Prime Minister Paul Martin used an international summit in South Korea yesterday to warn U.S. President George Bush that the on-going dispute over softwood lumber posed a threat to global free trade.

In a four-country leaders' meeting during the Asia-Pacific summit, Martin told Bush that Washington's refusal to respect a NAFTA ruling on Canadian softwood lumber sent a warning to other countries considering trade deals with the U.S.

Martin issued the caution as the leaders of Canada, U.S., Mexico and Peru discussed building a Free Trade Area of the Americas and knocking down trade barriers at the World Trade Organization.

Martin argued that U.S. tariffs on Canadian lumber and Washington's behaviour in the softwood dispute violated the terms of free trade.

"You cannot have free trade where one partner to a free-trade agreement -- when a decision goes against them -- simply says we're going to ignore it," Martin told reporters after the meeting.

Martin said Washington is undermining its own interests if its aim is to have liberalized trade with the rest of the world.

"We're not going to have free trade of the Americas if that's the precedent that's been established. We're not going to have free-trade throughout the Asia-Pacific if that's what occurs."

Martin also raised climate change and drilling in the Alaska National Wildlife Reserve, two areas where he and Bush disagree.

Martin twice pointed out during a press conference that he and Bush have different attitudes towards global warming.

"If anyone has any doubt about climate change I would simply ask them to go to the Canadian Arctic (to see the melting ice)," Martin told the news conference.

The prime minister's emphasis on issues that divide Canada and the U.S. appeared to contradict his oft-stated goal when he first took office of smoothing relations with Washington.

Martin dismissed suggestions that with a federal election looming, he was pandering to a Canadian public that is largely hostile to Bush, claiming he was just doing his job.

"If a friendship depends upon always agreeing, or if a friendship depends upon you simply saying to somebody else, 'Ready, aye, ready!' when in fact you fundamentally disagree then I don't think it's much of a friendship," Martin told reporters.

"And I think our relationship with the United States is very good. But there are some issues, such as softwood and climate change, that we disagree on, and I'm going to argue the Canadian position."

Martin said Bush retaliated with his own arguments about softwood, but the prime minister did not elaborate.

Softwood dispute

Washington has disregarded a string of decisions favouring Canada under the North American Free Trade Agreement in a bitter battle going back years over softwood lumber exports.

Ottawa broke off negotiations this summer after the U.S. refused to respect a NAFTA decision that found U.S. tariffs on Canadian softwood lumber to be in violation of the North American Free Trade Agreement.

Ottawa is insisting that the United States return at least $3.5 billion Cdn of some $5 billion in duties collected from Canadian lumber companies.

Washington wants to negotiate a settlement and U.S. officials like Secretary of State Condoleezza Rice and U.S. Ambassador David Wilkins have been telling Canada to tone down the rhetoric.

The U.S. has won several WTO rulings that support American action against allegedly unfair Canadian lumber subsidies.

Martin said the final word on the lumber dispute lies with the NAFTA panel, calling it a clear "black and white" case decided by the so-called "supreme court of NAFTA."

"They signed the agreement. We won. It should be honoured," Martin told reporters Thursday.

Protests

Meanwhile, riot police clashed with protestors armed with sticks and bottles outside the summit in the city of Busan Friday.

Thousands of slogan-chanting protesters gathered outside the summit, shouting: "No to Bush, No to Apec. No to foreign rice imports."

The 21 Apec leaders are set to push strongly for a breakthrough on global trade talks at next month's World Trade Organisation talks.

They are also expected to discuss a joint action plan on fighting terrorism and bird flu.

The combined Apec economies, from the U.S. to Japan, China and Australia, represent 57% of the world economy.