OTTAWA (CP) - The long-running softwood lumber dispute between Canada and the United States could be resolved by the end of the year, says David Wilkins, the American ambassador to Ottawa.
In an interview Sunday on television, Wilkins struck an upbeat tone, despite the apparent failure of Prime Minister Stephen Harper and     President George W. Bush to make any headway on the issue at last week's NAFTA summit in Mexico.

"I'm optimistic," said the ambassador. "I know that people of good faith, friends, can work out their differences. And I have no doubt that people on both sides of the border want to resolve this issue and resolve it this year."

The sale of Canadian softwood lumber into the United States has been an irritant between the two countries for 30 years.

The Americans have argued that Canadian lumber is unfairly subsidized through low stumpage fees for cutting in Crown forests. But Canada has won nearly every round under the North American Free Trade Agreement when the dispute has been heard by trade dispute tribunals.

The United States has nevertheless collected more than $5 billion in punitive tariffs, and Canadian producers want the money returned.

Harper, speaking at the conclusion of the Cancun summit on Friday, said he had directed Canadian officials to explore the possibility of resuming talks with their U.S. counterparts. There was no indication from Bush, however, that he had given any orders to the American side to meet Canada halfway.

Bush's administration has been hemmed in on the subject by the powerful U.S. lumber lobby, and by protectionist sentiment in Congress that has been exacerbated by the fact this is an election year south of the border.

Trade Minister David Emerson declined to speculate last week on a time frame for resolving the dispute - making Wilkins' prediction of a deal by year-end all the more surprising.

The ambassador, who hitched a ride on Harper's plane to attend the summit in Cancun, characterized the prime minister's talks with Bush on a wide range of issues as "very frank, very straightforward, very friendly."

The Conservative Harper has made improved trade and diplomatic relations with Washington a priority - as former Liberal prime minister Paul Martin said he wanted to do, only to fall into cross-border bickering during last winter's election campaign.

Wilkins, who was critical of Martin during the campaign, refrained from taking any more shots at the Liberals on Sunday.

He did suggest, however, that cross-border relations have a chance for a fresh start under Harper, and expressed his pleasure at the prime minister's comments during a recent visit to Canadian troops in     Afghanistan.

Harper made it clear that, despite mounting controversy at home over casualties, his government has no intention of abandoning the military commitment first made by the Liberals.

"I think (     President Bush) appreciates very much the prime minister's strong stand on Afghanistan," said Wilkins. "He sent a strong message to the world."

On softwood, he said summits between leaders rarely resolve things on the spot, but they can raise awareness and produce a "renewed commitment" to resolve the matter.

Canada won a major battle last month when a NAFTA panel essentially eliminated most of the punitive softwood duties. But the U.S. could still appeal that ruling.

The next face-to-face meeting between Bush and Harper is expected to be held in Washington in June.