U.S. and Canadian trade row escalates (1 billion in subsidies )

WASHINGTON, DC, United States (UPI) -- A trade row between the United States and Canada escalated further this week after Ottawa announced plans to place more than $1 billion in subsidies to assist its softwood lumber industry.

Ottawa`s announcement on Thursday came only two days after the United States agreed to comply with a regional trade panel ruling that said Washington had illegally imposed $1.4 billion duties on Canadian softwood lumber imports.

The U.S. Department of Commerce announced Tuesday it will comply with a North American Trade Agreement panel ruling to cut its countervailing duties on Canadian lumber to zero, or 'de minimis,' despite its strong reservations about the panel`s decisions. However, Washington said it would continue to collect duties as long as litigation was ongoing.

The U.S. decision means that Washington will reduce punitive duties, which are currently set at 16 percent, to less than 1 percent. Canada accounts for about one-third of the U.S. market for softwood, which includes pine, spruce and fir, exporting about $6 billion in softwood lumber to the United States each year.

While the Canadian government has consistently argued it does not subsidize its domestic lumber industry, Washington argues it has slapped countervailing and anti-dumping duties on Canadian imports to deal with Ottawa`s unfairly subsidized softwood lumber.

The Bush administration expressed disappointment Thursday over Canada`s decision to assist its softwood lumber industry, after agreeing to comply with the NAFTA panel`s decision.

'At the same time a NAFTA panel has directed the Department of Commerce to find that Canadian subsidies are de minimis, Canada announces over a billion dollars in aid,' said Carlos Gutierrez, U.S. Secretary of Commerce, in a statement. 'This just goes to show that Canada will continue to funnel vast amounts of assistance to its industry.'

The Canadian government has been calling on the United States to stop the use of countervailing duties and subsidies on imports of Canadian softwood lumber because of the damage it has caused its domestic industry.

While the decision by the United States to comply with the NAFTA panel was recognized by Canada as a 'positive move,' it argued it would not be a 'complete victory ... until the duties improperly collected have been returned - until all duties are eliminated.'

The Canadian government said that it would use its aid package until the United States agreed to stop the use of countervailing duties and subsidies on its softwood lumber industry.

'If the United States actually does the right thing -- that is, drop the duties and return our money -- the support package can be reviewed,' said Jim Peterson, Canadian Trade Minister, in a statement. 'Until then, the Government of Canada will stand behind our workers and we will keep reminding the United States of the need to respect the letter and spirit of NAFTA.'

Ottawa vigorously defended its action Thursday, arguing the United States has 'unjustly persecuted' its lumber industry be continuing to ignore NAFTA panel decisions.

'Panel after panel has found that Canadian softwood lumber is not subsidized,' said Jim Peterson, Canadian Trade Minister, in a statement. 'The United States claims that it has complied with NAFTA. In fact, the United States will only have complied with NAFTA when it stops collecting the duties and refunds the deposits.'

The United States said it would begin a review to examine Canada`s billion dollar aid package and take necessary action if needed to protect its own domestic industry.

'Only days after we fully complied with a NAFTA decision, Canada responds by announcing huge new subsidies,' said Rob Portman, U.S. Trade Representative, in a statement. 'Canada`s actions illustrate what the United States has been saying all along: the Canadian industry is the beneficiary of subsidies that create an un-level playing field to the detriment of the U.S. industry.'

The Canadian decision to offer aid to its lumber industry was expected to escalate tensions between the two trading partners, U.S. officials said Canada`s aid package would make it harder to reach a resolution to the two-decade trade dispute.

'While we continue to believe that a long-term, durable settlement is the only way to resolve this dispute, Canada`s actions complicate our attempts to reach a negotiated solution,' said Portman.

New Kansas City customs port may expedite trade with Mexico Region hopes to capitalize on growing cross-border trade By Garance Burke, Associated Press

KANSAS CITY, Mo. — Shipping American cars and electronics to Mexico may become much cheaper and faster early next year when the first Mexican customs facility in the United States is expected to open in the heart of the Midwest. It may be nearly 1,000 miles to the border from Kansas City, but this industrial hub will soon start building an inland port that would whisk thousands of trucks through export inspections and shoot them back out onto the North American Free Trade Agreement corridor, where they can roll through the border without further delays.

The $3 million facility, which would be the first foreign customs office inside the United States, will likely be approved by the U.S. and Mexican governments by year's end and is scheduled to open next May, said Chris Gutierrez, president of Kansas City SmartPort Inc., a nonprofit organization promoting the project.

Planners say manufacturing industries in the upper Midwest and Canada would be the first to benefit from the new customs operation, which they believe could expand to handle cargo from across the country.

Mexican government officials confirmed the two countries had agreed on the overall proposal, though both nations said finer points of the agreement were still being negotiated by customs officials — including security concerns and the legal standing of Mexican customs officials working in the United States.

After a visit to Kansas City in May, U.S. Customs and Border Protection Commissioner Robert C. Bonner said the pilot proposal was "bold and imaginative" and could transform Kansas City into a "major new trade link" that would fit well with new border security initiatives to pre-approve cargo.

