By Doug Palmer and David Ljunggren
WASHINGTON/OTTAWA (Reuters) - Canada and the United States extended a bilateral softwood lumber deal by two years to 2015 on Monday, underlining the two nations' close trade ties despite recent disagreements over an oil pipeline.
"This extension agreement will bring much-needed stability and predictability to the lumber industry," Canadian Trade Minister Ed Fast told reporters after a meeting in Washington with U.S. Trade Representative Ron Kirk.
Washington and Ottawa signed the initial seven-year deal in 2006 in a bid to end prolonged legal fights. Producers in the United States have complained for decades that Canada unfairly subsidizes its lumber companies.
In recent years, the U.S. housing downturn and the lingering effects of the global financial crisis have created hard times for North American lumber producers.
Kirk, in a separate statement, said continuing the pact was important, "particularly when both sides of the border are facing weak demand."
The extension was signed less than a week after President Barack Obama's administration irritated Canada by vetoing a proposed pipeline that would have carried crude from Alberta's oil sands to the U.S. Gulf Coast.
Fast declined to tell reporters whether he discussed the issue with Kirk but said he was optimistic the deal would eventually be approved.
At the same time, it is important Canada "diversify its markets" for both its oil and lumber, Fast said.
Canadian lumber producers are already enjoying increased sales to China, thanks in part to the efforts of the Canadian government, he said.
The original softwood lumber agreement, which was set to expire in October 2013, provided for a two-year extension.
Both sides will consult with industry on whether to pursue a longer renewal when the time comes, Fast said.
It is also possible that lumber issues could be addressed in the proposed Trans-Pacific Partnership talks, which Canada, Mexico and Japan have requested to join with the United States and eight other nations, he added.
The United States and Canada are the world's biggest goods trading partners. According to official U.S. data, two-way trade in 2010 totaled $525 billion.
Despite the new agreement, there are still tensions on the lumber file. Last year, Ottawa agreed to level small export charges on softwood shipped from Ontario and Quebec after an arbitrator ruled the two provinces had breached the deal.
Also in 2011, the United States accused Canada of violating the agreement by underpricing wood from trees killed in a massive insect infestation in British Columbia. That issue is expected to go to arbitration soon, and Fast expressed confidence that Canada would prevail.
(Reporting by Doug Palmer and David Ljunggren; Editing by Peter Galloway and Will Dunham)