Toronto Star: Trade war over softwood looms
ALEXANDER PANETTA CANADIAN PRESS http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1124792779650&call_pageid=968332188492&col=968793972154&t=TS_Home REGINA - Canada is threatening a trade war with the United States over softwood lumber as members of the federal government said they're studying which U.S. goods they could slap with tariffs. Several cabinet members said today that Ottawa is identifying products where Canadian tariffs would cause maximum pressure on the U.S. economy and minimal damage domestically. A government official said products already under consideration include water and California wines, but added that Canada will await a World Trade Organization verdict before proceeding. At a brief media scrum, Prime Minister Paul Martin castigated the United States for its lumber protectionism and its decision to ignore yet another ruling by a NAFTA panel made last week. "The American position is absolutely untenable. It's unacceptable," said Martin said, who didn't mention tariffs. "The fact is that we won those cases and under the terms of NAFTA and under the terms of any kind of an agreement, when a panel comes down and makes a decision, that should be honoured." One federal minister used a Canadian sports analogy to describe the federal government's willingness to retaliate against its largest and most powerful trading partner. "I have a background from my younger days in hockey. When somebody slammed you into the boards with undue force and aggression, you took their number," Industry Minister David Emerson said. "I think we've got to take their number." Federal officials were distributing an editorial from the prestigious Wall Street Journal that accused the U.S. government of ``bone-headed economic policy" and endorsed the Canadian position. Emerson said Trade Minister Jim Peterson and Finance Minister Ralph Goodale have begun the process of identifying suitable U.S. targets for tariffs. Goodale was cautious in his comments and Peterson said he could only proceed after a crucial WTO ruling expected next year. Canada has already sought approval for $4.8 billion in retaliatory measures. Foreign Affairs Minister Pierre Pettigrew appeared to welcome the idea of tariffs and said California wines were being considered as one possible target. "I do believe that we should do it in a way that will not go to the detriment of other Canadian interests," said Pettigrew, a former trade minister who dealt with the softwood dispute. "We have to do it in a way that some U.S. interests will ring their senators and congressmen in Washington." The warnings come one week after the United States announced it would ignore a decision by a NAFTA panel that found Canadian lumber exports posed no threat of injury to U.S. producers. With more that 80 per cent of Canadian exports going to the U.S. and the countries exchanging $1 billion each day, Canada would need to tread carefully to avoid a crippling trade war. But Goodale said the federal government is intent on making its point that U.S. Customs has illegally collected $5 billion in tariffs on Canadian softwood since 2002. "We want to make sure that whatever option we pursue is effective in making our point . . . without at the same time shooting ourselves in the foot," he said. "Canada has wanted to make it very clear that we are not happy with the position of the United States to simply ignore what is a clear NAFTA ruling in Canada's favour." One particularly draconian measure has already been ruled out - imposing quotas on Canadian oil exports to punish alleged U.S. protectionism on lumber. Emerson, who supported that idea when he was a lumber industry executive, now says it would unfairly saddle Alberta with the bulk of the economic fallout. He said Tuesday the government is considering tariffs that won't damage the economy in a single region of the country. "We are stronger as a country when we pull together in a unified way. If we take actions that create regional balkanization, division and friction, we're not becoming stronger as a country," Emerson said. "(We have) to find effective tools that aren't going to create more problems at home than they solve abroad." Canada announced earlier this year that it would impose a 15 per cent surtax on U.S. live swine, cigarettes, oysters and certain specialty fish - measures worth only an estimated $14 million. The move came after the WTO agreed that the so-called Byrd amendment in the United States violated that country's trade obligations. The controversial law allows U.S. producers to get the duties their government imposes on foreign competitors. Also Tuesday, Goodale dismissed reports of bursting government coffers as wildly exaggerated and rejected private-sector forecasts that the surplus for 2004-05 will total more than $8 billion. He said the actual surplus for the last fiscal year will wind up being far closer to his initial projections - $3 billion or "a little bit less" and said this year's projections are "the most accurate prognosticators"' of what lies ahead. #33#
