Coming lumber ruling has Canadians worried

Canadian lumbermen are anxiously awaiting a key deadline. The United States Department of Commerce is supposed to give a preliminary ruling by Oct. 16 on whether Canadian softwood exports to the US are subsidized, as the American lumber industry alleges.

``Everybody is nervous about it,'' notes a Canadian Embassy official in Washington.

The forest industry is the biggest business in this province, and the American market is crucial. British Columbia alone shipped some $2 billion of softwood lumber to the US last year. A large portion of the provincial industry is currently tied up by a strike.

At the moment, softwood lumber enters the US duty-free. Canadian lumber has won about about one-third of the American market.

The US industry wants to impose a 32 percent ``countervailing duty'' on Canadian lumber to stop further growth of these imports.

British Columbia industry already has suffered one blow. In May, President Reagan slapped a 35 percent duty, which will be reduced over the next five years, on imported red cedar shakes and shingles.

Canada's Prime Minister Brian Mulroney responded with both a harshly worded letter to Mr. Reagan and higher tariffs on books, computer parts, and other products of interest to US exporters.

International Trade Minister Patricia Carney has termed the American softwood lumber subsidy investigation ``trade harassment.''

She uses that phrase because in 1983, the Department of Commerce investigated a similar subsidy complaint from the American lumber industry. It ruled that the complaint was not justified, that the British Columbia government's system of charging relatively low stumpage fees on timber cut from government-owned land was not a subsidy. In return for stumpage fees, the British Columbia government builds some of the roads in logging areas.

Although continuing to argue it is not the beneficiary of subsidies, the Canadian industry has been showing a new willingness to negotiate a settlement of the trade dispute, rather than waiting for the Commerce Department's decision. This could involve boosting stumpage fees.

Nonetheless, there does seem to be some willingness on both sides of the border to consider a negotiated settlement of the trade fight.

This month British Columbia's new Forests Minister, Jack Kempf, asked for a review of the current fees to determine ``if the province is getting a fair return'' on province-owned forests.

``Things are fluid,'' says an official in the External Affairs Department in Ottawa.

The possibility of negotiations being launched hangs to a considerable degree on the fact that neither side knows whether it will lose or win the semi-judicial Commerce Department preliminary ruling.

If the October ruling is unfavorable to Canada, the Canadian industry might have to pay duties as high as 32 percent. And even if favorable, it would still face the risk of Congress enacting protectionist legislation to help the US industry.

``While we most vehemently insist that we are fair traders . . . we are also realistic and realize there is a tremendous political overhang on this,'' says Allan Sinclair, vice-president for government and public affairs of the Council of Forest Industries of British Columbia here. ``A victory could be snatched away from us.''

``We are open to discussions or negotiations,'' he adds.

From the US standpoint, any Canadian concessions would be a bird in the hand as versus two birds in the bush. Commerce Department officials have been talking with their counterparts in Ottawa about the possibility of a negotiated settlement.

In regard to shakes and shingles, when the 35 percent tariff was imposed June 7, about half the 244 mills in B.C. producing these products closed quickly. Since then, most have reopened.

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