Canada to appeal U.S. softwood lumber duties with WTO

Canada will appeal last week’s decision by a World Trade Organization (WTO) panel to allow the United States to use “zeroing” to calculate lumber anti-dumping tariffs, Foreign Minister Chrystia Freeland said on Monday.

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

Canada had launched the technical dispute with the WTO in 2017, saying it would forcefully defend its lumber industry, but last week’s long-awaited decision sided with the United States.

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

The United States had suffered a string of defeats at the WTO over zeroing, a calculation method that previously was ruled to have unfairly increased the level of U.S. anti-dumping duties.

Zeroing calculates tariffs based on whether the domestic price of a product exceeds its U.S. import price after it is adjusted for transportation and handling costs.

The repeated rejection of zeroing by the WTO had helped fuel U.S. President Donald Trump’s campaign to reform the WTO, where the United States is blocking appointments of the organization’s Appellate Body, which is effectively the world’s supreme court for trade disputes.

Trump said last year the United States could withdraw from the WTO if “they don’t shape up.”

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

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

In response, Canada imposed tariffs on $16.6 billion worth of U.S. exports. The initial Canadian list included orange juice, maple syrup, whiskey, toilet paper and a wide variety of other products.