-- Canada's government on Thursday announced a $1.3 billion aid package for lumber producers and mill towns hurt by U.S. tariffs and the rising Canadian dollar.
The aid -- promptly denounced by U.S. trade officials -- signals that a long-running trade dispute with the United States is far from over, despite the U.S. Commerce Department's announcement this week that it intends to comply with a ruling by a panel created under the North American Free Trade Agreement ordering the United States to slash its 21 percent duties on Canadian lumber.
Commerce Department officials on Tuesday said that they disagree with the panel's rationale and that the tariffs will remain until the NAFTA legal process runs its course. That could take months if the United States files another appeal.
Canada contends that NAFTA rulings require the United States to revoke all duties and to refund the $4 billion collected since 2002. U.S. officials assert that Washington isn't required to refund past duties. Canada is pursuing that matter in a U.S. court, but the case could drag on for years.
The $1.28 billion package announced yesterday provides money to insure $683 million in loans by financial institutions and $85 million in "repayable contributions" for "immediate short-term relief" to companies that have duties on deposit in the United States.
The plan also provides $496 million to support economic diversification in forestry-dependent communities, foster innovative forest-industry technologies and promote exports to developing markets such as China.
In Washington, U.S. Trade Representative Rob Portman said the new programs "illustrate what the U.S. has been saying all along: the Canadian industry is the beneficiary of subsidies that create an unlevel playing field to the detriment of the U.S. industry." Secretary of Commerce Carlos M. Gutierrez said the United States will continue to insist that Canadian subsidies "be eliminated by all means at our disposal."
The two countries have squabbled over lumber on and off since the early 1980s. Canada supplies roughly a third of the construction lumber used in the United States, and U.S. logging interests argue that Canadian companies receive subsidies in the form of cheap access to timber on public lands. Washington points to a recent World Trade Organization decision that the U.S. duties comply with WTO rules. The Canadians say the NAFTA rulings prove Ottawa doesn't subsidize lumber.
Lumber is a big employer in many regions of Canada, which sends four-fifths of its total exports into the United States.