U.S. probe could lead to tariffs on Canadian lumber

October 05, 1991|By Los Angeles Times

WASHINGTON -- One of the most fractious disputes between the United States and its largest trading partner reignited yesterday as the Bush administration took the first step toward imposing retaliatory duties on Canadian lumber imports.

President Bush approved the initiation of a government investigation into whether Canadian provinces unfairly subsidize their loggers and therefore should be penalized with higher tariffs.

It marked only the second time that the government has "self-initiated" a countervailing duty investigation, rather than responding to industry complaints.

The actions we are announcing today will protect our industry from dislocation in the near term while allowing a fair determination of whether Canadian provinces are providing injurious subsidies," Secretary of Commerce Robert A. Mosbacher Sr. said.

U.S. loggers have claimed for years that Canada unfairly subsidizes its timber industry. The two countries settled their differences temporarily in 1986 when Canada agreed to put a 15 percent tax on U.S.-bound lumber.

However, the Canadians insist that conditions have changed since then. In September, they notified the U.S. government that,

starting Friday, they no longer would be bound

the "memorandum of understanding."

U.S. officials have said that the Canadian decision could cost 15,000 more jobs in the already battered U.S. timber industry. With senators in several logging states up for re-election next year, pressure has mounted for quick retaliation.

Some analysts have speculated that the increasing friction could dampen the ongoing talks to create a free-trade zone that would include the two countries and Mexico.

Both U.S. and Canadian officials insist that the dispute will not sour those negotiations.

Although it is the subject of intense politics on both sides of the border, the U.S. move will not affect the vast majority of the $2.6 billion in annual Canadian softwood timber imports.

That is because the full 15 percent tariff would apply only to imports from six provinces. British Columbia -- the province that is Canada's single biggest exporter of timber to the United States -- has taken steps to fully offset the cost advantage its loggers receive, and Quebec has partly mitigated them.

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