"We've always had the railroad and the river and the airlines and the roads, but this will open up tremendous new business opportunities for Kansas City," said Kansas City councilwoman Bonnie Sue Cooper, who said she proposed the idea to the Mexican Finance Minister Francisco Gil Diaz last year.

In the 1940s, Kansas City — at the intersection of two major interstate highways along the Missouri River — was one of the country's largest rail distribution centers.

Now plans are to fill a gravel lot that once held cattle with a big-box building that will process long lines of big rigs packed with goods for export to Mexico.

Providing the containers stay electronically sealed once they're inspected, the trucks will be free to cross the border and avoid further inspections, resulting in efficiencies and cost savings.

"Kansas City is the geographical

heart of the United States and of the entire NAFTA region," said Everardo Suarez, Mexican consul general in Kansas City. Once the agreement is completed, Kansas City would essentially function like a Mexican port.

The transition to the global economy comes just in time: since the city's stockyards and airline industry declined, it has been struggling to rebuild itself as a leader in global logistics.

"I think this project would go a long way to transform trucking," said Chaz Jones, a research analyst with Morgan Keegan, a Memphis investment bank. "Truckers typically get paid per mile. The more time cargo spends moving on the road, the more revenue it generates for a carrier."

In recent months, delays at the hurricane-damaged port of New Orleans and bottlenecks at Long Beach and Los Angeles have caused companies to look for alternative trade routes. Industry analysts said Wal-Mart Stores Inc. is one of several companies moving freight through Mexico as an alternative to using West Coast ports; Wal-Mart spokespeople would not confirm the move.

Because so much trade between NAFTA partners is carried by truck, Midwestern cities with good transportation infrastructure stand to capture some of that trade flow.

In August 2005, trucks carried 64 percent of imports from Canada and Mexico and 80 percent of U.S. exports to those countries, according to the Bureau of Transportation Statistics.

San Antonio has also invested significant efforts to develop a competing inland port. But Kansas City officials hope the customs facility will give the city a leg up, especially once the project's second phase, which will allow rail cars to clear Mexican customs as well, is completed.

Kansas City Southern owns two Mexican train lines which means they can send freight from the Midwest directly to the Mexican port of Lazaro Cardenas, where car manufacturer Mazda Motor Corp. has begun shipping vehicles from Japan to Kansas City.

"There might not be enough volume to open a rail facility today, but we certainly expect that will increase in the next few years," said Warren Erdman, a vice president at Kansas City Southern. "We have great interest in the proposal."

US blinks in softwood standoff 11/24/2005 WASHINGTON -- The U.S. Commerce Department announced it would comply with a NAFTA panel's order to cut a 16 percent duty on Canadian softwood lumber imports -- for now. Even though the Bush Administration still strongly disagrees with the repeated NAFTA rulings in Canada's favor, it will comply, Commerce Secretary Carlos Gutierrez said yesterday. "We have serious concerns about the panel's decision. However, consistent with our NAFTA obligations, we have complied with the panel's instructions," Gutierrez said in a press release.

The ruling effectively means that the Americans would reduce duties from about 16 percent to less than one per cent. Separate antidumping tariffs averaging about 4 percent will not be affected.

While protectionists oppose the move to lift softwood tariffs, US consumer groups applauded the move However, the government says it's asking for clarification of the ruling -- meaning the duties on Canadian imports can remain in place for another 45 days. Officials also added they have the right to appeal the ruling. The two counties have been at odds over the softwood issue for years. Canada says the duties are in violation of the free trade agreement. The U.S. has argued that Canadian softwood is subsidized because it's cut on Crown timberland, while U.S. softwood is sawed privately, placing it at a competitive disadvantage.

Canada accounts for about one-third of the U.S. supply of softwood, used mainly in homebuilding.

As expected, U.S. protectionist industry groups decried the move. However, consumer commended the Department of Commerce for "finally doing the honorable and right thing in recalculating lumber duties as directed."

American Consumers for Affordable Homes (ACAH), representing more than 95 percent of lumber consumption in the U.S., said such duties only punish consumers. "These duties on Canadian softwood lumber increase the cost of a new home by at least $1,000, pricing more than 300,000 families out of mortgage eligibility and home ownership," said Susan Petniunas, spokesperson for ACAH.

Industries that depend on lumber as an input and that oppose import restrictions include manufacturers of value-added wood products, lumber dealers, manufactured and on-site home builders, remodeling contractors, mattress and box springs manufacturers, and individuals, says ACAH.

Here in Vermont we do a little farming and a little logging to make ends meet. My son bought a work horse and equipment last year and we recently sold 3,000 board feet of white pine to a local sawmill. This is not a way to get rich, but it's a way to use the land productively. A little farming, a little grazing, and it means you can afford to keep your woods healthy and your meadows mowed.

We also took out a few loads of cedar posts, to fence in some highland cattle for beef.

Classical civilization and history generally reveals that a healthy nation has healthy farming and especially family farms, with people living off the land. These have always made the best citizens and soldiers in time of war.

We have no intention or ability to compete with the large farmers or lumber operations, but if we open our borders much further, farming is going to depart this country. I read somewhere a month or so ago that for the first time, this past year, America imported more food than it exported. If so, that is a frightening statistic.

We are getting to the point where we will have only two businesses in this country: finance and fast food. And our only exports will be derivatives. Until some other market takes them away too.

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