OTTAWA (AFP) - Canada praised a World Trade Organization about-face giving it another legal win in its longstanding lumber feud with the United States, but planned to help its forestry firms with cash if the dispute is not resolved soon, officials said.
A WTO appeals body announced that it was reversing a November 2005 ruling which had found that the United States was complying with the organization's rules.

Canada appealed to the body last year claiming Washington had failed to respect an earlier WTO ruling that it was using flawed methods to determine whether Canadian lumber importers damaged their US competitors.

"We are pleased with this decision because it reflects the position we have maintained all along. The United States can no longer claim that its measure is WTO-consistent," Trade Minister David Emerson said in a statement.

Washington and Ottawa have jousted over lumber for several years at the WTO.

The two have also turned to the North American Free Trade Agreement's (NAFTA) dispute settlement body and US trade courts in an attempt to settle their differences.

The latest WTO ruling is one of a litany of wins, losses and draws for both sides.

The US Trade Representative's office in Washington said the WTO decision backed a US commission's finding, and said it was pleased with "this result".

"Today, the WTO Appelate Body issued a report that let stand a United States International Trade Commission (ITC) determination that dumped and subsidized Canadian lumber threaten the US lumber industry with material injury," USTR spokesperson Neena Moorjani said in a statement.

"We are pleased with this result," she said, adding that both countries needed to "reach a permanent solution" to the dispute.

A US anti-dumping investigation found that Canada had unfairly subsidized its industry and dumped cheap wood on the US market, and resulted in Washington imposing new duties on Canadian softwood products in 2002.

Canada has pushed for a refund of 4.5 billion US dollars in duties on Canadian softwood imports collected since then.

But the United States has balked at the demand and has instead repeatedly pressed for a negotiated settlement.

Last month Canadian Prime Minister Stephen Harper and US     President George W. Bush agreed to appoint special envoys to look into ways to kick-start talks to end the trade row.

Harper said Thursday he hoped to resolve the dispute in "the coming weeks" or else he would offer financial assistance, in the form of loan guarantees, to Canadian forestry companies harmed by US duties on softwood.

"If this political will doesn't lead to positive results over the coming weeks, we intend to support our lumber industry, including through loan guarantees," he told reporters.

"If we don't get a resolution of this issue, we intend to support our industry and to support it much more strongly than was supported in the past," he said, noting such aid would likely derail Canada-US negotiations.

Lumber companies in the United States blasted a similar proposal by former     Prime Minister Paul Martin's Liberal government last year, calling it a government subsidy.

"I think that during the preliminary discussions with the Americans, having this type of assistance program won't really help move the negotiations forward," Harper said.