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Canada to fight ‘unfair’ US softwood lumber taxes, appeal WTO ruling

Canada to fight ‘unfair’ US softwood lumber taxes, appeal WTO ruling

(Adds definition of zeroing, context on Trump and the WTO)

By Steve Scherer

OTTAWA, April 15 (Reuters) – Canada will appeal a World Trade Organization (WTO) panel’s decision last week to allow the United States to use “zeroing” to calculate anti-dumping duties on softwood lumber, Foreign Affairs Minister Chrystia Freeland said Monday.

“We firmly believe that U.S. duties on Canadian softwood lumber are unfair and unjustified,” Freeland said in a statement. “That’s why we challenge these rights at the WTO and under NAFTA.”

Canada launched a technical dispute with the WTO in 2017, saying it would vigorously defend its timber industry, but last week’s long-awaited ruling sided with the United States.

Trade tensions between the United States and Canada are escalating again after the two countries and Mexico agreed last year on a free trade deal to replace NAFTA.

The United States has suffered a series of defeats at the WTO over zeroing, a calculation method previously found to have unfairly increased the level of U.S. anti-dumping duties.

Zeroing calculates tariffs based on whether a product’s domestic price exceeds its U.S. import price after adjusting for transportation and handling costs.

The WTO’s repeated rejection of zeroing has helped fuel US President Donald Trump’s campaign to reform the WTO, where the US is blocking the appointment of the organization’s Appellate Body, which is actually the world’s supreme court for commercial disputes.

Trump said last year that the United States could withdraw from the WTO if it “doesn’t get its act together.”

The U.S. Department of Commerce had accused Canada of unfairly subsidizing and dumping softwood lumber, commonly used in residential construction. Its duties affected about $5.66 billion in imports annually, based on 2016 data.

Last week, Canada said it was looking for ways to increase the effectiveness of its retaliatory measures against the United States for its punitive measures on Canadian steel and aluminum exports, introduced last year last.

In response, Canada imposed tariffs on US exports worth C$16.6 billion ($12.4 billion). The initial Canadian list included orange juice, maple syrup, whiskey, toilet paper and a wide variety of other products. ($1 = 1.3372 Canadian dollars) (Reporting by Steve Scherer; editing by Jeffrey Benkoe and Chris Reese)