WTO Rules Against Canada over Softwood Lumber

[Toro]

For those who think that the WTO can replace NAFTA, the WTO just ruled against Canada in the softwood case. Thus, if we scrap NAFTA, Canada would have zero recourse in this dispute. Under NAFTA, Canada has leverage.

http://www.mytelus.com/news/article.do?pag...ticleID=2017583

Softwood fight still on, despite WTO ruling against Canada: minister

OTTAWA (CP) - Trade Minister Jim Peterson says he's "disappointed" with a world trade panel ruling that favours the United States in the longrunning softwood lumber dispute.

But the minister says it won't change Ottawa's plans to keep fighting in the courts.

Peterson said Ottawa is also still considering retaliation against Washington with possible trade sanctions against U.S. exports to Canada.

In a setback to the Canadian case, the World Trade Organization has ruled that the U.S. complied with international laws in imposing billions of dollars in duties on Canadian softwood.

That interim decision, which Canada may appeal, directly contradicts a ruling earlier this month under the North American Free Trade Agreement that favoured Canada.

That panel found the U.S. duties, which now total nearly $5 billion, illegal under U.S. law.

Experts say the contradictory decisions make it likely the only way to solve the softwood dispute is through negotiations.

[Guest eureka]

We will have to await the appeal process. Before NAFTA, the WTO rules did apply and there had never been fault found or complaint filed. It would appear that this interim ruling may be flawed. I fail to see how the Byrd amendment can be possibly upheld since it violated lae, both national and international - even the US Constitution.

If the ruling is upheld, then Canada will of necessity void the FTA AGreements since NAFTA overrides the WTO. Under NAFTA, the ruling does violate US Law which is what decides.

The plot is thickening.

[Toro]

Actually, eureka, though I agree with your sentiment that the Byrd law is a ridiculous, idiotic, uneconomic and egregious law, there were many disputes under GATT, which was the forerunner of the WTO. For many years, Canada deliberately flouted GATT rulings over the beer industry for example.

[mcqueen625]

THe reality is that Free Trade period is simply a multinational corporate agenda designed to allow these corporate bums to shift products across international border withour paying tariffs of any kind. It is all about maximizing profits, and has nthing whatsoever to do with free trade, and anyone who believes otherwise is very naive.

Immediately following the signing of the first deal, the FTAgeement, manufacturing stated to shut down operations in Canada, and with the advent of the NAFTA, it just excellerated the process. In fact, factories who had moved their operations stateside, now were given the opportunity to also close U.S. manufacturing plants, and that is when the U. S. realized that these deals are of benefit to only multinational corporations who have no respect for borders or the people of North America. THis is all about increasing profits, and to hell with workers and theri families in either Canada or the United States.

What needs to happen is for these trade deals to be totally scrapped and for these multinational corporations to be told, either shift your manufacturing base back to North America, or face tariffs that will syphon off any profits being made by out-sourcing to third world countries. Loss of markets is the only thing these corporate bums seem to understand, and they need to have it stuck to them so they will never again forget that they either play ball Noth American style or take your ball and go home. As long as they can contiue to have their manufacturing performed for sweat-shop level wages they will continue to do just that.

[Toro]

THe reality is that Free Trade period is simply a multinational corporate agenda designed to allow these corporate bums to shift products across international border withour paying tariffs of any kind. It is all about maximizing profits, and has nthing whatsoever to do with free trade, and anyone who believes otherwise is very naive.

Or took an economics class...

[Riverwind]

We will have to await the appeal process. Before NAFTA, the WTO rules did apply and there had never been fault found or complaint filed. It would appear that this interim ruling may be flawed. I fail to see how the Byrd amendment can be possibly upheld since it violated lae, both national and international - even the US Constitution.

You have to understand the game the Americans are playing. They will go to the tribunal and ask an obvious question like: "Is it _theoretically_ possible that Canada's stumpage system could represent an unfair subsidy?" or "Are we allowed under international law to apply anti-dumping duties?". The tribunals will always side with the americans on these kinds of questions and they claim itis a victory.

However, when Canada goes to the tribunals and asks questions like: "Is Canadian lumber _actually_ subsidised?" or "Did the US use a fair methodology to calculate the tariffs?" then Canada always wins.

We cannot draw an conclusion from this later ruling until we know the entire ruling.

