Updated: Fri Jul. 14 2006 11:02:25 PM

Canadian Press

OTTAWA — Liberal leadership candidate Bob Rae is urging the party's MPs to vote against the softwood lumber deal, even if it means toppling the minority Conservative government and plunging into an election before the Grits have chosen a new chief.

Rae, a former Ontario NDP premier and a leading contender for the top federal Liberal job, dared Stephen Harper to call an election over the trade agreement finalized on July 1.

Harper intends to put the deal to a Commons vote in mid-September and he's warned it will be a confidence vote, upon which the survival of his government will hinge.

"My view to that would be, fine," Rae said in an interview.

"It should be a matter of confidence. It is a terrible, terrible deal and it sets an atrocious precedent for all of our trade negotiations with the U.S."

Rae said Harper is assuming the Liberals will support the deal, or at least absent themselves from a vote that could bring down the government, rather than risk an election before a new leader is chosen on Dec. 3. But he said the Liberals must not fall into Harper's trap.

"The Liberal party can not under any circumstances allow our own internal issues to get in the way of focusing on the importance of this question in the House of Commons," said Rae, who once served as legal counsel to the Free Trade Lumber Council.

"This is a terrible deal. It should not pass. It should not be allowed to pass. If the prime minister is saying there will be an election over this deal, I would like nothing better than an election on the issue of Stephen Harper's relationship -- or perhaps I should say Steve Harper's relationship -- to George Bush," Rae said, referring to Bush's new nickname for Harper.

Rae said the Liberal party could move up the date of its leadership convention, among other options, if it needed to install a leader quickly to fight an election.

Liberal president Mike Eizenga said recently that the party is preparing contingency plans just in case Harper orchestrates the defeat of his government before the leadership convention.

Liberals will choose delegates to the convention at the end of September. Once those delegates are chosen, Eizenga said there are mechanisms the party could use to abbreviate the leadership process.

All three opposition parties, many forestry companies and some provinces have dubbed the softwood agreement a sell-out to the United States. One of the main bones of contention is an opt-out clause in the seven-year deal that would allow either party to pull out after two years.

Under the agreement, forestry companies would get back $4 billion of the $5 billion the Americans have collected from them in tariffs. Another $50 million is going into a cross-border lumber council.

But Canadian companies would also have to give up all legal fights against the U.S. penalties.

Rae said the deal means the White House will effectively get nearly a half-billion dollars to spend as it sees fit.

"It's kind of a presidential slush fund that's being given to them."

Meanwhile, he said the Canadian softwood industry won't get any refunds on tariff duties until December, at the earliest.

Harper and International Trade Minister David Emerson have rejected provincial and industry demands that the deal be renegotiated.