Dynamics of the U.S.-Canada Softwood Lumber Trade: Market and Welfare Effects of the 2006 Softwood Lumber Agreement

This article examines the effects of macroeconomic variables (i.e., housing starts, disposable income, and the exchange rate), market variables (i.e., lumber price and wage rate) and the 2006 Softwood Lumber Agreement (SLA06) on U.S. lumber imports from Canada. It also looks at the welfare consequences of the SLA06. Results suggest that macroeconomic variables are more important than lumber price in determining the bilateral trade in softwood lumber. It is also found that, although the SLA06 has a significant negative effect on lumber imports from Canada, the market and welfare impacts of the trade restriction are moderate.exchange rates, housing starts, softwood lumber trade, trade restrictions, U.S. import demand, Financial Economics, Industrial Organization, International Relations/Trade, Political Economy, Public Economics,

Economics of the US - Canada Softwood Lumber Dispute: A Historical Perspective

This paper reviews the U.S.-Canada softwood lumber dispute over the past two decades by outlining the key developments and critically appraising the arguments put forward by both countries. It also presents a welfare analysis of lumber trade distortions. Given the importance of lumber trade between Canada and the United States, an expeditious resolution of this long-running trade dispute would be beneficial for both countries.antidumping and countervailing duties, lumber, trade distortions, welfare, Resource /Energy Economics and Policy,

A Re-examination of Factors Affecting United States Softwood Lumber Imports from Canada

This paper examines the effects of the lumber price, the housing starts, and the bilateral exchange rate on U.S. softwood lumber imports from Canada in a cointegration framework. To that end, the Phillips-Hansen fully-modified cointegration (FM-OLS) procedure is applied to monthly data for the period from January 1994 through June 2009. Results show that there exists the long-run equilibrium relationship between the U.S. lumber imports from Canada and the selected macroeconomic and market variables. We also find that the U.S. lumber price and housing starts are more important than the bilateral exchange rate in influencing U.S.-Canada softwood lumber trade.Exchange rate, housing starts, lumber imports, lumber price, Phillips-Hansen fully-modified cointegration technique, softwood lumber trade, International Relations/Trade, Resource /Energy Economics and Policy,

Canada-US Softwood Lumber Trade Revisited: Examining the Role of Substitution Bias in the Context of a Spatial Price Equilibrium Framework

In the last two decades, softwood lumber trade between Canada and the United States has been characterized by numerous trade restrictions. Many studies have attempted to quantify the effects of such sanctions, and in doing so, softwood lumber was modeled as a single, homogenous commodity. However, recent research has suggested that this may be a misleading assumption, since not all softwood lumber products are equivalent substitutes. We refer to this problem as the substitution bias, and uniquely address this issue in estimating the effects of trade restricting policies. Using a spatial price equilibrium (spe) model, impacts of the post-sla import duties are estimated and compared to estimates of two alternative policy regimes – an export tax and quota. By controlling for substitution bias, our estimates indicate a larger share of the tariff burden is placed on us consumers, with Canadian producers suffering less injury compared to estimates using the traditional homogenous lumber assumption. In addition, by comparing the net impact associated with the alternative policy regimes, a policy equivalence result is found. Our results suggest that the short-run impact of a trade restriction is largely independent of the policy regime incorporated, with the collection of quota rents or tax revenues determining overall winners and losers.Softwood lumber trade, spatial price equilibrium, lumber substitutability

Political Pressure: An Examination of U.S. Senators’ Actions in Restricting Canadian Softwood Lumber Imports

interest groups, lumber industry, political contributions, U.S.-Canada softwood lumber dispute., International Relations/Trade,

An Evaluation of Canadian and U.S. Policies of Log and Lumber Markets

The recent lumber trade war between Canada and the United States deals with Canadian stumpage policies, Canada’s log export controls, and U.S. retaliatory duty. This study determines the appropriate level of U.S. countervailing duty (CVD) by employing a vertically interrelated log–lumber model. The theoretical results show that the U.S. CVD can be greater (will be less) than the Canadian subsidy for a vertically related log–lumbermarket (for lumber market only). Empirical results support the theoretical findings in that the U.S. CVD for the log–lumber market (lumber market alone) is 1.55 (0.91) times the Canadian subsidy.countervailing duty, dispute, log, lumber, subsidy, Agribusiness, Agricultural and Food Policy, International Relations/Trade, Political Economy, F13,

Evaluation of the Substitutability between U.S. and Canadian Softwood Lumber

Softwood lumber trade between the United States and Canada has worldwide attention due to its economic importance and for lengthy dispute. Most studies have focused on welfare effects of the dispute, while few studies have evaluated the question of likeness of product. This study evaluates the substitutability between U.S. and Canadian softwood lumber including other countries' softwood lumber. Price elasticities are derived from the linear approximation of the Almost Ideal Demand System. The results show that softwood lumber imports to the U.S. from various countries are indeed substitutes for U.S. softwood lumber. The Morishima elasticities of substitution indicate that other countries have a higher degree of substitutability than Canadian softwood lumber.International Relations/Trade,

THE USERS OF LUMBER AND THE US-CANADA SOFTWOOD LUMBER AGREEMENT: AN EVENT STUDY

In this paper we analyze whether the Softwood Lumber Agreement between US and Canada imposed significant economic costs on the users of Lumber in the US. To ascertain this impact we use an event study. Our event study analyzes variations in the stock prices of lumber using firms listed at the major stock markets in the US. We find that events leading to the Softwood Lumber Agreement had significant negative impacts on the stock prices of industries using softwood lumber. The average reduction of stock prices for our sample of firms was approximately 5.42% over all the events considered.International Relations/Trade,

Resolving Canada-U.S. Trade Disputes in Agriculture and Forestry: Lessons from Lumber

Prominent trade disputes between Canada and the U.S. involve agriculture and forestry, with lack of transparency caused by Canadian non-market institutions a source of U.S. objections. Though there has been a recent flurry of activity in the binational dispute resolution panel on Canadian exports of wheat, one of every six panels since 1989 has involved softwood lumber. We examine lessons from the lumber dispute to shed light on U.S. objections to the Canadian Wheat Board (CWB). We argue that U.S. lumber lobbyists will continue to use perceived Canadian institutional obscurity to keep pressure on policymakers, while the CWB system enables similar agricultural interests in to agitate for trade sanctions. Traditional strategies such as dispute resolution boards, appeals to the WTO, and bilateral policy reform can only buy Canada time – new strategies are needed if Canada is to maintain sovereignty over its trade institutions.

Adding Sweeteners to Softwood Lumber: The WTO-NAFTA “Spaghetti Bowl” Is Cooking

With the Doha round in trouble, the so-called spaghetti bowl of multilateral trade rules and proliferating regional trade deals, is, once again, prominently on the radar screen of the international trade community. Perfect examples of this image are the longstanding US-Canada softwood lumber and US-Mexico sweetener disputes. Both trade spats, extensively litigated in NAFTA and the WTO, are close to reaching a climax. Fueling the suspense is that the WTO and NAFTA may reach different results