THE ON-AGAIN, OFF-AGAIN LUMBER TRADE deal between the United States and Canada may be off again, say Canadian officials and industry executives. Trade reps from both sides trumpeted a breakthrough agreement in April after Canada's Conservatives captured a Parliament majority. The deal would cap Canadian lumber exports to the United States at 34 percent of the total U.S. market and require Canada to place its own tax of up to 15 percent on exports whenever lumber prices dropped below set thresholds. In return, the United Sates would revoke its punitive duties on Canadian lumber and return most (but not all) of the money already collected (half a billion would be handed over to U.S. lumber firms).

Trade officials signed off on the deal on July 1. But Canadian lumber executives—who have to approve the deal for it to take effect in Canada—have gotten cold feet. Since the deal was first announced, two U.S. court decisions have fallen Canada's way: First, the U.S. Court of International Trade (CIT) ruled that money collected at the border couldn't be paid out to U.S. firms; then, CIT judges ruled that the import duties themselves had no basis in U.S. law, following a 2002 NAFTA panel decision ordering the U.S. International Trade Commission to reverse its finding that Canadian imports threatened harm to the U.S. industry. On the Canadian side, lumber companies aren't sure they want to hand back to U.S. competitors the money they've just won in U.S. court.

Now, Trade Minister David Emerson says, “If we do not have sufficient buy-in from industry, there really isn't an agreement to bring before Parliament.” That's fine with U.S. builders: Representatives from the NAHB had already traveled to Canada to lobby Parliament against the deal, which they say would raise prices and destabilize the lumber market.