Canada - USA Trade Dispute

  
The federal government should not threaten to block the Alaska pipeline through Alberta as a way to deal with other trade issues such as the softwood lumber dispute with the United States, Alberta government ministers said Friday.
That would only escalate trade conflicts between the two countries, said provincial Energy Minister Murray Smith.
"The solution to a trade war is not to start a bigger trade war," Smith said.
Instead, Canada should continue to pursue diplomatic and international channels to try to resolve the issues, he added.
"Keep your phone lines open. Keep your ears to the ground. Keep on working on solutions."
But that didn't prevent Smith from wondering out loud about why the U.S. seems to be taking anti-free-trade measures lately.
"What is hoped to be gained with a trade protectionist attitude from a Republican, free-trade, entrepreneurial president?" Smith asked.
Similarly, International and Intergovernmental Relations Minister Halvar Jonson urged Ottawa not to link various industry trade issues.
Other countries are also fighting U.S. protectionist moves and that will ultimately help Canada, he said.
Smith commented after federal Natural Resources Minister Herb Dhaliwal said Canada might consider blocking the Alaska Highway pipeline route through Canada in efforts to fight back against newly imposed U.S. tariffs on Canadian softwood lumber. Dhaliwal said Canada might instead press for building the alternative Mackenzie Valley pipeline that would allow northern Canadian natural gas to be shipped to the U.S. instead of Alaskan gas.
The U.S. farm subsidies will harm Alberta and Canadian farmers because they will tend to depress prices as more U.S. farmers unfairly grow more competing crops, said Ken Moholitny, an Alberta Agriculture assistant deputy minister. As well, the farm bill will require labeling of Canadian products such as beef.
He, too, advised against linking different trade issues.
"The U.S. is a major market. If we get mad at them over this and turn off the taps for oil and gas, that economic activity is lost, so who pays?" the provincial official said.
Smith urged a more diplomatic approach, as he will be using when he visits Washington, D.C., next week to meet various state officials.
The provincial government stand was echoed by the oil industry.
"Our view is that linkages are very dangerous," said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.
"It starts to spread. You link oil and gas, you're drawing in a whole bunch of other sectors as well."
 

Food fight looms

 A $180-billion US American farm subsidy bill poses a huge threat to Canada and may drive some farmers out of the business, an advocate warns.
 "It will severely impact our agricultural economy," said Rod Scarlett, executive director of the Wild Rose Agricultural Producers. "It will be more difficult to compete against the Americans, who are our biggest trading partner.
 "There are components of this farm bill that affect just about every type of farm operation in the country. There are some very threatening pieces of legislation as to how it relates to cows and hogs, and that is country-of-origin labeling."
 Some farmers may give up the fight, Scarlett said.
 "It's possible. If our government doesn't come up now with some kind of help to mitigate the problems, we're going to see a dramatic shift in our rural economy.
 "It's going to large factory farms or small niche markets."
 Alberta Agriculture Minister Shirley McClellan called the U.S. move an international setback.
 "We have been fighting hard, working with the federal minister, supporting elimination of subsidies both on the domestic and the export side," said McClellan.
 "This farm bill is not going that direction. At WTO talks, we were encouraged that the Europeans seemed to be in agreement on total elimination over a period of time, and the farm bill in our view is going in the opposite direction."
 The subsidies directly undermine Canadian farmers, she said.
 "It lessens their competitiveness, because if the subsidy level was something over 25% before, and additional dollars go in, it's pretty hard to be competitive, isn't it?"
 "We are an export country. We produce far more than we consume and we depend on our export markets, so it's difficult for our producers, as efficient as they are and as good as they are, to stay competitive with that regime."
 The U.S. bailout bill, seen as a protectionist volley by Canadians, stays within World Trade Organization rules and won't distort trade, says Ann Veneman, the U.S. secretary of agriculture.
 "We have kept within our WTO commitment," she said yesterday. Veneman, who was to meet Agriculture Minister Lyle Vanclief, defended the $180-billion, 10-year program.
 "Not all domestic support of agriculture is prohibited by the WTO," she said.
 Vanclief agreed that the American moves will push the trade organization limits, but likely won't go over. However, he disagreed strongly with the whole program:
 "I am very disappointed that the U.S. Congress has agreed to significantly increase trade-distorting farm support in the new farm bill."
 Veneman said she doesn't think the two countries are in a trade war, and that Washington will continue to push hard for international trade reform.
 She conceded that the farm bill contains some measures the White House opposed, clauses that went through because of the tricky politics of an American congressional election year. She said, though, that no country is completely innocent in trade matters. Washington dislikes bodies such as the Canadian Wheat Board and marketing boards.

TORONTO (CP) -- Montreal forestry company Tembec Inc. plans to sue the U.S. government, seeking $200 million in damages over punishing lumber duties that will batter the Canadian industry and cost the company millions of dollars in lost business.
 Tembec chief executive Frank Dottori said yesterday the duties finalized a day earlier by a U.S. trade tribunal are "tantamount to expropriation of our markets" and contravene the North American Free Trade agreement.
 "We've signed a free trade agreement. And we expect the U.S. to honour its international and national obligations. And it hasn't," Dottori said.
 The U.S. International Trade Commission's decision hurts both Canadian lumber producers and American consumers who will have to pay more for imported Canadian lumber, he said.
 In a ruling Thursday, the international trade commission approved duties averaging 27.22% against Canadian softwood exports.
 Those could cost the industry between $2.5 billion and $3 billion annually and lead to tens of thousands more layoffs in the troubled industry.
 Tembec becomes the third major Canadian lumber producer to use the continental trade deal to launch legal action against softwood duties.
 Last month, Doman Industries Ltd., a Vancouver Island firm, said it plans to file legal action against the U.S. government under Chapter 11. Vancouver-based Canfor Corp., Canada's largest lumber producer, filed a $250-million US claim last November.
 Chapter 11 of the trade agreement requires Canadian and U.S. governments to treat corporations equally under their national laws and allows companies to seek damages if they believe they have been financially hurt by government actions.
 Several companies in other industries, including U.S.-based Ethyl Corp., and the former Canadian funeral home giant, Loewen Group, have launched such legal challenges under the 13-year-old trade deal.
 Such challenges, however, are lengthy and could take up to two or three years to resolve.
 Tembec has more than 50 mills and plants in New Brunswick, Quebec, Ontario, Manitoba, Alberta and British Columbia, as well as in France and the United States.