[August1991]

THe reality is that Free Trade period is simply a multinational corporate agenda designed to allow these corporate bums to shift products across international border withour paying tariffs of any kind. It is all about maximizing profits, and has nthing whatsoever to do with free trade, and anyone who believes otherwise is very naive.

Immediately following the signing of the first deal, the FTAgeement, manufacturing stated to shut down operations in Canada, and with the advent of the NAFTA, it just excellerated the process. In fact, factories who had moved their operations stateside, now were given the opportunity to also close U.S. manufacturing plants, and that is when the U. S. realized that these deals are of benefit to only multinational corporations who have no respect for borders or the people of North America. THis is all about increasing profits, and to hell with workers and theri families in either Canada or the United States.

What needs to happen is for these trade deals to be totally scrapped and for these multinational corporations to be told, either shift your manufacturing base back to North America, or face tariffs that will syphon off any profits being made by out-sourcing to third world countries. Loss of markets is the only thing these corporate bums seem to understand, and they need to have it stuck to them so they will never again forget that they either play ball Noth American style or take your ball and go home.  As long as they can contiue to have their manufacturing performed for sweat-shop level wages they will continue to do just that.

<{POST_SNAPBACK}>

McQueen, it is truly impressive how much nonsense you have compacted into three short paragraphs. Your arguments are the equivalent to economic theory what intelligent design is to evolution. Are you related to Pat Robertson?

[Guest eureka]

Most of your post is accurate, McQueen. Don't be frazzled by August's tortured "reasoning" and funny analogies.

Sparhawk, what will be asked at Tribunals is does this violate American Law. The answer is yes as the Tribunals have found in the past.

What, it seems, is difficult for people to grasp is that it is American Trade Law that is the determinant and another reason to void NAFTA. This time, though, it works to our advantage.

However, I think the decision of the WTO is absurd and would wonder why, as I have earlier posted, there was never a complaint or ruling against Canada's lumber industry before NAFTA.

[August1991]

However, I think the decision of the WTO is absurd and would wonder why, as I have earlier posted, there was never a complaint or ruling against Canada's lumber industry before NAFTA.

Once eureka, if you agree with the decision of a court/tribunal/government, then court/tribunal/government is impartial and just. If you don't agree, then it is absurd or illegitimate.

In an ideal world, the WTO would not be ruling on anything. What is there to rule on?

If Canadian governments impose low cutting-fees on Canadian softwood lumber producers and indirectly subsidize the industry, then it is Canadian taxpayers that should be upset, not the WTO and not the US government. This is an advantage to the US economy and Americans should be the last to complain.

If I offer you a brand new Lexus at $5000 because I subsidize the cost, how can that possibly be bad for you? And how can it possibly be good for me? No person would ever offer you such a deal. But governments frequently do. According to the WTO, Canadian governments are offering just such a deal to American consumers.

So then, are the US duties on Canadian softwood lumber justified? Most certainly not. If your neighbour is giving out ice cream to kids on the street, why in heavens name would you forbid your own children from getting some.

Another irony in this dispute is that Canadians seem to be upset that the WTO has "ruled against Canada" when in fact we should be upset that, according to the WTO, our governments are handing over billions of our tax dollars to Canadian lumber producers.

[Guest eureka]

The point, August, is that the NAFTA Tribunals have not only ruled that the taxes are a breach of American Trade Laws, they have ruled that there is no illegal subsidization. Several hearings over several years have reached the same conclusion. Why has the WTO suddenly come to a different conclusion? And how credible can it be?

When the nation that is most heavily into subsidiztion of its exports decides to make a phony claim that we are subsidizing something that we are not, what would you suggest. Negotiate how much they can stal from us.

Even were we subsidizing lumber, according to NAFTA we are not. And that is all that counts. NAFTA is dead and needs to be decently buried unless the US starts to live up to the contract. I would like it to not be resuscitated since living it only harms Canada.

[I Miss Trudeau]

Another irony in this dispute is that Canadians seem to be upset that the WTO has "ruled against Canada" when in fact we should be upset that, according to the WTO, our governments are handing over billions of our tax dollars to Canadian lumber producers.

<{POST_SNAPBACK}>

Handing over tax dollars? Thats a catchy slogan these days, but doesn't describe the situation at all. Not a single penny of tax revenue is handed over due to low stumpage fees.

