State C is a major exporter of lumber products (especially plywood) to State U. State C’s lumber companies are able to manufacture and sell their products in State U inexpensively because (unlike State U) State C’s government charges only a nominal fee for cutting lumber in its national forests. In State U, on the other hand, the cutting fee is substantial, adding 15–20 percent to the cost of the finished lumber product. One of State U’s plywood lumber companies, Multi-Ply, Inc., has lost much of its market share in State U due to imports from State C. Multi-Ply has complained to State U’s government, arguing that State C is unfairly subsidizing its lumber companies by charging such a low forest-cutting fee.

Multi-Ply would like State U’s government to impose a countervailing duty on imports of plywood from State C. May State U do so? Note that both State C and State U are members of the WTO. Discuss.