Canada, US closer to lumber deal, says source

OTTAWA (Reuters) - Talks between the United States and Canada on ending a protracted dispute over softwood lumber are "picking up speed" and a deal could be reached soon, a well-placed Ottawa source told Reuters on Tuesday.

"They're trying to get something done in the next week or two but they're not there yet," the source said.

The United States has imposed duties on Canadian wood it says is subsidized and illegally dumped in the U.S. market -- a charge Canada denies. Washington has collected around $4 billion in duties, money that Ottawa wants back.

President Bush called Canadian Prime Minister Stephen Harper on Saturday and during the conversation the two men reaffirmed their commitment to ending the long-running dispute, the White House said on Tuesday.

But the Ottawa source denied a report in Canada's Globe and Mail newspaper that said Bush had outlined an offer to end the trade dispute. The report said the offer would involve Washington returning most of the duties it has collected.

Other Canadian media reports said the deal being discussed would see the United States return 78 percent of the duties, and Canada would limit shipment to about 34 percent of the U.S. market.

Canadian International Trade Minister David Emerson skirted questions about a deal, saying no agreement had been struck yet.

"Probably, over the last five years, there have been at least five occasions when it was alleged that Canada and the United States were close to a deal on softwood lumber. I can tell you that being close doesn't count," he told Parliament.

In Washington, U.S. Trade Representative Rob Portman said he hoped the dispute could be resolved before he moved to a new job as White House budget director.

A group representing Ontario lumber companies warned on Tuesday that Canada might be giving up too much.

The Ontario Forest Industries Association statement hinted at previous splits between lumber firms in Eastern and Western Canada that have hampered efforts to reach a settlement.

"For at least the eastern Canadian forestry sector and possibly the entire C$81 billion Canadian industry, the recent return to the negotiating table is an ominous sign that a deal at any cost is in the works," said group president Jamie Lim.

Canada has launched a raft of cases against the United States through the North American Free Trade Agreement and the World Trade Organization.

The Ontario group said producers in the province and in Quebec -- which are third and second respectively behind British Columbia in lumber exports -- had warned Ottawa not to negotiate away Canadian victories at NAFTA trade panels.

"What we now know is that our government may be considering a deal that ... will harm the industry in Ontario and accelerate the already ominous list of closures and job losses," Lim said.

(With additional reporting by Allan Dowd in Vancouver and Sophie Walker in Washington)