GENEVA/OTTAWA (Reuters) -- Canada and the United States finalized a deal to end a long-standing trade dispute over softwood lumber on Saturday after ironing out final details on the sidelines of World Trade Organization talks in Geneva.

Canadian Trade Minister David Emerson and U.S. Trade Representative Susan Schwab initialed the agreement in a late-evening ceremony on Canada's national holiday.

The seven-year deal -- first agreed to in principle in late April -- now needs to be formally approved by both sides and should take effect on Oct. 1, Emerson said.

"This is a very exciting way for me to celebrate Canada Day," he told reporters in Geneva, saying the agreement should end "decades of squabbling and trade wars" that have strained relations with the United States in past years.

The dispute centers on exports of Canadian softwood, which the United States said was dumped on the American market – a charge Canada denied. Washington imposed duties on the lumber and has collected $5 billion so far.

About $4 billion will be returned. Some of the remainder will go to a coalition of U.S. lumber firms that first launched complaints about what they said was Canadian dumping.

Emerson said he hoped the Canadian lumber firms would start receiving refunds of the duties about six weeks after the agreement was ratified by both sides. Schwab told reporters in Geneva the deal would temper "a lot of bad feelings" that have arisen between the world's two largest trading partners. A spokesman for the U.S. coalition described the deal as "a critical step toward what we hope will be a negotiated resolution of the dispute."

Much of the Canadian lumber comes from the Pacific province of British Columbia, where some producers and politicians complain Canada was asked to make too many concessions.

Industry officials in British Columbia said on Saturday they were still studying the final agreement and were concerned it did not address complaints they raised in the last days of the talks. They did not give details.

Under the terms of the deal, both sides will drop all litigation over the dispute and neither country can walk away within the first three years. Beyond that, Canada and the United States would need to give 13 months' notice they intended to abandon the deal.

"The likelihood of the agreement being terminated by either country is extremely remote," Emerson told Canadian reporters on a conference call from Geneva.

Canadian exports would be allowed to continue at the current level of about 34 percent of the U.S. market. In 2005, Canada exported $7.4 billion in softwood to the United States, where it is used in construction markets.

The agreement must be ratified by the Canadian Parliament, which resumes sitting on Sept. 18. Harper's Conservative Party controls only a minority of seats in Parliament, which means in theory the deal could be rejected.

But Harper could well make the vote a matter of confidence, meaning an election would be triggered if the government lost.

The official opposition Liberals are unlikely to take the bait, since they will only elect a new leader in early December and are in some disarray.