VANCOUVER — Top Canadian and U.S. trade officials put a diplomatic face Wednesday on inconclusive talks aimed at ending the countries' softwood lumber dispute.

Government and industry representatives ended three days of discussions in Washington, which included a tough new U.S. proposal. There are tentative plans for another meeting but "both sides will need time to reflect on the discussions,'' the Canadian and U.S. governments said in a joint statement.

"I have asked Canada's negotiating team to continue to seek input from Canadian industry and provinces as we take the necessary time to evaluate the options that have been presented,'' Trade Minister Jim Peterson said in the release.

Peterson's U.S. counterpart, Trade Representative Rob Portman, called the talks a constructive start that "gave us a better understanding of each other's positions.

" Minister Peterson and I have spoken and I am convinced that both sides are serious about seeking to resolve this dispute,'' he said. "We look forward to continuing the talks.''

The statement said the two sides will try to meet late next month in Ottawa after consulting with their respective stakeholders in the forest industry and the producing provinces.

This week's talks were characterized by an unexpectedly tough U.S. proposal that blindsided the Canadians in what one source called "a bait-and-switch'' move.

The package boosted the lumber export tax that Canada had already agreed to in principle to replace U.S. duties in place since mid-2002.

It also put a ceiling on lumber exports from British Columbia, which accounts for half the Canadian softwood shipped south. American producers apparently fear their domestic market would be flooded with high volumes of wood from the B.C. Interior, where accelerated logging is underway to quell a massive pine-beetle infestation.

Canada has ruled out any return to quotas such as those used in the 1997-2001 softwood lumber agreement.

The Americans also have not budged on a previous demand to keep about half the $5 billion in lumber duties already paid by Canadian producers since tariffs were imposed in May 2002.

The U.S. proposal's so-called "exit ramp'' to get out from under tariffs permanently would require provinces to institute market-based reforms to their forest policies that would raise stumpage anywhere from 100 to 230 per cent, with no provision for future reductions in the Crown timber-cutting fee, the source said.

While steadfastly rejecting allegations their lumber is subsidized, the major producing provinces had undertaken or were planning policy changes to address U.S. claims Canadian Crown timber harvesting didn't reflect true market values for the wood.

The U.S. Commerce Department slapped on countervailing and anti-dumping duties after American producers complained for the fourth time in 20 years that Canadian lumber exports were unfairly subsidized, mainly through low stumpage fees.

Canada has challenged the duties through the North American Free Trade Agreement and World Trade Organization.

A pivotal ruling by a NAFTA panel on whether Canadian lumber presents a threat of injury to American mills is expected around the end of this month. If the extraordinary-challenge committee rules in Canada's favour, analysts believe the United States will be forced to cancel the duties.

Canadian producers sell about $10 billion worth of spruce, pine and fir lumber a year to the U.S. home-construction and renovation sectors, accounting for about 34 per cent of the market.