A Commerce Department proposal for resolving the lumber trade dispute between the United States and Canada has brought the sides closer, but doubts remain about the likelihood of an agreement.

The proposal calls for the United States to reduce duties on Canadian lumber as Canada gradually privatizes its lumber market. A temporary tax would remain in place until Canadian market practices satisfy U.S. criteria.

Observers say both sides agree on the essential elements of the proposal but will likely have trouble ironing out details. However, after meeting in Washington recently with government and industry officials on both sides, Canadian Trade Minister Pierre Pettigrew told the Toronto Globe and Mail, "We could get there relatively rapidly."

Claiming Canada's regulated lumber market unfairly undercuts American competition, the United States last year imposed tariffs totaling 27% on Canadian softwood. Canada responded with formal complaints to NAFTA and the World Trade Organization. A preliminary WTO ruling sided with Canada, but both proceedings are still under way.

NAHB economist Michael Carliner says the NAHB backs the new proposal because it could permanently end the dispute. However, noting the early WTO ruling, Carliner doubts Canada will abandon its legal challenges.

The NAHB opposes taxing Canadian lumber, Carliner says, because domestic lumber production can't meet builders' needs. Restricting imports could increase the cost of home construction, he says.