A group representing the US lumber industry filed a lawsuit last week challenging the constitutionality of a dispute settlement system under the North American Free Trade Agreement, or NAFTA.

The group, the Coalition for Fair Lumber Imports, said the free-trade agreement allows US-Canadian panels to make binding decisions applying US law to federal actions regarding unfair trade. The group called that contrary to due process and other constitutional requirements.

“The Constitution does not permit these panels to be the final arbiter of whether US law provides for relief from unfair subsidies and dumping for US producers and workers,” said Steve Swanson, the group’s chairman.

The lawsuit is the latest step in an ongoing dispute between the U.S. and Canada over steep US tariffs imposed on imports of Canadian softwood lumber used in home construction.

The tariffs, which average 27%, were put in place at the urging of the domestic lumber industry, which contended it was losing thousands of jobs because of unfair subsidies provided to Canadian producers.

Canada’s International Trade Minister Jim Peterson condemned the lawsuit and said Ottawa would defend its rights under NAFTA.

“This is nothing more than a veiled attempt by the US coalition to undo the softwood victories that Canada has achieved through the Nafta,” Peterson said. “We stand ready to vigorously defend the Nafta and we will take all steps open to us to ensure it is respected.”

A spokeswoman for US Trade Representative Rob Portman said he was still reviewing the complaint.

“However, the United States firmly believes that the dispute settlement procedure in the NAFTA…complies with the Constitution,” spokeswoman Neena Moorjani said in a statement.

The Bush administration said it is considering reducing lumber tariffs and other duties if building needs from Hurricane Katrina cause prices to spike.

Treasury Department spokesman Tony Fratto said the administration has executive authority to reduce the tariffs in an emergency, but no decision has been made. (ODC via Comtex)