Previous decision said plaintiffs couldn't challenge Canadian agreement

By MATEUSZ PERKOWSKI

Capital Press

Several dozen U.S. lumber companies will be able to proceed with a lawsuit against the federal government over a controversial trade deal with Canada.

A federal appellate court has overturned a previous decision that held that the lumber companies can't challenge the U.S. Trade Representative's Softwood Lumber Agreement with Canada.

The underlying dispute between U.S. lumber producers and the government of Canada dates back more than two decades.

In 1986, a coalition of lumber companies filed a petition with federal trade agencies charging that Canada was unfairly subsidizing timber production to the detriment of U.S. producers.

The ensuing controversy between the U.S. and Canada generated several trade deals, most recently the 2006 Softwood Lumber Agreement.

Under the terms of the deal, Canada agreed to offset subsidies by imposing export charges and volume restrictions on its lumber if prices fell below certain levels.

Canada also had to pay $500 million to members of the Coalition for Fair Lumber Imports, which initiated the original complaint with U.S. federal agencies.

Plaintiffs in the current case filed a complaint in 2008 against the U.S. Trade Representative, which negotiated the deal, arguing that payments should be made to all affected U.S. lumber producers -- not just those in the coalition.

The complaint claimed that USTR had acted "arbitrarily and capriciously" in violation of federal law by not representing the interests of the entire lumber industry.

However, the U.S. Court of International Trade dismissed the lawsuit, ruling it lacked jurisdiction over the litigation because the USTR was acting under its authority to negotiate on behalf of the president.

The U.S. Court of Appeal for the Federal Circuit has overturned that opinion, ruling that the USTR was acting under a trade statute that left it open to a lawsuit from lumber companies.

The controversy over the Softwood Lumber Agreement is also continuing on a broader scale. Earlier this year, the U.S. initiated arbitration proceedings against Canada over the agreement, alleging that it had been circumventing the terms of the deal.

An international tribunal has twice ruled against Canada in similar disputes over the Softwood Lumber Agreement. The deal is to remain effective until 2013 but then may be extended for another two years.