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Winnipeg Free Press - PRINT EDITION

$1B for pulp firms threatens trade fight

By: Julian Beltrame

Posted: 06/18/2009 1:00 AM | Comments: 0 (including replies)

OTTAWA -- The federal government has extended a $1-billion lifeline to Canada's struggling pulp and paper industry in an effort to match billions of dollars in subsidies available to U.S. rivals.

But the irony is that the effort may have the effect of touching off another costly and protracted trade fight with the United States over whether Canada is unfairly subsidizing its forestry industry.

The government's announcement Wednesday was quickly followed by a release from the notoriously litigious U.S. Coalition for Fair Lumber Imports, which labelled the program an unfair subsidy.

'To the extent that the subsidy goes to corporate groups that produce softwood lumber, this likely constitutes a violation of the U.S.-Canada Softwood Lumber Agreement," said the group's chairman Steve Swanson in a release.

Trade Minister Stockwell Day said the Canadian program is designed to level the playing field with the U.S., adding that the government has sought legal advice to ensure it does not contravene the agreement.

"I would suggest anyone on the U.S. side who thinks this is not compliant with (the softwood agreement) needs to look in the mirror," he told reporters late Wednesday.

Day said he talked to the U.S. Trade Representative Ron Kirk, and said "he was sympathetic to our position." But Day said he did not get any assurance from the top U.S. trade official that the program would not be challenged.

Ottawa and industry groups led by the Forest Products Association of Canada have been working for months on a program that could both match a U.S. subsidy valued at up to US$8 billion and still remain compliant with the lumber agreement.

Natural Resources Minister Lisa Raitt said she believes the program does that both in terms of the spirit of the agreement and the letter of the law.

In fact, the program matches closely a key element of what the U.S. has been doing by paying its pulp mills 16 cents a litre for the production of so-called black liquor, a liquid byproduct of the chemical pulping process used as an alternative fuel.

Under the terms, mills that produce black liquor between Jan. 1 and Dec. 31 of this year qualify for the grant on the condition they use the tax money on capital improvements within a three-year period.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition June 18, 2009 B8

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