Angered by new duty rates, Canadian execs cancel softwood lumber meeting

---

Originally posted at: http://news.tradingcharts.com/futures/0/8/62072780.html

VANCOUVER, Dec 15, 2004 (The Canadian Press via COMTEX) -- Angry Canadian forestry executives scrapped a planned meeting with their American counterparts Thursday in Chicago to discuss a resumption of talks on settling the longstanding softwood lumber trade dispute.
The decision Wednesday was not unexpected after the U.S. Commerce issued unexpectedly high revised duties on Canadian lumber shipments into the U.S. market.
The Canadian industry had expected Commerce to halve the 27.2 per cent combined countervailing and anti-dumping duties after completing a review. Instead, it reduced the combined rate to 21.2 per cent.
The revision infuriated the Canadians, especially since Commerce used a new method of calculating the rate of subsidy Canadian softwood allegedly receives.
The decision to at least postpone the meeting was driven largely by the B.C. chief executives in the half dozen-member delegation, Jim Shepherd of Canfor Corp. (TSX:CFP) and Hank Ketchum of West Fraser Timber Co. Ltd. (TSX:WFT).
Neither was available for an interview Wednesday.
"I had my boarding pass in hand and I was advised the B.C. guys decided that they weren＇t going to go, so I didn＇t get on the plane," said Frank Dottori of Montreal-based Tembec Inc., one of three Quebec chief executives in the delegation.
Dottori said he agreed with the decision.
"I think we have to initiate discussions because I think we have to be constructive," he said in an interview. "But I think the other party has to show some willingness to be constructive."
Dottori said a U.S. diplomatic cable leaked last week that suggested maintaining high tariffs would encourage negotiation "show there＇s no constructive approach being taken by the U.S."
"So in that light the question is, do you really want to talk to them?"
Industry officials cast doubt on the meeting Tuesday when they reacted angrily to Commerce＇s rate changes.
They accused the U.S. industry of lobbying Commerce and the White House after the lower provisional rate was set in June to find a way to maintain the higher tariffs as negotiating leverage.
Dottori said the Canadian lumber industry has cemented its united front. Executives plan to sit down next month and discuss their strategy on renewing negotiations with a view to rescheduling talks with the Americans.
"I think from our point of view, we＇ve got to make one more effort but there＇s got to be some good will on the other side," he said.
Far from softening up the Canadian side, Dottori said the rate revisions threw the integrity of the whole process into question.
The industry, which has deposited almost $4 billion in duties with U.S. Customs since May 2002, expects ultimately to defeat the tariffs through a series of legal challenges under North American Free Trade Agreement and World Trade Organization rules.
Canada won a crucial victory last summer when a NAFTA panel ruled Canadian softwood presented no threat of injury to U.S. producers.
The U.S. government is appealing the ruling under NAFTA＇s extraordinary challenge provisions but if it loses the duties would have to be cancelled.
Dominion Bond Rating Service said Wednesday it believes negotiation, not litigation, will produce a resolution next year.
In a release, Dominion said the slightly reduced duties will have little impact on lumber companies so it will not revise their credit ratings.
Even if Canada wins in the trade courts, Dominion said the threat of yet another complaint by the American lumber lobby suggests a negotiated settlement will be needed to ensure peaceful trade and the return of duties paid to date.
"We feel that there will be a resolution that allows Canadian sawmillers and the U.S. industry to operate at reasonable returns in the future," Dominion analyst Tom Fitkowski said in an interview.
"But it will be a negotiated settlement rather than a legal settlement."
Fitkowski said the shape of a final settlement is less important than the fact a deal would return some certainty to the $10-billion annual cross-border lumber business and make it easier to assess companies＇ creditworthiness.
"At least we know what framework the companies are going to operate in over the longer term," he said. "It＇s the uncertainty that causes the problem."
A decision in the extraordinary challenge is not expected until the second quarter of 2005. Fitkowski said he suspects the industry will wait until then before sitting down for serious talks.