Canada has won another round in the long-running softwood lumber trade dispute with the United States. The World Trade Organization’s (WTO) appellate body ruled that the U.S. Department of Commerce violated international trade rules in the way it calculated an 8.43-per-cent, anti-dumping duty against Canadian lumber exporters.

The technical ruling found the practice of so-called zeroing — used to determine anti-dumping rates imposed on goods imported into a country — was “inconsistent with the WTO Anti-dumping Agreement.”

International Trade Minister Jim Peterson called the ruling a win in a key issue in the dispute.

“While I urge the United States to comply and re-evaluate these duties, I maintain that any duty on Canadian softwood lumber is unjustified,” he said through his office.

“We have to remember that neither the NAFTA panel nor the WTO have supported the United States’ claims that there is threat of injury to the American industry. If there is no sign of threat, there should be no duties.”

It’s the latest in a string of decisions from the WTO and North American Free Trade Agreement panels that have cut into the U.S.’s contention that Canada exports subsidized lumber that unfairly competes with American producers.

Canadian softwood has been subject to combined 27.2-per- cent countervailing and anti-dumping levies since May 2002, when U.S. trade authorities affirmed a 2001 complaint by the U.S. Coalition for Fair Lumber Imports.

A series of WTO and NAFTA rulings has cut the prospective rates drastically, although exporters must still deposit cash to cover original duties until final rates are confirmed or the tariffs are struck down.

Carl Grenier, executive vice-president of the Free Trade Lumber Council, said zeroing works something like this: Trade authorities investigating a dumping complaint will look at a range of exports in the category. Products that are being sold at an apparent loss figure into the calculation, but those that make a profit are assigned a margin of zero and ignored in the calculation, inflating the dumping margin.

“They do a weighted average but they put the sales that are above cost at zero, whereas they fully take into account the losses,” Grenier said from Montreal. “So when you do that, obviously, you’re going to have a negative sum and that means dumping.”

The WTO ruled the practice illegal in an earlier case involving the European Union. “But this is the first time that the U.S. use of that methodology has been found to be illegal as well,” he said.

Ironically, Canada also uses zeroing in its dumping reviews but has not yet been challenged on it.

In the softwood case, the U.S. Commerce Department investigated six major lumber exporters and assigned them individual dumping duties. Their results were used to create a weighted average applied to all other Canadian lumber exporters.

Grenier said the WTO decision will drive down the overall anti-dumping rate. Commerce’s own recalculations and NAFTA reviews have already cut it, as well as the countervail rate, in half.

The NAFTA anti-dumping appeal panel did not address zeroing in its earlier decision that forced Commerce to review its rates, but said it would reconsider if the WTO ruled the practice illegal.

NAFTA rulings have the force of law.

“The U.S. has unfairly used zeroing to push the anti-dumping duties upwards and forced Canadian lumber producers to pay unjustified cash deposits on lumber shipments,” said John Allan, president of the B.C. Lumber Trade Council.

Allan noted if zeroing were eliminated in Commerce’s first administrative review, the effect would be to cut the 3.98-per-cent preliminary dumping margin by up to half.

Canada is still challenging the overall basis for the duties, contending lumber is not subsidized by low provincial stumpage rates or other forestry policies.

A spokesman for the U.S. Trade Representative’s office said Canada won on a technical question but the main U.S. argument for levying duties was not struck down.

But B.C. Forests Minister Mike de Jong called on U.S. President George Bush to throw in the towel. “It’s time for Mr. Bush to acknowledge the obvious, that the U.S. has lost this dispute “