[Congressional Record Volume 141, Number 173 (Friday, November 3, 1995)]
[Senate]
[Pages S16663-S16665]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BAUCUS:
  S. 1392. A bill to impose temporarily a 25-percent duty on imports of 
certain Canadian wood and lumber products, to require the administering 
authority to initiate an investigation under title VII of the Tariff 
Act of 1930 with respect to such products, and for other purposes; to 
the Committee on Finance.


                      emergency timber legislation

  Mr. BAUCUS. Mr. President, I rise to introduce legislation to give 
our timber industry emergency relief in the face of a surge of 
subsidized lumber imports from Canada.
  I have said before that when it comes to trade Canada does not play 
for the love of the game. Canada plays rough. Canada plays to win. 
Canada plays hardball.
  You see that in fisheries, wheat, beer, intellectual property, and 
maybe most of all in timber. And if the game is hardball, we have to 
put on our helmets, pick up our bats and show that we can play too.


                       provisions of legislation

  That is what my bill will do. It contains three tough but fair 
measures:
  First, temporary duty: We impose a temporary 25-percent tariff on 
Canadian lumber. This figure is based on the best estimates of the 
value of Canadian subsidies to Canadian timber exporters.
  Second, countervailing duty investigation: We direct the Department 
of Commerce to investigate Canadian subsidization. At the end of the 
investigation, the temporary duty would be lifted.
  If Commerce finds subsidization and damage to U.S. industry, the 
International Trade Commission would impose a permanent countervailing 
duty at a level appropriate to the damage. If the investigation were to 
find no subsidy, Commerce would refund the money collected under the 
temporary duty. Likewise, if the damage were under 25 percent, the 
difference would be refunded to Canada.
  Third, renegotiate dispute settlement panels: We declare that no 
American judicial function or authority can be delegated to an 
international body under any trade agreement and give the President 
authority to renegotiate the so-called chapter 19 dispute settlement 
panels of the United States-Canada Free-Trade Agreement and NAFTA.
  The general effect of this would be to eliminate the jurisdiction of 
international dispute settlement panels over our countervailing duty 
decisions. In the specific case of timber, it would repeal the 1992, 
1993, and 1994 decisions of the United States-Canada dispute panels 
which have barred us from using our countervailing laws against 
subsidized Canadian softwood lumber exports.
  Now, some will say, ``Max, gee, that is pretty tough.'' I agree. 
Sometimes tough measures are necessary. That is because today we face a 
surge of imported timber which has depressed prices, closed mills, and 
put Americans out of work.
  The first two sections of this legislation respond to this crisis in 
a reasonable, fair way. We have the right to emergency relief under our 
domestic laws, and all our trade agreements so provide. This is a case 
where we definitely need it.
  The third section responds to the longer term, but equally grave 
problem with the decisions dispute panels have made on United States-
Canada timber disputes. Again, it does so in a tough but limited way. 
So, yes, this is tough but it is also fair.
  Now, let me explain the situation and my proposed response in more 
detail. We will begin with the facts and figures 

[[Page S 16664]]
on the immediate crisis, the Canadian subsidies and the import surge 
they have created.
  Our bill deals with two forms of subsidies. The first is the 
extremely low stumpage fees the Canadian provinces charge for logging 
on their public land. Do not forget almost all the land in Canada on 
which timber is harvested is public land, called Crown land--the land 
owned by the provinces: very low stumpage; timber sale, very low, low 
prices.
  The other subsidy is Canada's ban on all export of raw logs, which 
lowers the price of logs in Canada's market and gluts Canadian mills.
  Some have a broader definition of subsidy. The Raincoast Conservation 
Society, a Canadian environment group based in Victoria, BC, says.

       * * * low stumpage rates, unsustainable rates of timber 
     cutting, inadequate environmental controls, and the continued 
     destruction of natural habitat constitute a massive network 
     of public subsidies to the British Columbia timber industry.

  Canada's timber practices have created an environmental disaster. 
British Columbia, for example, requires neither sustainable forestry; 
we do. Nor environmental assessments of forest practices; we do. It has 
minimal riparian protection; we have a lot. Allows clearcuts up to four 
times what is legal in the United States and requires no protection of 
endangered species and habitat.
  Compare that with our Endangered Species Act. It gives the public 
virtually no role in forest management. Think of all the appeals and 
all the private rights of action we have in our country. If you take a 
boat up the coast of Washington State, you can literally see the border 
because Canadians have cut right down to the shore.
  Our bill defines subsidies much more narrowly. All by themselves, the 
artificially low-stumpage rates on the ban on raw log exports have 
caused a trade disaster as profound as the environmental disaster in 
British Columbia.
  Imports of Canadian lumber have risen 121 percent since 1991, from 
$2.56 billion to $5.65 billion last year. During this period, Canada's 
share of the American lumber market rose from 27 percent to 36 percent.
  Mr. President, 36 percent of all the softwood timber consumed in the 
United States is Canadian. Last year we imported more than 16 billion 
board feet of timber; 3 billion board miles of softwood timber. That is 
enough to build a wooden bridge to the Moon 12.5 feet wide.
  By comparison, we sold Canada about .3 of a billion board feet of 
lumber. That is a fiftieth of Canada's exports.
  Canada's subsidies vastly inflate our imports of timber. We estimate 
that they cost American timber companies about $829 million last year 
and cost American workers 25,100 jobs.
  This is an emergency. Every mill worker and mill operator in Montana 
can tell you the pressure from these subsidies is intolerable and the 
situation is getting worse all the time. That is the reason for part 1 
of the bill, the temporary duty, and also for part 2, under which the 
Commerce Department will investigate Canadian timber practices and 
arrive at a long-term countervailing duty.
  Now, let us turn to part 3. That is renegotiation of the application 
of the dispute settlement panels established in chapter 19 of the 
United States-Canada Free-Trade Agreement to our domestic 
countervailing duty or CVD decisions. To start, we need to review a bit 
of history.
  During the drafting of the United States-Canada Free-Trade Agreement 
in the 1980's, a Canadian negotiator told the American side:

       You must understand that the Canadian people are committed 
     to helping their industries that cannot compete. Our 
     Constitution requires that funds be transferred to assist 
     companies in noncompetitive locations to compete in 
     international trade.

