THE PEOPLES COURT

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THE PEOPLES COURT

• With JUDGE DiSBee
• U.S. v. CANADA
• SOFTWOOD LUMBER

Maryan Farag Nellie Shaheen Vivianie Vanni
Carolyn Whisenhunt
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What is Softwood Lumber?

• Douglas Fir, Western White Pine, Yellow Cedar,
  Red Cedar, Eastern White Pine
• Used in construction plywood, high-grade
  lumber, windows, door frames, paneling, shelving
• Used in furniture exterior furniture and
  furniture where appearance grade knots are
  desired

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Relevant Terms

• Subsidy- Under Article 1.1 of the SCM, a
  financial contribution by a government within the
  territory of a member where
• i. direct or potential direct transfers of
  funds or liabilities occur
• iii. a government provides goods or services
  other than general infrastructure, or
  purchases goods

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Relevant Terms

• Countervailing Measures/Duties
• Duties charged after a finding that a product is
  subsidized.
• Used to offset injury caused by subsidized
  imports.
• Stumpage standing timber as viewed by a
  commercial cutter
• Canadian Provincial Stumpage Program
• The right to cut standing timber on public
  lands. The management of forestry resources
  through system of interlocking rights and
  obligations between the Crown and timber
  harvesters.

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Land Allocation by Province
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HISTORY

• 1820s Dispute between New Brunswick and Maine.
• 1853 Lumber disputes figured prominently in a
  reciprocity treaty with Canada.
• October 1982 U.S. producers filed CVD petition
  against Canada alleging subsidized lumber
  products. Case terminated.
• May 1986 Second CVD petition filed. Before
  final determination issued by DOC, MOU entered
  into between Canada and U.S.

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HISTORY

• October 1991 DOC self initiated CVD
  investigation . USTR self initiated a 301
  investigation.
• 1991 and 1992 Canada requested a panel under
  GATT and under the U.S.- Canada Free Trade
  Agreement.
• May 1996 U.S. Canada Softwood Lumber Agreement
  reached.
• April 2001 CVD AD investigations initiated

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HISTORY

• August 2001 DOC found subsidization and
  dumping. ITC found that imports posed a threat
  of injury to U.S. industry.
• December 2001 DSB established panel
• April 2002 Canada requested panel reviews under
  NAFTA.
• September 2002 WTO panel filed final report
  regarding Preliminary Determination of Subsidies.
  

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HISTORY

• Summer 2003
• NAFTA panel determined that US erred in
  calculating A/D duties
• NAFTA panel determined that US erred in
  calculating CVD duties
• NAFTA panel ruled against US on threat of injury
• August 2003
• WTO panel issued final decision

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Dispute Claims

• Claim One Inconsistent Finding of the Existence
  of a Financial Contribution

• Canada -
• Stumpage is a right to harvest timber not the
  provision of a good. No good. No subsidy.

• United States-
• Canadian stumpage constitutes a good,
  therefore a subsidy exists.

• WTO Panel-
• Right to harvest standing timber Right over
  standing timber.
• Definition of a good includes standing timber.
  
• Financial Contribution Goods Provided
• WTO rules in favor of USDOC determination that
  Canadian lumber subsidies exist in the form of a
  good.

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Dispute Claims

• Claim Two Inconsistent Determination of Benefit
  Under Article 14 of SCM

• Canada-
• US used domestic market prices to determine the
  existence of a benefit for Canadian-lumber
  purchasers.

• United States-
• Lack of private-lumber market in Canada
  justified US use of cross-border price
  analysis. Such use did not conflict with SCM
  stipulations.

• WTO Panel-
• Textual interpretation requires in-country
  market comparison.
• Private Canadian-Stumpage Market exists/
• In-Country Market Price Available
• WTO rules in favor of Canada-USDOC acted
  inconsistently with the SCM Agreement, Article
  14.

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Dispute Claims

• Claim Three USDOC impermissibly assumed a
  pass-through of alleged subsidy

• Canada-
• USDOC failed to prove that alleged upstream
  subsidies benefited downstream producers.

• United States-
• A pass-through analysis is not required because
  both the sellers and purchasers of the lumber
  inputs were themselves producers of softwood
  lumber.

• WTO Panel-
• No demonstration of pass-through, therefore no
  benefit found.
• WTO rules in favor of Canada Pass-Through
  Analysis required. USDOC acted inconsistently
  with the SCM Agreement, Article 14.

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Dispute Claims

• Claim Four Canadian Stumpage Programmes are not
  specific to certain enterprises.

• Canada-
• Subsidy not specific because more than one
  industry is engaged in manufacturing multiple
  products other than softwood lumber.

• United States-
• Specificity occurs because the stumpage program
  is used by a limited number of industries while
  the majority of companies within Canada do not
  receive stumpage.

• WTO Panel-
• All enterprises which manufacture products
  within the wood-product industry, regardless
  of the other products they deliver, are
  considered in the same group.
• WTO rules in favor of US US did not act
  inconsistently with Article 2.1 of SCM.

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Economic and Political Implications

• Softwood makes up more than half of the Canadian
  provinces exports
• Economic conditions make Canadian lumber more
  attractive
• In-country divisions in Canada and the US
• How should collected tariffs be disbursed?

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Conclusions

• Recent developments
• The recurring dispute is costly to US and Canada
• Damages US-Canadian relations
• DSB Reform Inadequacy of strict interpretation

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Works Cited

• American Consumers for Affordable Homes. Bush
  Administration Trade Policy Against Canada
  Significantly Harms Manufactured Housing Buyers.
  www.acah.org/Bush091901.htm
• National Forestry Database and Statistics Canada
• Palecek, Mike. Softwood Lumber dispute between
  Canada and the USA Protectionist is not the
  answer. www.marxist.com
• Reuters 05 November, 2003 US Lumber Trade
  Criticized As Too Restrictive
• World Trade Organization. United States- Final
  Countervailing Duty Determination with Respect to
  Certain Softwood Lumber from Canada Report of
  the Panel. 29 August, 2003. www.wto.org