US Trade Representative Ambassador Ron Kirk
Washington accused Canada on Tuesday of breaking a five-year-old agreement on lumber exports to the United States, and demanded arbitration.
Ottawa rejected the charge as "unfounded."
US Trade Representative Ron Kirk said Canada has sold softwood timber from public lands to Canadian lumber exporters for prices below those agreed in a 2006 pact.
The Canadian province of British Columbia is said to have sold exporters timber felled from public lands for a low price of 25 cents per cubic meter.
"Canada is in breach of its commitments," said Kirk. "When we believe our trading partners are not living up to their obligations, we will not hesitate to enforce our rights under our trade agreements."
Washington said talks to resolve the matter without arbitration had failed.
But Canadian Trade Minister Peter Van Loan shot back, saying the US complaint "deals with a pricing system that is no longer in place" and relies "on unfounded allegations."
Van Loan said he was "disappointed" that Washington has "rejected cooperative dialogue on this matter in favor of formal dispute settlement."
"There is no justification for arbitration, and Canada will vigorously defend the interests of its softwood lumber industry," he added.
Van Loan pointed to an "unprecedented infestation of the mountain pine beetle" in British Columbia for an increased proportion of low-value logs in the province's timber harvest, sold at auction.
The dispute is the third between the two countries over the 2006 agreement, which was designed to regulate the multi-billion-dollar" class="inform">dollar trade.
In the first case, Canada was ordered to pay over CAN$68 million (US$68.8 million) in export duties after failing to correctly calculate quotas.
The second case, involving provincial subsidies, has not yet been resolved.
The arbitration process in this latest case could last for two or more years before a decision is made.
While it is ongoing, British Columbia Forestry Minister Pat Bell said there would be no change in how the province's lumber is shipped to the United States.
Copyright 2011 AFP American Edition