If two countries disagree on a trade matter, they take their problems to court — trade court. But what happens when two courts are...

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If two countries disagree on a trade matter, they take their problems to court — trade court.

But what happens when two courts are asked to decide and can’t agree on who’s right?

That’s the situation surrounding trade in lumber between Canada and the U.S., which is playing out partly in the World Trade Organization’s trade court.

For years, the two countries have been fighting over tariffs the U.S. charges on Canadian softwood lumber, used to make joists and two-by-fours that provide the frames for houses.

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The U.S. says Canada subsidizes its timber industry by letting companies pay far less than market value to harvest trees from Canada’s vast public forests. Late last month, Canada announced a new $1.28 billion package of forest-industry subsidies.

In the U.S., companies bid for such rights, paying up to 75 percent more than in Canada, said Harry Clark, a lawyer for the Coalition for Fair Lumber Imports, an association of U.S. lumber companies.

Since 2002, the U.S. has charged a tariff as high as 27 percent on imports, adding about $1,000 to the cost of a new house and amassing a pot of around $4 billion.

Trees


Wood products are Washington’s No. 8 export. Taken together with paper products, they’d rank fifth.

In October, a dispute-settlement panel of the North American Free Trade Agreement (NAFTA) said the Canadians are doing nothing wrong and that the U.S. is miscalculating the tariffs.

But in November, the WTO’s dispute-settlement panel affirmed the U.S. claim that Canada’s practices amount to unfair trade. Accordingly, the tariffs the U.S. charges are legal.

Now, both sides are trying to change the rules. The coalition claims the NAFTA dispute-settlement provision violates U.S. constitutional guarantees of due process.

Canada is among the countries pushing a WTO change that could force the U.S. to alter its trade laws. The proposal is expected to be part of the Hong Kong talks on trade rules.

“Canada and other countries want to shut down these unfair-trade cases by negotiating rules at WTO that make them impossible to bring,” Clark said.

It could get more complicated still. Canadian farmers in November were reportedly preparing to allege U.S. subsidies to corn farmers are unfair, and seeking a tariff to protect corn growers in Canada from U.S. competition.