Premiers from across the country and the new U.S. Ambassador to Canada emerged from their first meeting sounding optimistic about relations between their countries. But they conceded that softwood lumber was a sticking point in their talks.

"One of the greatest myths is that U.S. and Canada don't get along, that the two countries don't trust each other," said David Wilkins, who was named ambassador to Canada in May. "But there is great cooperation, friendship and warmth between the two peoples.

"I think we have wonderful relations. I hope to build on that strong relationship, and play a small role in making it stronger."

Wilkins, former speaker of the South Carolina House of Representatives, said he and the premiers, who are in Banff for their annual meeting, "agreed on 96 per cent of the issues" they discussed, but not on softwood lumber.

On Wednesday, a panel for the North American Free Trade Agreement (NAFTA) upheld an earlier ruling that said the U.S. has no legitimate reasons to impose duties on Canadian softwood.

Washington, however, said the unanimous ruling was largely irrelevant, and insisted more negotiations were needed before the dispute could end.

Wilkins said the U.S. maintains the only way to end the softwood trade war is through a negotiated settlement.

He left little hope that the $5 billion in penalties collected by Washington in countervail and anti-dumping duties will be returned anytime soon.

"Without a negotiated settlement there will continue to be a myriad of lawsuits as there has been," said Wilkins.

British Columbia Premier Gordon Campbell said he wasn't surprised the American lobby planned to ignore the ruling, but he said it's time for the U.S. administration to live up to its obligations.

"How would the Americans feel if we lost and then said, 'We're going to ignore that?'" asked Campbell, adding that it's time Prime Minister Paul Martin raises the issue with U.S. President George W. Bush.

The host, Alberta Premier Ralph Klein, was more subdued.

"It's a difficult issue for the ambassador," he said after the meeting. "Officially, his position has to be that of the (U.S. government). Our response is to let him do what he can to pass on our concerns."

Klein said a "strong resolution" on the softwood lumber dispute would come out of the premiers' meeting. "The resolution will call on Ottawa to use whatever legal means it can to force, if you will, the Americans to live up to their obligations under NAFTA."

"It would be a mistake to underestimate the potency of the symbolism connected with this issue," added Ontario Premier Dalton McGuinty. "I impressed upon the ambassador that this issue is easily understood by the people of Canada. It's the kind of thing that can become more than just a little irritant."

In the meeting, McGuinty also voiced concerns about border security and gun smuggling.

Authorities estimate that of all the guns coming into Ontario from the U.S., only five per cent are being confiscated at the border.

Wilkins said such issues are "a shared responsibility" by Canadian and American officials. He also said American and Canadian law enforcement officials have been working together closely.

He said American officials had offered the RCMP access to intelligence, computers, technology and other initiatives.

Transportation and Energy

The premiers said they want to develop a national plan for the country's crumbling transportation system.

Klein said the premiers are hoping that transportation, energy and post-secondary education can be added to a first ministers meeting later this year to deal with native issues.

In a communique, the premiers said "reinvestment of federal fuel taxes will be an integral part of a sustainable, long-term strategy."

The premiers also set up a pan-Canadian energy group.

With files from The Canadian Press