[Toro]

The point, August, is that the NAFTA Tribunals have not only ruled that the taxes are a breach of American Trade Laws, they have ruled that there is no illegal subsidization. Several hearings over several years have reached the same conclusion. Why has the WTO suddenly come to a different conclusion? And how credible can it be?

That's the reason why we have NAFTA. The rules are different in the WTO than in NAFTA. The fact that you (or I) may have an opinion on the credibility of the WTO is irrelevevant. What matters is that the WTO has ruled against Canada. If there was no NAFTA, this issue is over, full-stop. With NAFTA, Canada can continue to argue that the US is violating an international treaty - which it is. This issue shows that we cannot replace the NAFTA with the WTO.

Also, the US lumber industry wants to kill NAFTA too because it knows it is in the wrong. It also knows that if it succeeds, it wins and Canada loses. So killing NAFTA will only make it worse for the softwood lumber industry in Canada.

[August1991]

Handing over tax dollars? Thats a catchy slogan these days, but doesn't describe the situation at all. Not a single penny of tax revenue is handed over due to low stumpage fees.

If the government buys some land, builds a house on it and then gives me the land and house for free, what do you call it? Foregone revenue, or handing over tax dollars? What's the diff?

I am not saying that this is what Canadian governments are doing. But it is what the WTO and the US government say Canadians governments are doing. Am I upset? Well, I know that Canadian governments hand over tax dollars in weird ways so I wouldn't be surprised if the WTO is right. But I don't really know. (BTW, since we're talking trees here, environmentalists might take a different view of the problem.)

Now then, whether foregone revenue or handing over tax dollars, is the US counterveiling duty justified? Absolutely not. Whether Canadian governments are foolish or not, there is no justification for the foolishness of American governments.

The point, August, is that the NAFTA Tribunals have not only ruled that the taxes are a breach of American Trade Laws, they have ruled that there is no illegal subsidization. Several hearings over several years have reached the same conclusion. Why has the WTO suddenly come to a different conclusion? And how credible can it be?

The WTO and NAFTA are not referees in a boxing match. eureka, you can't see the forest for the trees.

Ah, the irony.

[I Miss Trudeau]

If the government buys some land, builds a house on it and then gives me the land and house for free, what do you call it?  Foregone revenue, or handing over tax dollars?  What's the diff?

<{POST_SNAPBACK}>

So now you're suggesting that the government bought land and built trees? This analogy is so far gone that I'm surprised you offered it up, August.

Look. Even if Canada increased their stumpage fee to be triple what any other nation charged, there would still be foregone revenue (and in your opinion, tax dollars handed out) because it could always go a little higher. The only way out of your little conundrum is to prohibit forestry on crown land all together.

[August1991]

Even if Canada increased their stumpage fee to be triple what any other nation charged, there would still be foregone revenue (and in your opinion, tax dollars handed out) because it could always go a little higher. The only way out of your little conundrum is to prohibit forestry on crown land all together.

Presumably, if the stumpage fees were raised high enough, no one would cut any trees down because the fees would make it unprofitable. In that case, the stumpage fee revenues would be zero.

I don't know if tripling the stumpage fees would be too high. According to a US environmental group, the fees are currently too low:

Although timber companies pay a stumpage fee for every tree cut to the provincial government, not only are these fees below market prices, but they are often reduced or returned to the timber companies.

EMS

Without knowing this industry well, I would think auctioning the rights to cut timber would be a good way to collect the royalties of this renewable resource. I notice that the BC Lumber Trade Council "seems" to agree with me:

The BC government introduced a comprehensive forestry revitalization plan to reverse the decline of the province’s most important industry. The changes include:

- Reallocation of 20% of logging rights from major licensees, which will be put on the open market;

- As a result, up to 45% of the province’s total harvest will eventually be available through the open market;

- One-time transition funding of $275 million;

- Elimination of appurtenancy (the tie of timber from companies to certain mills);

- 8% of the allowable annual cut will go to First Nations;

- Adjusting cut control regulations so companies can decide when to log without being penalized for not cutting wood; and

- Moving to an auction-based system for selling Crown timber to create a market-based stumpage system that reflects global market and local harvesting costs.

WTF? A $275 million subsidy, the "reallocation" of logging rights, "moving" to an auction-based system and "eventually" 45% of the harvest will be open.

