Canadian officials are only cautiously optimistic about a deal reached as they prepare for Monday's talks with the US on the long-time softwood lumber trade war between the two neighbors.

Federal and provincial government representatives, along with forest-industry executives, will sit down Monday in Washington with their American counterparts for two or three days of discussions, reports reaching here from Vancouver said Sunday.

The talks are based on an exchange of proposals earlier this year whose goal was the lifting of punitive US lumber duties in exchange for reforms to make Canadian provincial forestry policies more market-oriented.

The talks are taking place as the fourth round of lumber trade litigation in 25 years heads towards an end game, which Canadian officials cautiously believe their country can win, but not necessarily during this round of talks.

Rich Coleman, Forests Minister of the province of British Colombia which is a major softwood exporter to the US, says given the history of Canada's longest-standing trade irritant with the United States, he's not overly optimistic the discussions will yield results. However, the window is open, anyway, he believes.

"I think the opportunity's there now," says Coleman, "Whether the window's going to stay open very long, I don't know. It depends, frankly on both sides of the border."

Lumber industry spokesman John Allan agrees with him. "I think the door is open but we're trying to go to see how far it's open," says Allan.

Canadian lumber exporters are paying about 21 percent in combined countervailing and anti-dumping duties, first imposed in May 2002 after the US Commerce Department accepted American lumber producers' claims Canadian softwood was unfairly subsidized.

Ottawa and the lumber-producing provinces have always denied exports are subsidized and challenged the duties under the North American Free Trade Agreement (NAFTA) and before the World Trade Organization.

Canada has claimed victory in a series of WTO and NAFTA rulings but must still deposit the money with US Customs until the issue is resolved.

Coleman adopts a widely held industry view that the US case is less about alleged subsidies than about market share.

Canada shipped about 21 billion board feet of lumber south last year, up two billion feet from 2003 . Canadian softwood has a 34 percent share of the US market, which American producers want to see closer to 30 percent.

"It's obvious that the party to the south doesn't have an interest in a trade deal, so to speak, but more what's a negotiated settlement that balances the industry in their minds," says Coleman.

Nevertheless, most of Canada's lumber-exporting provinces have undertaken some policy reforms in hopes of satisfying the Americans.

While nothing's been committed to paper, there's a lot of discussion now around what kind of temporary export tax Canada might levy while the US Commerce Department signs off on those changes.

Canada favours a flat-rate tax while US officials want one that 's higher at low points in the lumber market-price cycle - just when Canada's more productive mills have a competitive advantage.

Source: Xinhua