by October 28, 2005. The letter was signed by 21 senators from bothsides of the aisle. Upon sending this letter, Senator Baucus issued the following statement:

“Today, 21 senators urged Secretary Gutierrez to use all permissible means to maintain duties onsubsidized Canadian lumber imports. Time and again, U.S. agencies, upheld by the World TradeOrganization, have found that unfair Canadian subsidies have injured producers in Montana andelsewhere in the United States.

“The recent NAFTA decision in no way requires the Commerce Department to lift the duties.Rather, that decision affords the Commerce Department sufficient flexibility to comply with theruling in a way that retains duties on subsidized Canadian lumber.

“Canada’s determination to continue litigation is not working for anyone. It has hardenedattitudes on both sides of the border and is having a negative effect on U.S.-Canada ties. Bothsides must get back to the table now to negotiate a durable solution. Litigation and heatedrhetoric will not settle this dispute.”

The letter follows:

October 20, 2005

Secretary Carlos M. Gutierrez

Department of CommerceOffice of the Secretary
14th and Constitution Ave., N.W.
Washington, D.C. 20230

Dear Mr. Secretary:

We are writing to express serious concern about recent decisions by North American FreeTrade Agreement (NAFTA) binational panels in the ongoing dispute over Canada’s subsidizedsoftwood lumber imports. Most recently, one such panel remanded to the Department ofCommerce its calculation of the countervailing duty on Canadian lumber imports. In addressingthe panel’s concerns, the Commerce Department must ensure that it calculates the duties in away that sufficiently offsets pervasive Canadian subsidies.

There is no question that Canada subsidizes its lumber industry. The CommerceDepartment has repeatedly found significant countervailable subsidies, and the InternationalTrade Commission (ITC) has repeatedly confirmed that Canadian lumber imports threaten thelumber industry with injury. Such findings have also been upheld by the World TradeOrganization (WTO). Nevertheless, in reviews of Commerce and ITC determinations, NAFTApanels have overstepped their limited standard of review and have declared the methodologiesemployed by U.S. agencies unacceptable.

In the past, the Commerce Department has measured the extent of these subsidies byreference to prices in U.S. markets, particularly given the pervasive price effects of Canadiansubsidy programs on private Canadian timber prices. This methodology remains appropriate andlegally defensible. In fact, the WTO specifically rejected Canada’s complaint that such a crossbordermethodology under such circumstances was inconsistent with U.S. WTO commitments.NAFTA panel decisions cannot and should not force the Department to deny legitimaterelief under U.S. law to the domestic lumber industry and its workers. Adopting a methodologythat does not adequately measure these subsidies is contrary to the Department’s statutoryresponsibilities, as the Department must offset fully any subsidies in place. As such, we urge theDepartment, in responding to this flawed NAFTA decision, to fully consider and utilize any legaland appropriate alternative that would allow for this essential trade law relief to stay in effect.


Sincerely,

Senator Max Baucus
Senator Larry Craig
Senator Ron Wyden
Senator Conrad Burns
Senator Olympia Snowe
Senator Mike Crapo
Senator Saxby Chambliss
Senator Blanche Lincoln
Senator Susan Collins
Senator Mark Pryor
Senator Gordon Smith
Senator Thad Cochran
Senator Mike Enzi
Senator Trent Lott
Senator Lindsay Graham
Senator Norm Coleman
Senator Craig Thoma
sSenator Jeff Sessions
Senator Richard Shelby
Senator Mark Dayton
Senator Mary Landrieu