This seems to me like Irving and the New Brunswick government - a cozy deal at the expense of taxpayers.

But let me repeat. If BC taxpayers want to forego potential revenues and in effect subsidize US new home buyers, then I say that should be their right. The US government, on the other hand, is absolutely foolish to prevent American citizens from receiving the BC taxpayers' largesse.

----

I'm sorry if my reasoning seems difficult to follow.

The analogy of an Olympic hockey game with a biased referee is dramatic but fundamentally false.

So, let me return to the ice cream. If I drive to Westmount and hand out free ice cream to kids, am I foolish? Living in Westmount, are you foolish to prevent your kids from getting any? This analogy is weak because it is so absurd. But it is fundamentally correct.

I think the absurdity arises because we confuse government (group) behaviour and the way individuals behave.

[I Miss Trudeau]

Although timber companies pay a stumpage fee for every tree cut to the provincial government, not only are these fees below market prices, but they are often reduced or returned to the timber companies.

How could this possibly be a subsidy, though? Would you consider any jurisdiction with a lower minimum wage than anywhere else to be subsidizing products? Lower road taxes? Less corporate tax? Perhaps because Canadian provinces allow trucks to carry far, far more weight than most states, that amounts to a subsidy as well?

[Guest eureka]

In 2002, the WTO ruled in faviur of Canada. What has changed? Canada has won at every turn except for this interim ruling of the WTO.

Could it be that we are experiencing American pressure on the WTO.

I think we are entering murky waters and should start using our paddle to crack a few skulls.

[August1991]

How could this possibly be a subsidy, though? Would you consider any jurisdiction with a lower minimum wage than anywhere else to be subsidizing products?

A minimum wage means that it is illegal to sell a service below an arbitrary price - typically above a market clearing wage. In the case of softwood lumber, the accusation is that a good is being sold for below the market clearing price.

In the case of BC lumber, it would be more correct to say: "Would you consider any jurisdiction with slavery to be subsidizing products?"

But IMT, the issue of a subsidy should only be of concern to BC taxpayers - not the US government or the WTO. (BTW, does the WTO care about Albertan taxpayers and subsidies to oil production? Do Albertans care?)

In 2002, the WTO ruled in faviur of Canada. What has changed? Canada has won at every turn except for this interim ruling of the WTO.

eureka, you persist in seeing this as a hockey game with referees, some of whom are objective. The hockey game analogy is completely wrong.

[Guest eureka]

August, you are the only one talking hockey. I see it for what it is; a breach of contract and a trade issue.

Explain to me how, as I said, Canada has won every hearing, including that at the WTO, except this new interim decision and yet is in the wrong. The hearings are not hockey games. They are legal tests.

[I Miss Trudeau]

A minimum wage means that it is illegal to sell a service below an arbitrary price - typically above a market clearing wage.  In the case of softwood lumber, the accusation is that a good is being sold for below the market clearing price.

The point is that a lower minimum wage gives a competitive edge to companies in that jurisdiction, just as a low stumpage fee does. By your reasoning, a low minimum wage is also a subsidy.. just think of all the tax revenue the government is forgoing by setting it a littler lower! rolleyes.gif

In the case of BC lumber, it would be more correct to say: "Would you consider any jurisdiction with slavery to be subsidizing products?"

Even if the stumpage fees were effectively zero, it wouldn't be a subsidy. How is $0.00 compared to $0.15 any different, fundamentally, than $1.00 compared to $1.15?

But IMT, the issue of a subsidy should only be of concern to BC taxpayers - not the US government or the WTO.

If it was a subsidy, sure. But it isn't. Furthermore, the low stumpage fee helps a rather large industry survive and thrive. If the fees were increased by much, it would likely result in BC taxpayers losing out on more revenue than the low fee.

(BTW, does the WTO care about Albertan taxpayers and subsidies to oil production?  Do Albertans care?)

A low royalty rate on pumped oil until the development is paid off, and then a steadily increasing rate still does not amount to a subsidy. At any rate, count me as one Albertan rather upset about how Klein and his ilk are practically giving away oil to corporations.

[BHS]

Anyone in favour of putting an export tax on oil to recuperate the $5 billion owed?

[August1991]

Anyone in favour of putting an export tax on oil to recuperate the $5 billion owed?

