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Canada and the United States may be going chain saw to chain saw in their long-running trade showdown over lumber imports, but at least one Washington group in the fight is in no danger of being buzzed � the lawyers. Companies, trade groups, and government agencies on both sides of the border are spending tens of millions on legal and lobbying fees, and the battle has drawn in more than 40 law firms, nearly every international trade practice in the District. Now, just two weeks after the two sides resumed talks after a lapse of more than a year, the fight may be getting even hotter � and more expensive. The Canadian government wants the United States to return $3.4 billion in tariffs collected on lumber imports. And although Canada has won appeals on the issue at nearly every step of the legal process, the United States says it doesn’t believe it has to pay up. In the coming months, the World Trade Organization (WTO) could allow Canada to hit the United States with trade sanctions. Congress � driven by members from states with big timber interests � may get into the act, and lawyers for the U.S. industry are threatening to turn the fight into an all-out attack on the international legal system. “If the U.S. says, ‘We lost the case, and we’re going to revoke the orders and return the money,’ it’s a lot of pork that Congress won’t be able to bestow on its constituents,” says Daniel Ikenson, an international trade specialist at the libertarian Cato Institute. “This is a huge, huge case.” How huge? Last year, lumber and paper companies spent more than $6.1 million on lobbying Congress, according to disclosures filed with the Senate. And according to a February 2004 estimate in The Globe and Mail, the government of Canada and the Canadian timber industry spent $100 million on legal fees in the previous three years. The big money has meant hefty paydays for firms, particularly Dewey Ballantine, which represents the Coalition for Fair Lumber Imports, a group of U.S. companies. In lobbying fees alone, the firm has collected more than $1 million over the last three years, Senate disclosure records show. Scott Shotwell, a lobbyist for the U.S. industry who is working on the matter, says the coalition has spent about $10 million on legal efforts in recent years.
Law and Lobby Firms Representing U.S. Lumber Interests
Bracewell & Giuliani Dewey Ballantine Loeffler Tuggey Pauerstein Rosenthal
Law and Lobby Firms Representing Canadian Lumber Interests
Akin Gump Strauss Hauer & Feld Alston & Bird Arent Fox Arnold & Porter Baker & Hostetler Baker & McKenzie Barnes & Thornburg Betts, Patterson & Mines Cameron & Hornbostel Clifford Chance Covington & Burling DLA Piper Rudnick Gray Cary Farris Vaughn Wills & Murphy Gibson, Dunn & Crutcher Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt Hogan & Hartson Howrey Simon Arnold & White Hughes Hubbard & Reed Hunton & Williams Kaye Scholer Law Offices of Joel R. Junker Law Offices of Stephen J. Leahy Law Offices of Mark R. Sanstrom Law Offices of A. Woodson Stuart Law Offices of George R. Tuttle Miller & Chevalier Pepper Hamilton Powell Goldstein Public Affairs Associates Inc. Quinn Gillespie & Associates Ryan, Swanson & Cleveland Shibley Righton Steptoe & Johnson Weil, Gotshal & Manges White & Case Wiley Rein & Fielding Willkie Farr & Gallagher Wilmer Cutler Pickering Hale and Dorr

U.S. lumber companies are also gilding their lobbying and legal teams with connected political players, including former Republican National Committee Chair and Montana Gov. Marc Racicot and former Rep. Ed Bethune (R-Ark.), both of Houston-based Bracewell & Giuliani, and former Rep. Tom Loeffler (R-Texas) of Loeffler Tuggey Pauerstein Rosenthal. And late last year, two former attorneys general, Richard Thornburgh of Kirkpatrick & Lockhart Nicholson Graham and Griffin Bell of King & Spalding, wrote letters to Congress on behalf of U.S. interests. In the Canadian camp, north-of-the-border companies, provincial governments, and lumber trade associations are using Wilmer Cutler Pickering Hale and Dorr; Steptoe & Johnson; Weil, Gotshal & Manges; Baker & Hostetler; Gibson, Dunn & Crutcher; and Miller & Chevalier, among others. Though Canada’s team lacks the political star power of the one being used by U.S. companies, many of their advocates are longtime heavyweights in international trade. M. Jean Anderson, for example, a partner at Weil, Gotshal, is lead counsel for the government of Canada on the issue. She is a former chief counsel for International Trade at the Department of Commerce and helped craft the North American Free Trade Agreement (NAFTA). “This [issue] is by far the largest employer of international trade lawyers at present,” says Gary Horlick, a partner at Wilmer Cutler who lobbies for Canadian companies and U.S. homebuilders. SENATE SUPPORT The United States and Canada have long battled over the lumber trade, but the fight escalated in 2001 as a 15 percent U.S. tariff on Canadian lumber expired. The Coalition for Fair Lumber Imports filed for protection with the Department of Commerce, arguing that Canadian provinces unfairly subsidize their industry, allowing Canadian companies to sell lumber in the United States below market rates. The Department of Commerce agreed and imposed steeper