By JEFFREY SIMPSON
Tuesday, August 23, 2005 Page A13 / GLOBE AND MAIL
Canada has no serious option but trade retaliation against the United States.
The Americans have acted outrageously and illegally in the softwood lumber file. They have harried Canadian exports, imposed illegal tariffs, and announced their intention to disregard a NAFTA panel ruling that called their actions to account. This insolence is really the last straw.
Doubt it? Then read the 68-page ruling of the so-called extraordinary challenge panel. It's dry, technical and devastating to the United States. It shows how spurious were the American complaints against the original NAFTA panel that ruled in Canada's favour.
What did it mean, that the panel ruled in Canada's favour? Quite simply, it meant that the U.S. had interpreted its own trade laws wrongly, and unfairly, in asserting that Canadian softwood lumber exports were causing "material injury" to U.S. interests.
So specious was the U.S. lumber interests' claim, and so gimpy was the U.S. International Trade Commission's reasoning in support of that claim, that the issue before the panel wasn't about actual "material injury."
Rather, the issue was whether injury might be done once the export restrictions that had been negotiated in a previous Canada-U.S. deal were lifted. It was a bit like saying someone might commit a crime because the beholder thought he looked suspicious.
David Wilkins, the new U.S. ambassador, counsels resumption of negotiations and lowering of rhetoric. U.S. ambassadors always say something similar: calm down, you Canadians, and let the law and cool heads prevail. After all, we're friends, and friends work these things out.
Except things don't work out this way. If an agreement is reached, it always mocks free trade in softwood lumber. It always tilts toward the U.S. lumber interests.
The U.S. interests have enough federal legislators in their pockets that they successfully twist U.S. policy. Legislators from states that don't produce much lumber couldn't care less.
The congressional system operates, in part, on log-rolling -- that is, a legislator remains silent or gives support for an issue of little concern in exchange for votes on issues of importance to his or her state.
The senators and members of the House of Representatives from Idaho, Montana, Georgia and a handful of other states run U.S. softwood lumber policy, or rather manipulate it to protect their lumber interests. Their decisive power is part of the increasingly obvious congressional influence over all aspects of U.S. trade policy.
No president will expend an iota of political capital to twist these legislators' arms over softwood lumber. He needs their votes on much more important national issues. And Canada just doesn't count. From Canada's perspective, the announced U.S. intention to disregard the NAFTA panel ruling strikes at the heart of the original bargain over bilateral free trade. The Canadian negotiators didn't get the binational panels they wanted, ones that could over-rule national decisions. They settled for second best: panels that could review if each country had correctly administered and interpreted its own trade laws.
It was all that the Canadians could extract from the Americans, but the modest agreement was sufficient enough for Brian Mulroney to sign off on the negotiations. The panels' purpose was precisely to stop U.S. political interests from perverting U.S. trade laws, as has happened repeatedly in the softwood lumber file.
The lumber interests have used every weapon in the traditional arsenal, but they are not finished yet. They are now arguing that elements of NAFTA are unconstitutional because they empower a panel other than an agency of the U.S. government to review American action.
These are the instincts of the heartland that reject supra-nationalism in all its forms, be it the United Nations, the International Criminal Court, Kyoto.
The lumber interests will make this legal argument before the appropriate U.S. courts, and they will continue to immobilize U.S. trade policy.
The best way for Canada to awaken at least a few U.S. legislators that their country is defying NAFTA and hurting another country is to draw up a list of selected U.S. exports that will be hit with retaliatory tariffs within a fixed period of time unless the U.S. changes its attitude.
Don't worry about Canadian consumers. Big tariffs on California wine, for example, will just shift our preference to domestic or other imported wines. The same goes for other kinds of products where alternatives are easily available.
The softwood charade has gone on long enough. Talk is fine, but it's also cheap when one side ignores the law.
jsimpson@globeandmail.ca
