WASHINGTON (AP) – The Bush administration set conditions Wednesday for Canada to adopt in moving toward a market-based system for lumber exports as a way to eliminate stiff U.S. tariffs.

The conditions, set out in a Commerce Department policy bulletin, are intended to raise the price of Canadian softwood lumber to a level more in line with prices in the U.S. market and end a decades-old dispute between the two countries.

A Canadian official called the plan a step forward, but said “much consultation needs to be done.”

The U.S. last year imposed tariffs averaging 27 percent on softwood imports from four Canadian provinces, contending that government subsidies kept prices artificially low and threatened the U.S. industry.

Softwood lumber from pine, spruce and other trees is used to frame houses. The United States imported nearly $6 billion of softwood lumber from Canada last year, about one-third of the American market.

Undersecretary of Commerce Grant Aldonas said the latest U.S. proposal was intended to meet Canada “halfway” by laying out a series of steps provincial governments can take to remove the U.S. tariffs, which Canada considers punitive.

“The goal is … for our colleagues north of the border to see a way clear to resolve the dispute,” Aldonas said in a conference call.

Among other conditions, the U.S. is asking Canada to drop so-called minimum cut requirements that invite harvesting even when market conditions dictate otherwise; and change policies that force mills to produce lumber even when the market is bad.

The United States also wants Canada to ensure that a significant percentage of its lumber is sold at auction, with fees for remaining lumber set according to auction prices.

The proposal follows a mixed ruling by the World Trade Organization last month. The WTO found that the U.S. erred in imposing the tariffs but called Canada’s system of providing lumber producers with timber from public lands a financial contribution that is subject to duties.

The U.S. proposal does not address a Canadian plan for a quota system as an interim solution. Canada’s plan would allow the Canadian government to collect an export duty on shipments that exceed 17 billion board feet a year, or about 90 percent of the expected shipments to the United States. The proposal would effectively cap Canada’s share of the U.S. market at its current level of 34 percent, although key details still need to be worked out.

Sebastien Theberge, a spokesman for Canadian trade minister Pierre Pettigrew, said Pettigrew and other officials would consult with provincial and industry leaders before making any response.