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Long-outlawed US trade policy wins WTO approval in Canada lumber dispute

(Adds U.S. comment)

By Tom Miles

GENEVA, April 9 (Reuters) - A World Trade Organization ruling approved a long-outlawed U.S. trade policy on Tuesday, when a panel of adjudicators said Washington's use of "zeroing" to calculate anti-dumping tariffs was permissible in the case of Canadian softwood lumber.

The WTO's long-running row over zeroing is a technical dispute that turned into a power struggle between the United States and the arbiters of international trade law.

The United States has suffered a string of defeats at the WTO over zeroing, a calculation method that was ruled to have unfairly increased the level of U.S. anti-dumping duties.

The repeated losses helped to fuel U.S. President Donald Trump's campaign to reform the WTO, where the United States is blocking appointments at the WTO's Appellate Body, effectively the supreme court of world trade.

Trump said last year the United States could withdraw from the WTO if "they don't shape up".

U.S. Trade Representative Robert Lighthizer welcomed the ruling by a WTO dispute panel, which he said showed the "erroneous", "unpersuasive" and "flawed reasoning" of Appellate Body rulings in the past. "The United States commends this panel for doing its own interpretive analysis, and for having the courage to stand up to the undue pressure that the Appellate Body has been putting on panels for many years," Lighthizer said in a statement.

He said the WTO rules did not prohibit zeroing, and the United States would never have signed up to WTO rules that did prohibit the practice.

"WTO Appellate Body reports to the contrary are wrong, and reflect over-reaching by that body," he said.

Canada launched the WTO dispute in November 2017, saying it would forcefully defend its lumber industry against "unfair, unwarranted and deeply troubling" U.S. tariffs.

The U.S. Commerce Department had accused Canada of unfairly subsidising and dumping softwood lumber, which is commonly used in the construction of homes. Its duties affected about $5.66 billion worth of imports.

There was no immediate reaction from Canada’s international trade ministry, which could appeal against the ruling. (Reporting by Tom Miles; Editing by Stephanie Nebehay and Mark Potter)