U.S.-Canadian Timber Dispute Takes Root : Imports: The Bush Administration moves toward retaliatory duties on lumber.

One of the most fractious disputes between the United States and its largest trading partner reignited Friday as the Bush Administration took the first step toward imposing retaliatory duties on Canadian lumber imports.

President Bush approved the initiation of a government investigation into whether Canadian provinces unfairly subsidize their loggers and therefore should be penalized with higher tariffs. It marked only the second time that the government has launched such a probe on its own, rather than in response to industry complaints.

“The actions we are announcing today will protect our industry from dislocation in the near term while allowing a fair determination of whether Canadian provinces are providing injurious subsidies,” Commerce Secretary Robert A. Mosbacher said.

The investigation to determine whether Canada gives its timber industry an unfair advantage could take up to 205 days. While it is under way, the United States will collect a bond from Canadian timber importers, to be returned if the government finds no fault with the Canadian practices.

U.S. loggers have claimed for years that Canada unfairly subsidizes its timber industry. The two countries settled their differences temporarily in 1986, when Canada agreed to put a 15% tax on U.S.-bound lumber.

However, the Canadians insist that conditions have changed since then. In September, they notified the U.S. government that, starting Friday, they would no longer be bound by the “memorandum of understanding.”

U.S. officials have said the Canadian decision could cost 15,000 more jobs in the already-battered American timber industry. With senators in several logging states up for reelection next year, pressure has mounted for quick retaliation.

“We in Congress--and the timber industry in my state--trusted the Canadians in 1986 to keep their word. That word has been broken,” said Sen. Bob Packwood (R-Ore.), one of those who will seek reelection next year.

However, the Canadians note that their economy is suffering as well and contend that their relatively low fees for logging on provincial government lands do not constitute a subsidy.

“A subsidy depends on the beholder,” Derek Burney, Canadian ambassador to the United States, told reporters. “A subsidy for some is a birthright for others.”

Burney added that his country plans to try to block the retaliatory tariffs on three fronts: in the U.S. government investigation, under dispute-settlement arrangements of the U.S.-Canada Free Trade Agreement and at the Geneva-based General Agreement on Tariffs and Trade.

“We have a fight on our hands,” the ambassador said. “We intend to win.”

Some analysts have speculated that the increasing friction could dampen the ongoing talks to expand the North American free-trade zone to include Mexico. Both U.S. and Canadian officials insist that it will not sour the negotiations, but Burney conceded, “this is one of the most sensitive issues running between the two countries today.”

Although it is the subject of intense politics on both sides of the border, the U.S. move will not affect the vast majority of the $2.6 billion annually in Canadian softwood timber imports.

That is because the full 15% tariff would apply to imports from only six provinces. British Columbia--the province that is Canada’s single biggest exporter of timber to this country--has taken steps to fully offset the cost advantage its loggers receive, and Quebec has partly mitigated them.