Yet Another Softwood Lumber Victory

The panel's answer was clearly no, a finding Canada will use to negotiate a favourable end to the dispute, said Trade Minister Jim Peterson.

"Today's decision says loud and clear that Canadian softwood is not injuring U.S. producers," he said from Washington.

"This is certainly a significant victory for Canada and we hope the U.S. will comply."

Peterson was in the U.S. capital with Prime Minister Paul Martin, who met with legislators Thursday and sits down Friday with U.S. President George W. Bush.

Softwood, mad cow and other trade irritants are high on Canada's agenda.

While Martin likely won't want to make too much of this softwood victory when he meets Bush, he sounded triumphant in a Washington speech Thursday.

The NAFTA panel "vindicated the Canadian position," Martin said.

But the ruling will almost certainly be challenged by the powerful U.S. lumber lobby.

"If (U.S. producers) were behaving rationally, they would have no choice," but to agree with the panel, said Carl Grenier of the Montreal-based Free Trade Lumber Council.

"They've been told twice. . .the original finding (of threat of injury) was not based on fact or law," said Grenier.

"But they're probably going to try again," to find new excuses to keep duties on softwood imports.

U.S. industry officials couldn't be reached for comment.

The NAFTA panel ruling said the U.S. International Trade Commission's original finding in 2001 that Canada's softwood exports posed a serious threat of injury to American producers "is not supported by substantial evidence."

The ITC has 21 days to respond to the ruling.

But the American lumber lobby has already launched an indirect challenge, questioning the NAFTA panel's credibility by alleging one panellist has a conflict of interest.

Ottawa disagrees.

Talks to end the trade war have been in limbo since provinces rejected a settlement proposal floated by the U.S. administration last December.

Canada intends to move fast, with a meeting of provincial and federal trade officials as early as next Thursday, to put together a counter-proposal for a deal with the U.S. to finally end the trade war, said Peterson.

That will be followed by a meeting of provincial ministers in mid-May, he added.

Thursday's victory proves the provinces were right to not settle, said Opposition Conservative critic Charlie Penson.

"It is reasonable to believe that if Canada holds the line and doesn't cave into American demands, we will achieve free trade in lumber," Penson said.

The win strengthens Canada's position in future talks, said John Allan, president of the B.C. Lumber Trade Council.

"In negotiations, we have more strength given today's ruling," he said.

Lumber companies said they hope they'll soon see some of the duties paid to the U.S. returned.

"(Duties) should be dropped and the money we have put in - ourselves, it's $88 million since May 2002 - should be returned to the different companies," Domtar Inc. president Raymond Royer said after the company's annual meeting in Montreal.

Canada has been fighting the countervailing and anti-dumping duties at both the World Trade Organization and under NAFTA.

Canada has won some rulings, the U.S. industry others.

Decisions by NAFTA panels are generally considered to have more weight because they're binding, unlike decisions made under the World Trade Organization.

But Ottawa acknowledges Thursday's ruling won't end the historic dispute that has flared several times over the past 20 years.

"We've seen (the U.S. industry) are very capable of all kinds of litigious shenanigans and there are no guarantees in life," said Peterson.

Canada's softwood industry has been getting back on its feet in recent months as timber prices climbed. An improving U.S. economy has also boosted demand.