OTTAWA (AP) – Canada is claiming a net victory in the latest softwood lumber dispute with the United States after an arbitration panel found that a majority of Canadian wood exports to the U.S. did not violate a 2006 trade agreement.

But it was unclear whether the decision, which is binding under the agreement, ends the matter, as the U.S. government said it would consider its options.

Although Canadian Trade Minister David Emerson quickly said Canada would abide by the ruling, the U.S. Trade Representative’s office said it disagrees with key aspects, and did not say it would accept the decision.

“While we remain committed to the long-term goal of market-based trade in lumber, we will be consulting with our stakeholders on options going forward,” said spokeswoman Gretchen Hamel.

Both countries have an option to opt out of the seven-year agreement.

The London Court of International Arbitration ruled Tuesday that Alberta and British Columbia – which represent more than half of Canada’s softwood lumber exports – did not violate the pact.

“It’s very good news for our industry,” said British Columbia Forests Minister Rich Coleman.

“On the flip side, it’s not particularly good for some of the issues in regards to Eastern Canada.”

Western producers, which pay a 15 per cent border tax on exports, had estimated the cost of losing the arbitration at $75 million.

The ruling found Canadian provinces that chose a quota system instead of the export tax – Quebec, Ontario, Manitoba and Saskatchewan – violated the agreement by not adjusting exports back to Jan. 1, 2007, instead of July 1 as they had claimed the agreement required.

“It will be difficult (for eastern producers),” said John Allan, president of the B.C. Lumber Trade Council. “Overall, I would guess we won the bigger issue.”

Canadian officials said the London court will decide on the penalty in May and compensation will likely involve a reduction of quotas for the four provinces.

“While Canada believes that it has fully complied with the agreement, we respect the tribunal’s ruling,” Emerson said in a statement.

The softwood lumber dispute has flared for decades, led by U.S. forestry companies that argue Canada subsidizes its industry through provincial cutting policies.

The two countries settled the trade fight in late 2006 when Canada agreed to limit lumber shipments to the United States.

However, since then the slumping American housing market has battered the homebuilding sector, pushing down lumber prices and squeezing producers.

That provoked renewed complaints from the U.S. forest sector lobby about shipments from Canada.

In Washington, the Coalition for Fair Lumber Imports, the main U.S. lumber industry lobby on the issue, said it was pleased with part of the ruling but disappointed with the decision on export tax levels applicable to British Columbia and Alberta.

That reaction was echoed by Sen. Olympia Snowe, R-Maine.

“While I am pleased that the panel recognized that Canada had failed to honor its commitments to implement export restraints during the months it was flooding the U.S. market with cheap lumber, I am disappointed with their decision to allow the provinces responsible for the greatest portion of the problem to evade export taxes by ignoring expected sales to the United States, counter to the intent of the parties,” Snowe said in a statement.

AP-ES-03-04-08 1829EST