  That is to say, in areas where free trade means a competitive United 
States industry will do well, Canada will subsidize its own industry to 
do its best to make sure that we cannot do well.
  This sort of practice is, for obvious reasons, the most controversial 
issue we considered when the Reagan administration negotiated the 
United States-Canada Free-Trade Agreement in the 1980's. The Canadians, 
as was their right, refused to change their subsidy policies, but they 
also asked us to guarantee that we, Americans, would not use our 
countervailing duties laws against their subsidies.
  Obviously, that was unacceptable. A free trade agreement which let 
Canada subsidize exports, while we gave up our right to combat the 
subsidies of domestic trade laws, would not be a free trade agreement 
at all. It would have been an agreement to give Canada a captive 
market, and we would have opposed it.
  So we essentially agreed to disagree. Canada did not give up its 
subsidies and neither did we give up our trade laws. We agreed that the 
United States would continue to settle subsidy disputes through our 
domestic CVD laws. That is, dispute settlement panels setting up in the 
agreement's so-called chapter 19 would be available to Canada in these 
cases only to make sure that we had properly used our laws. That was 
the only point of that provision.
  That was fine in theory. Unfortunately, at least in the timber case, 
it has not worked very well in practice. The past 10 years of this 
dispute have gone as follows.
  On December 30, 1986, Canada and the United States signed, agreed to 
a joint memorandum of understanding on softwood lumber, under which 
Canada agreed to charge its timber companies a 15-percent export tax to 
make up for the value subsidies. Canada agreed.
  In September 1991, 5 years later, Canada unilaterally abrogated this 
memorandum of understanding--just walked away from it, threw it in the 
trash bin. On October 1991, a month later, the Commerce Department 
opened up, as we obviously should have done, an investigation of the 
Canadian lumber subsidies.
  In June 1992, this legislation ended with a finding that the 
subsidies damage the American industry. The ITC imposed countervailing 
duties, as is our right and is what we really should have done and did 
do.
  Canada then challenged this finding at the dispute panels set up 
under chapter 19 of the United States-Canada Free-Trade Agreement. 
Later in 1992, and in appeal decisions in 1993 and 1994, the panels 
split along national lines and upheld Canada's cases. In each one, 
Canada had a majority of judges. There were more Canadian judges than 
American judges. At least two of the judges had serious conflicts of 
interest and one had even worked for the Canadian timber industry. In 
each case they all voted as a bloc to deny justice to the U.S. 
industry.
  The last of these cases, our appeal to the Extraordinary Challenge 
Committee, which decided in the spring of 1994. Judge Malcolm Wilkey 
was the only American panelist and he describes the decision this way:

       The Panel started, of course, by giving us the litany of 
     the standard of review of administrative agency action as 
     enunciated in United States law, all thoroughly familiar. The 
     Panel then preceded to violate almost every one of those 
     canons of review of agency action * * *. This Binational 
     Panel Majority opinion may violate more principles of 
     appellate review of agency action than any opinion by a 
     reviewing body I have ever read.

  That is the opinion of the American panelists--the only American 
panelists; the rest are Canadian. As Wilkey says, ``The panel reached 
egregiously wrong results.'' Those are his words. It was allowed to 
review only whether we applied our CVD laws as the United States Code 
requires. That is what we were supposed to do.
  Instead, the panel declared our laws should not apply at all. That is 
what the panel said, totally above and beyond its jurisdiction. The 
panel had no right to make that decision, but it made it. Under the 
United States-Canada Free-Trade Agreement, the panel has no right to 
make such decision, yet the Canadian majority went ahead and did it 
anyway. Worst of all, have been the concrete real results of these 
decisions.
  Since 1993, imports of Canadian timber have skyrocketed. The price of 
lumber has fallen by more than a third. Mills have closed in Superior, 
Libby, Bonner, and elsewhere in Montana, putting hundreds of good folks 
out of work. The same thing has happened all over America.
  Our timber workers have been cheated, cheated by the dispute panels. 
There is no other word for it. We need to make sure nobody else suffers 
the same injustice. 

[[Page S 16665]]

  Since Canada refuses to a fair settlement through negotiation, I see 
no alternative other than to remove the cause of the trouble.
  Now, these are tough measures, but if your partner is playing hard 
ball, you need more than a golfing cap and a whiffle bat, you need a 
hard plastic helmet and Louisville slugger. You need tough measures 
like the ones my bill will provide.
  I say let us stand up, restore fairness in the timber market, let us 
give a hand to some workers who have suffered grave injustice. I ask 
support for my bill, which I think, once enacted, we can restore the 
playing field so it is fair and give people in our country the justice 
they deserve.
                                 ______