‘Black liquor’ subsidy prompts trade action

Canada and several other countries are threatening to take the United States before the world trade body over so-called “black liquor” subsidies to American pulp mills.

OTTAWA — Canada and several other countries are threatening to take the United States before the world trade body over so-called “black liquor” subsidies to American pulp mills.

In a joint letter to Congress, Canadian ambassador to Washington Michael Wilson and his counterparts call on the United States to close a loophole that allows pulp and paper companies to take advantage of a tax credit for using alternative fuels.

They say American companies are reaping up to $8 billion a year by mixing in a pulp byproduct called black liquor with diesel fuel, qualifying for the credit, in contravention of World Trade Organization rules.

Some companies claim credits that amount to approximately 30 per cent of the selling price of pulp, the diplomats assert.

“It is clear that these credits amount to actionable subsidies and that any adverse effects caused by them could be subject to remedies in the WTO or through domestic countervailing duty investigations,” the letter adds.

The letter, issued Thursday, is signed by Wilson, the head of the European Commission delegation to the United States, and the ambassadors of Chile and Brazil.

The issue has been a sore point in the Canadian forestry sector, which believes it is a constant target for what the U.S. perceives as unfair subsidies, but which have repeatedly been discarded by trade dispute panels.

But while the Forest Products Association of Canada welcomed government action, it said the chosen course will be too little too late even if it does follow through and succeed at the World Trade Organization.

“By the time a WTO case were to be launched and concluded, the damage would be done,” said Marta Morgan, vice-president of trade and competition with the trade association.

Morgan would not say what specific measures Ottawa should adopt, but said it was critical it act quickly because with each day, the Canadian mills are being put at a competitive disadvantage in terms resources to pay down debt and to invest on new plants and equipment.

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