Latest WTO Ruling on Softwood Lumber: Detailed Explanation

The reality is that Canada is “trapped” in an issue between the World Trade Organization and US President Donald Trump’s Administration. Knowledgeable insiders explain that the US is blocking appointments of adjudicators to the global trade resolution agency, seemingly in an effort to put pressure on the WTO to allow “zeroing” (a method of calculation that is part of claims of dumping).

The mixed ruling just announced in this early stage of Softwood Lumber Dispute V finds partially in favour of each side. These kind of technical details need an advanced law degree to decipher …. luckily there are just such experts around to help regular people understand the intricate details:

“Some have held the April 9 WTO Dispute Settlement Body Panel Report decision out as a successful, from the United States’ point of view, reversal of years and years of WTO rulings against the use of “zeroing” in calculations of margins of dumping. [ … ] A reading of the Report indicates that this is, if not false, an ambitious overstatement.” — McCarthy Tétrault LLP

As Madison’s previously mentioned, another recent development on the softwood trade file was the US request of an Administrative Review issued in March. This filing included a 93-page appendix which listed every single solid wood operator in Canada (whether they be strictly hardwoods, or don’t export, or otherwise have nothing to do with the softwood lumber duty).
The filing cites Madison’s Canadian Sawmill Directory as a source of this information.

SOURCE: Madison’s Lumber Reporter

While our office is delighted to be hearing from so many forest operators across Canada as they ALL receive their legal packages (everyone is getting two apparently). Two envelopes full of 93-pages which is essentially a “Yellow Pages” listing of Canadian wood products manufacturers and exporters, sent to the 1,300 operators listed in Madison’s Canadian Sawmill Directory.
Again, while flattering and puzzling at the same time, this is alarming precisely because:

“The dumping thus found and its margin can be used, as is the case in Softwood Lumber where the investigation dives into the details of selected exporters only, to spread dumping findings and resulting dumping-margin-based duty to other exporters whose exports have not been examined at all. That is, an uninvestigated exporter can be saddled with duty without ever having had a single of its sales found to have been dumped, even if no other exporter’s sales are found to have been dumped on a real weighted average, if the other exporter is found, by the arithmetic artificiality of zeroing, to have been dumping even if by a margin divorced from overall reality.” — McCarthy Tétrault LLP

Back to the issue of blocking with WTO appointees, McCarthy Tétrault explains, “Considering the Appellate Body’s significant backlog, caused in large measure by the United States’ refusal to cooperate in the naming of new Appellate Body members to fill vacancies there, even putting in danger the Appellate Body’s capacity to field a quorum, this appeal might take some time.”