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North America's Source for Oil and Gas News
March 2002

Vol. 7, No. 13 Week of March 31, 2002

Canada’s prime minister puts oil, gas on line in lumber showdown

Gary Park

Canada’s Prime Minister Jean Chretien has again made veiled threats that his government won’t exclude oil and natural gas from a tit-for-tat trade war that exploded March 22 when the U.S. Commerce Department imposed a 29 percent duty on softwood lumber shipments.

When the lumber talks collapsed, despite pressure from Chretien and President George W. Bush on their negotiators to reach a settlement, Chretien said the tariffs put a “big question mark on the Americans’ record on free trade.”

“We have signed a free trade agreement with them. They want to have our oil, they want to have our gas. And they don’t want to have our wood ... they cannot choose and pick,” he said, reiterating comments he made last year.

“If we were to cut off their gas and their oil they would buy a hell of a lot of softwood to heat their homes.”

Without saying that he has any plans to use oil and gas as leverage in the dispute, Chretien said he will “keep trying at the political level, if I can.”

But he said Canada will also take its case to a tribunal of the North American Free Trade Agreement and to the World Trade Organization, where it has won previous lumber cases.

The U.S. lumber industry vowed that it could withstand any Canadian legal challenges at the WTO or under NAFTA.

Soviet-style system

“Truth is on our side,” said Rusty Wood, chairman of the U.S. Coalition for Fair Lumber Imports. “We will win in NAFTA. We will win at the WTO.”

Montana Senator Max Baucus accused Canada of protecting its own lumber industry and of jeopardizing free trade, lambasting what he described as British Columbia’s “Soviet-style system” of managing its lumber harvest.

“The message to our good friends in Canada is clear — the United States will not tolerate Canadian lumber protectionism,” he said.

Suggestions that Canada’s oil and gas exports, which account for more than 15 percent of U.S. consumption, could get dragged into a wide trade war did not sit will with the Alberta government or the industry.

Alberta Energy Minister Murray Smith said any attempts to use U.S. hunger for Canadian oil and gas to strong-arm a better lumber deal won’t work.

“There has been political rhetoric, but there has never been any definite linkage of commodities flowing north and south,” he said.

Energy should be model

Spokesman for the Canadian Association of Petroleum Producers and the Alberta government argued that the remarkable success Canada and the United States have had in trading energy freely should be used as a model for resolving the lumber dispute.

But feelings boiled over March 22, with Trade Minister Pierre Pettigrew calling the new duties “obscene,” and British Columbia Forests Minister Mike de Jong calling Bush and the U.S. administration “gutless wonders.”

Some mills in British Columbia were closed immediately, amid forecasts by the British Columbia Lumber Council that the new duties could cost C$3 billion a year and see layoffs in British Columbia double to 30,000. A coalition of U.S. lumber consumers complained the duty would penalize American home buyers, adding at least US$1,500 to the price of a home.

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