Senator Crapo Introduces Tariff Act Amendment Bill

Mr. CRAPO. Mr. President, I appreciate the opportunity to join with my colleague from Idaho, Senator Craig, and with the other Senators he has listed who are cosponsoring this critical legislation.

Senator Craig has already laid out this circumstance. Some time ago, when we could not reach an agreement with Canada on this critical issue through trade negotiations, WTO and other trade sanctions were sought by American companies seeking to correct the problem that has been faced by subsidized timber flooding into the United States from Canada. As a result of that effort, the U.S. Department of Commerce found the Canadian provinces subsidize their industry by providing lumber mills timber at prices that are 33 to 50 percent below market value.

As Senator Craig has indicated, as a result of that, a countervailing duty was applied and the Canadian timber producers, who are trying to bring their timber into the United States, are now required to pay this countervailing duty as a cost for their subsidized timber.

The response of the Canadian Government to that has not been simply to comply and try to negotiate a new, workable softwood lumber agreement. Instead, the Canadian Government has continued to increase the available subsidies and to try to flood the United States markets with this timber. The outcome has been that from August 2000 to March 2001, the United States lumber manufacturers closed 27 mills permanently while only two Canadian mills were closed during that time. The reason, of course, was this continued support provided from the Canadian Government.

How was it provided? As has already been indicated, allegedly bug kill timber. But timber wood that has not faced the impact yet was provided for prices which were as low as $1 per 1,000 board feet when the market price for that timber would have been somewhere in the neighborhood of $100 per 1,000 board feet. This significantly subsidized timber has been brought into the United States, exacerbating the problem.

Second, as Senator Craig already indicated, the British Columbian government has already revised their forest practice code to reduce the cost of lumber manufacturers under their code, saving them millions of dollars annually. What we see is, in response to this anticompetitive situation of unfair trade practices that have been identified and which are now being dealt with in litigation, the Canadians have increased their subsidies and are continuing to flood timber into the United States markets.

A number of changes need to occur. But one of them needs to occur in U.S. law because as a part of the entire process, it is important to determine the amount of subsidy. The subsidy is determined by evaluating whether the price that is being charged to the Canadian producers is above or below their cost of production. One of the critical elements is determining that value.

Currently, we have found Canadian companies are selling their lumber into the United States at below their subsidized cost of production, requiring antidumping duty of 8.79 percent. The point I make is that their current subsidies are even below and make it so that they are able to provide their timber to U.S. markets below subsidized cost of production.

The legislation we are introducing today will require them to include the countervailing duty which they pay as a part of their cost of production in determining what their true subsidy is. As long as the United States does not require the Canadians to include their countervailing duties as a cost of their production, then the amount of the subsidy which we determine will be even less than it truly is. It will not be accurately reflected.

This is a simple change to clarify what is already on the books in the United States. This practice is pursued in Europe and in Canada already under their approach to these issues. It is only proper that the U.S. Government stand firmly behind this principle. Again, the principle is, when a nation is subsidizing its products and shipping them into U.S. markets to the detriment of our producers, that subsidy must be included as a cost of doing business when we calculate in our litigation with them the amount of subsidy and the resultant countervailing duties we can apply.

I don't believe there is a legitimate argument against this legislation. I realize nations across the world are trying to figure out how to continue to do the best they can for their producers to help them get their products into our markets. However, we have now very aggressive negotiations underway in bilateral trade arrangements as well as in multilateral trade arrangements such as the world trade negotiations seeking to bring down the level of subsidies across the world to a level of zero. That is our objective in our international trade negotiations. We cannot tolerate the continued defiance of these types of laws in our negotiations. That is the simple purpose behind this legislation.

The United States and the Department of Commerce and our United States trade negotiators in particular have been doing a tremendous job in helping deal with a very difficult situation resulting from the Canadian unfair trade practices in softwood lumber. They are to be commended for this. One of the things we need to provide to them as a tool in this ongoing process is a congressional and, indeed, American statutory declaration that countervailing duties must be included in the cost of production as we negotiate on these critical issues with our neighbors to the north.

I thank the Senate for this time. I thank my colleague Senator Craig for his leadership on this issue and the other Senators supporting this effort.