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However, two weeks later, a WTO panel concluded that the U.S. wrongly applied harsh duties on Canadian softwood exports. They also found that provincial stumpage programs provide a "financial benefit" to Canadian producers. But, the panel made it clear that the benefit is not enough to be a subsidy, and does not justify current U.S. duties.

"We are extremely pleased that the ECC dismissed the claims of the United States," said Canada's International Trade Minister Jim Peterson.

"This is a binding decision that clearly eliminates the basis for U.S.-imposed duties on Canadian softwood lumber. We fully expect the United States to abide by this ruling, stop collecting duties and refund the duties collected over the past three years," he said.

Negotiations between Canada and the U.S. are expected to resume next week.

While there have been suggestions that the ruling could bring the softwood dispute to an end after more than four years, the issue may not be resolved. The United States could still file legal challenges outside of NAFTA.

The United States has been collecting duties on Canadian softwood lumber since May 2002, after American lumber producers accused Ottawa of subsidizing lumber exports.

Sources

• "Canada 'extremely pleased' with NAFTA softwood ruling". CBC, August 10, 2005
  
• "Softwood lumber dispute". CBC, December 08, 2003