A complaint by the American lumber industry that Canada unfairly subsidizes softwood lumber exports to the United States lost in its first round before the Commerce Department yesterday.
If the decision holds up under more than two months of further review and a public hearing next month by Commerce's International Trade Administration, it averts the imposition of tariffs that American homebuilders said could raise the price of an $80,000 house by $5,000.
The lumber-industry complaint is the largest countervailing-duties case ever filed. It involves $1.7 billion a year in Canadian imports of softwood lumber to the United States--about 30 percent of the U.S. lumber market.
Lumbermen on both sides of the border shared the boom times of the late 1970s as well as the housing recession of the past two years that sharply cut demand for lumber.
The American lumber industry's complaint added another irritant to relations between the United States and Canada, which, with about $85 billion in commerce between them each year, are the world's largest trading partners.
"These determinations were made by applying our countervailing-duty law to the facts discovered so far during the investigation. They directly address the issue of subsidies, and no other consideration except the law and the facts were involved in them," said Commerce Secretary Malcolm Baldrige, who made the preliminary finding.
Canadian lumber groups, who said they would be thrown out of business by tariffs on exports to the American market, hailed the decision. "It is a victory for free trade as well as fair trade," said Donald Lanskail, chairman of the Vancouver-based Canadian Softwood Lumber Committee.
But the U.S. Coalition for Fair Canadian Lumber Imports, which brought the unfair-trade complaint, said it is considering an appeal to the U.S. Court of International Trade as well as continuing to fight the case during the Commerce Department review.
"The coalition and its counsel still believe the Canadian system constitutes a subsidy. The coalition is confident that its legal position will be upheld by the trade court, whose decision will be binding on the department for its final determination," the group said.
The Commerce Department's key decision--and the one that upset the American coalition most--was that the method used by Canada's provincial and federal governments for selling timber (stumpage) does not amount to a subsidy. Together, the government groups own 95 percent of Canada's timber land.
"Stumpage programs do not confer an export subsidy," the Commerce Department said in its preliminary ruling.