REGINA - The federal government hinted at an escalating trade
war today as two senior cabinet ministers warned of potential
tariffs on American exports in retaliation for U.S. policies on
softwood lumber.

Trade Minister Jim Peterson is identifying areas where
Canadian tariffs could put maximum pressure on the U.S. economy with
minimal damage domestically, two of his cabinet colleagues said.

One federal minister used a Canadian sports analogy to
describe the federal government's willingness to retaliate against
its NAFTA partner.

"I have a background from my younger days in hockey. When
somebody slammed you into the boards with undue force and aggression,
you took their number," Industry Minister David Emerson said in a
scrum.

"I think we've got to take their number."

The warning comes one week after the United States announced
it would ignore a decision by a NAFTA panel that found Canadian
lumber exports posed no threat of injury to U.S. producers.

Emerson said Ottawa is trying to "identify a number of
products where a tariff on American exports into Canada can be
applied without serious damage to the Canadian economy and,
hopefully, with maximum impact in the U.S.

"The idea is a wakeup call (to the U.S.)"

Canada is already seeking WTO authorization for billions of
dollars in punitive tariffs against U.S. imports and is going before
the U.S. Court of International Trade in New York to force the
refund of duties.

With more that 80 per cent of Canadian exports going to the
U.S. and the countries exchanging $1 billion each day, Canada would
need to tread carefully to avoid a crippling trade war.

But the federal government is intent on making its point that
U.S. Customs has illegally collected $5 billion in tariffs on
Canadian softwood since 2002, said Finance Minister Ralph Goodale.

"We want to make sure that whatever option we pursue is
effective in making our point ... without at the same time shooting
ourselves in the foot," he said.

"Canada has wanted to make it very clear that we are not happy
with the position of the United States to simply ignore what is a
clear NAFTA ruling in Canada's favour."

One particularly draconian measure has already been ruled out
- imposing export quotas on Canadian oil exports to punish alleged
U.S. protectionism on lumber.

Emerson, who initially supported the idea when he was a
lumber-industry executive, now says it would unfairly saddle Alberta
with the bulk of the economic fallout.

He said today the government is considering tariffs that
wouldn't damage the economy in one single region of the country.

"We are stronger as a country when we pull together in a
unified way. If we take actions that create regional balkanization,
division and friction, we're not becoming stronger as a country,"
Emerson said.

"(We have) to find effective tools that aren't going to create
more problems at home than they solve abroad."

Also today, Goodale dismissed reports of bursting government
coffers as wildly exaggerated and rejected private-sector forecasts
that the surplus for 2004-05 will total more than $8 billion.

He said the actual surplus for the last fiscal year will wind
up being far closer to his initial projections - $3 billion or "a
little bit less" and said this year's projections are also "the most
accurate prognosticators" of what lies ahead.

Published in the Toronto Star, Aug. 23, 2005

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