BHS, I would argue that a big chunk of the $5 billion should go to recent new home buyers in the US. They in effect paid the duty.

As to oil, since Canada does not influence the world price of crude, an export tax would just be a tax on our own industry. The idea is dumb, and Albertans wouldn't like it.

The point is that a lower minimum wage gives a competitive edge to companies in that jurisdiction, just as a low stumpage fee does. By your reasoning, a low minimum wage is also a subsidy.. just think of all the tax revenue the government is forgoing by setting it a littler lower! rolleyes.gif

As long as the legal minimum wage is above a market clearing wage in the jurisdiction, then I can't see how it is a subsidy (although it is costly to the society). The low stumpage fee is the equivalent of forcing people to work below the market wage. (It would be a subsidy to employers coming at the expense of workers).

Even if the stumpage fees were effectively zero, it wouldn't be a subsidy. How is $0.00 compared to $0.15 any different, fundamentally, than $1.00 compared to $1.15?

If I understand you properly, it all depends what lumber firms would be willing to pay in an auction to obtain the right to cut wood. If they were willing to pay, let's say, $1.40, then your two examples of increases above would at least get the government $0.15 closer to what it could be receiving, and the implicit subsidy is reduced.

If the government can sell something for $3.00 but sells it for $1.50 instead, I would call it a subsidy.

A minimum wage is when you would like to sell something for $5.00 but it is illegal to sell it for less than $8.00.

The two situations are very, very different.

If it was a subsidy, sure. But it isn't. Furthermore, the low stumpage fee helps a rather large industry survive and thrive.

If the low stumpage fee helps an industry survive and thrive, then by definition it is a form of subsidy.

I can partly understand why a theatre troupe does not have to pay certain taxes (and so receives an indirect subsidy). I see no reason for allowing lumber companies the same treatment.

A low royalty rate on pumped oil until the development is paid off, and then a steadily increasing rate still does not amount to a subsidy.

I'm not certain the government should skew the risk decision of a private business concerning oil development. But even if it does in the case of oil, I see no possible comparison to a resource like lumber.

At any rate, count me as one Albertan rather upset about how Klein and his ilk are practically giving away oil to corporations.

I consider it a solemn duty of a government to collect the maximum royalty possible from the exploitation of a natural resource. So, it appears we agree on this.

Are you so sure the BC government doesn't do as the Alberta government?

IMT, let me make it plain that I'm not debating the existence of a possible subsidy to BC lumber producers because this would justify a US duty. IMV, nothing justifies a US duty on lumber. I'm curious to know whether BC taxpayers in fact subsidize the industry.

[Toro]

Anyone in favour of putting an export tax on oil to recuperate the $5 billion owed?

I'm not.

[Riverwind]

IMT, let me make it plain that I'm not debating the existence of a possible subsidy to BC lumber producers because this would justify a US duty.  IMV, nothing justifies a US duty on lumber.  I'm curious to know whether BC taxpayers in fact subsidize the industry.

The Americans have repeatedly tried to make a case that the stumpage system represent a subsidy, however, they have failed. The main reason is stumpage is only part of the cost paid by logging companies. In the US, the federal gov't builds the roads that the logging companies use to harvest timber. In Canada, the logging companies build the roads - that is a huge expense. In addition, environmental regulations make it more expensive to harvest timber in Canada which is also a cost that must be factored into the equation.

The last flaw in you argument is the idea money is the only was the gov't can receive compensation for a public resource. Logging rights in BC frequently come with strings attached regarding where the lumber can be processed - this is based on the logic that the communities closest to the resource should benefit as much as possible. You can argue that the gov't should not engage in such social engineering activities, however, in theses cases, the lower stumpage benefits the people of BC directly and not the logging companies.

[Riverwind]

Anyone in favour of putting an export tax on oil to recuperate the $5 billion owed?

BHS, I would argue that a big chunk of the $5 billion should go to recent new home buyers in the US. They in effect paid the duty.

August, I have repeatedly argued that this statement is mostly false since the duties did not increase the lumber prices enough to replace the cost of the duties. The large portion of the duties was paid by Canadian industry for exactly the same reasons that you use to argue against an export tax on oil. Furthermore, 70% of the increase costs paid by the US consumer went to the US industry: it is ridiculously unfair to suggest that Canadian companies should be the only companies required to compensate the US consumer for higher prices cause by the trade action.