U.S. Will Study Complaint Over Canada Lumber : American Companies Say Wood Exports Are Being Subsidized; Want Duty

WASHINGTON —  The Reagan Administration announced Friday that it will investigate U.S. industry charges that Canada is subsidizing lumber exports to the United States.

The investigation comes on the heels of a bitter dispute with Canada over wood shingle imports on which President Reagan imposed stiff import duties, only to be answered by angry criticism from Prime Minister Brian Mulroney and retaliatory tariffs on American computer parts, books and periodicals and other exports.

Under existing trade laws, the Commerce Department must open a detailed inquiry if an industry claiming injury from imports can support the need for such a probe. In this case, a group representing a coalition of U.S. lumber interests complained May 19 that the $2.8 billion in softwood products that Canada sold here last year benefited from an unfair 27% export subsidy.

If the department and the quasi-judicial U.S. International Trade Commission substantiate the charges, such products imported into the United States from Canada would be subject to countervailing duties of up to 27%.

The two disputes over wood products have emerged at a time when Congress seems determined to pass severely protectionist trade laws. Sensing a potent issue in November’s elections, House Democrats, backed by 59 Republicans, two weeks ago overwhelmingly passed a bill that would sharply restrict imports from around the world.

May Disrupt Plans

At the same time, there is a danger that the skirmish with Canada, the United States’ largest trading partner, may delay or disrupt plans to negotiate a sweeping free-trade agreement between the two countries.

In a statement Friday in Ottawa, Canadian External Affairs Minister Joe Clark said he expressed his government’s “very deep regret” during a telephone conversation with U.S. Commerce Secretary Malcolm Baldrige at the U.S. decision to open the investigation into the charges by the U.S. lumber interests. Clark appealed for time for Canada to present its case.

“There is an opportunity for Canada to make a strong, calm case,” Clark was quoted as telling opposition party spokesmen who urged the Progressive Conservative government to suspend the free-trade talks between the two countries.

The Administration’s initial move to impose tariffs on wood shingles and shakes--about which the Canadian government was not forewarned--provoked the angry attack by Mulroney on U.S. trade policies. The air was cleared somewhat after Reagan apologized for the failure to inform Mulroney in advance.

In the first steps of the investigation, the International Trade Commission has until July 3 to decide whether the U.S. lumber industry has suffered injury from the Canadian imports, as alleged by the Coalition of Fair Lumber Imports. If the commission finds no such injury, the case would be dismissed.

If injury is determined, however, the case would be referred to the Commerce Department for a more detailed probe.