With the Doha round in trouble, the so-called spaghetti bowl of multilateral trade rules and proliferating regional trade deals is, once again, prominently on the radar screen of the international trade community. Perfect examples of this image are the long-standing US–Canada softwood lumber and US–Mexico sweetener disputes. Both trade spats, extensively litigated in the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), are close to reaching a climax. Fueling the suspense is that the WTO and NAFTA may reach different results. On 15 November 2005, a WTO panel accepted a US finding that Canadian imports of softwood lumber threaten to cause material injury to US competitors.1 Earlier this year, however, on 10 August 2005, a NAFTA Extraordinary Challenge Committee confirmed an earlier (Chapter 19) NAFTA panel conclusion that the evidence on record does not support a finding of threat of material injury.2 With NAFTA finding in favor of Canada (that is, no threat of material injury, hence no US right to either antidumping or countervailing duties) and the WTO finding in favor of the United States, what is next? Can the United States maintain its extra duties on Canadian lumber (currently averaging 20.15%) or must the duties be withdrawn and/or repaid? If the latter, must the United States refund the full, or only part of the, amount of what so far adds up to over US $4.2 billion?
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Joost Pauwelyn (2006) studied this question.