tariffs � 27.2 percent � on Canadian lumber imports. That tariff has been the crux of the current fight. The Canadian side has challenged the decision in a dozen separate cases at the WTO and at panels created under NAFTA to mediate cross-border trade disputes. More than a dozen rulings have said the tariff is too big. Every ruling has been appealed, sometimes by both sides. Right now, the parties are awaiting a special NAFTA panel’s June hearing on whether the United States should have enacted its tariff. And the WTO could act by the end of the year on allowing Canada to impose trade sanctions. Congress, too, could jump into the fray. In November, shortly after the election, Sen. Max Baucus (D-Mont.) took to the Senate floor and issued a legislative threat. A representative of a key lumber-producing state, Baucus proposed a bill requiring the government to immediately hand over the disputed $3.4 billion in deposits to the U.S. lumber industry. The bill is “a way of reminding the parties of the stakes that are still very much on the table,” Baucus told the Senate at the time. Baucus’ bill never advanced out of committee. But its message was clear: U.S. companies don’t want the money going back to Canada. They believe that kind of windfall would give Canadian companies a key competitive advantage. And they are willing to go to their friends in Congress to short-circuit the legal process that’s playing out before the WTO and NAFTA panels. The key player behind the congressional pressure has been the Coalition for Fair Lumber Imports, which includes U.S. lumber giants like the International Paper Co., the Potlach Corp., Sierra Pacific Industries, and dozens of smaller Southern lumber producers. The coalition has been a client of Dewey Ballantine since the group was created in 1986. The relationship is so tightknit that the organization’s office is located inside Dewey Ballantine’s D.C. outpost on Pennsylvania Avenue. “It made . . . sense because we work so closely together,” says Harry Clark, a partner at Dewey Ballantine who works on the case. The lumber dispute has been central to the firm’s international trade group, and Dewey has had 15 lawyers devoted to the issue at times. The coalition isn’t the only player on the U.S. team. International Paper, for example, also does its own lobbying � to the tune of $2.5 million a year, according to Senate disclosure records. The timber industry has also learned the art of campaign finance, spending $4.8 million during the 2004 election cycle, 80 percent of which went to Republicans, according to the Center for Responsive Politics. Among the top donors: International Paper, at $479,332, and the Plum Creek Timber Co., at $89,400. The Forest Landowners Association, a group of Southern timber owners, also aided in the fight. The group spent $130,095 during the 2004 election cycle. Its incoming president, Otis Ingram, is a Bush Pioneer, having raised more than $100,000 for the president’s re-election efforts. The U.S. lumber industry also has a distinct political advantage: a large geographic reach. Both the Southeast and Northwest are home to major timber landowners and companies, and it can count on a vocal and bipartisan cadre of congressional supporters, particularly senators from big timber states like Baucus and Idaho Republicans Larry Craig and Michael Crapo. “It’s one of the most aggressive industries I have dealt with,” says Jon Huenemann, a Fleishman-Hillard senior vice president who handled lumber litigation in the mid-1990s as an assistant U.S. trade representative. “It was just a constant flow of information and a very high degree of scrutiny by congressional supporters of what the administration was doing.” TARIFF TUSSLE Not every U.S. company is backing the tariffs, including one of the biggest forestry players, the Weyerhaeuser Co. of Federal Way, Wash. The reason: Weyerhaeuser is also one of the largest timber companies in Canada, with licenses on more than 30 million acres of forest land there and nearly 10,000 Canadian employees. Canadian lumber represents one-third of Weyerhaeuser’s output. The company spent more than $2 million on lobbying in the last two years, and it formed a coalition � the Free Trade Lumber Council � with other Canadian companies and with the American Consumers for Affordable Homes, a home builders industry group, to fight the tariffs. The Free Trade Lumber Council is represented by Wilmer Cutler. Other U.S. companies simply didn’t agree with the tariff strategy. In 2001, as the U.S. industry was pushing for renewed tariffs, the Louisiana Pacific Corp.’s then-CEO Mark Suwyn warned that forcing Canada to change its production system might drive prices “down, rather than up,” according to media reports at the time. But even disagreements among U.S. companies are unlikely to curtail the political and legal wrangling. Late last month, the two sides resumed political negotiations for the first time in more than a year. But should the talks fail, the Coalition for Fair Lumber Imports is threatening to revive its 1995 legal challenge to the constitutionality of NAFTA. “If we still feel we’re injured, we’d bring another case,” says the coalition’s Shotwell. “There is no question about it.” Emma Schwartz can be contacted at [email protected].

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