Canada is disappointed with a ruling from the World Trade Organization (WTO) which favored the United States in their softwood lumber trade dispute, and will not change its position, Trade Minister Jim Peterson said Tuesday.

An interim ruling from the WTO late Monday said the United States complied with international law when it imposed billions of dollars in duties on Canadian softwood exports.

The ruling is the direct opposite of a previous one by the North American Free Trade Agreement (NAFTA), which dismissed Washington's claims that Canadian softwood exports are subsidized and damage the US lumber industry.

Canada had hailed the NAFTA ruling as a major victory, and expected the US to be bound by the ruling to return punitive tariffs that have been collected from Canadian exporters since 2002.

But Washington refused, saying the ruling did not end the matter because it did not deal with a 2004 decision by the US International Trade Commission which supported the American case.

Even after the WTO ruling, Canada won't change its demands that Washington back down and return the money, because NAFTA decisions supersede WTO rulings, Peterson told reporters.

Under the terms of NAFTA, the continental trade pact "trumps" the WTO in disputes, Canadian trade experts pointed out.

"NAFTA states very clearly that in the case of a conflict between NAFTA and WTO, NAFTA prevails," said Barry Appleton, a Toronto-based trade lawyer.

Following the US rejection of the NAFTA ruling, Ottawa cancelled planned talks and has already begun the process of seeking WTO permission for the right to slap trade sanctions on almost 5 billion US dollars on US products in retaliation. The process is expected to continue for at least one more year.

The US victory this week at the WTO could undermine Canada's applications there for sanctions if the ruling in Washington's favor ultimately stands, senior Canadian trade officials acknowledged.

Canadian softwood producers sell about 10 billion Canadian dollars (8 billion US dollars) worth of spruce, pine and fir lumber a year to the US home-construction and renovation sectors.

The US industry has long claimed that Canadian producers are unfairly subsidized through low fees paid to governments for timber. The US government began to collect punitive tariffs on Canadian softwood in May 2005.

Canada has been fighting the countervailing and anti-dumping duties through legal channels as well as in high-level negotiations.

Besides the WTO and NAFTA, officials said Canada is also pursuing its case in another venue, the US Court of International Trade where hearings are expected to begin in September.

Despite its victory, Washington has reiterated its call for negotiations. A spokesperson for Trade Representative Rob Portman said the US would like to have more talks towards a new softwood lumber pact, according to reports reaching here from Washington.

Source: Xinhua