Canada needs to repair the damage done to its relationship with the United Arab Emirates, Defence Minister Peter MacKay said Thursday.

The two countries have been engaged in a diplomatic squabble since Canada rejected a request for additional landing rights from two UAE airlines.

In retaliation, UAE banned Canada from using the semi-secret Camp Mirage base in Dubai -- an important staging ground for operations in Afghanistan -- and troops had to beat a hasty exit last month.

On Thursday, while boarding a plane to attend a NATO summit in Portugal, MacKay suggested some bridge-building is required.

"We have some work to do in repairing the relationship with the UAE," MacKay said. "Clearly, the circumstances under which we left the base require now some work."

Deputy Liberal leader Ralph Goodale took up the issue during question period, charging that "the foolish, clumsy bungling of international airport landing rights in Canada" had led to "badly damaged Canadian relations with what should be a valued ally in the struggle against terrorism."

Conservative House Leader John Baird replied that cabinet had decided the landing-rights deal sought by the United Arab Emirates "was not of net benefit to Canada and that's why we couldn't sign on."

Baird told reporters after Parliament adjourned that such international aviation agreements are not subjected to free trade rules and exist within a "highly regulated" domain.

"If we want to go to free trade around the world… that's one thing. But that's not the system we have today," he said.

Just one day earlier, MacKay was spotted wearing a red "Fly Emirates" ball cap outside Parliament after a fire alarm went off. Emirates is one of the two airlines that were seeking greater access to Canadian airports.

Astral Radio bureau chief Daniel Proussalidis, who spotted the cap, said the defence minister discussed the current impasse after being asked about the cap by Sen. Michael Meighen.

Proussalidis said he was chatting with Meighen and Finance Minister Jim Flaherty when MacKay joined them.

MacKay first joked that he wore the hat for former transport minister John Baird -- a comment Proussalidis took to suggest that Baird and MacKay were on opposite sides of the issue, as has been reported but not confirmed.

"MacKay went on to tell Meighen that Canada could have continued to use a military base in the UAE for free (as it had been doing for 10 years) if only it had granted those slots," Proussalidis wrote on his Talk 1010 blog.

"Then the defence minister suggested it would take 10 years to repair the relationship with the UAE."

It isn't clear whether the comments were knowingly made in the presence of a reporter. MacKay's office was reported as saying it was a private conversation, but Proussalidis insisted on Twitter Thursday that the conversation unfolded right in front of him.

"The conversation I was part of with Peter MacKay about the UAE was not private," he wrote on Twitter.

Proussalidis wrote that MacKay ultimately called the whole dispute "spilled milk," suggesting it wasn't worth crying over.