Transcript Slide 1

Estimating Export Response in
Canadian Provinces to the USCanada Softwood Lumber
Agreement
Sumeet Gulati and Nisha Malhotra
The Softwood Lumber Agreement
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US Claim
 Artificially low stumpage fees
 Countervailable subsidies.
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April 1996-Softwood Lumber Agreement finalized.
 First 14.7 Billion Board Feet (BBF) of softwood lumber exports
from Alberta, British Columbia, Ontario, and Quebec would enter
the US market duty free.
 The first 650 million board feet over 14.7 BBF -tax of $50 per
thousand board feet.
 Any further exports were subject to a tax of $100 per thousand
board feet.
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Other provinces- Unrestricted access to the US market.
Timeline for the SLA
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Softwood Lumber I: 1982
 US authorities decided no subsidy
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Softwood Lumber II: 1986
 15% provisional duty
 Replaced by 15% export tax in MOU
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Softwood Lumber III: 1991
 Canada unilaterally terminates MOU
 Countervailing case filed: Interim bonding requirement
 Canada wins appeal against countervailing duty in CUSTA (1993
and 1994)
 US revokes duties against Canadian lumber (Aug 1994)
 Bilateral consultation process for softwood established
Provincial Effects
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Provinces paying tariff (SLA)
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Alberta
British Columbia
Ontario
Quebec
Export Growth Rates
All Years (19902002)
Before SLA
(1990-1995)
After SLA (19962002
SLA Provinces
147%
119%
-8%
Non-SLA
Provinces
513%
155%
56%
Preliminary Test: A Gravity Model
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A cross-section ‘gravity’ equation
xit  0  1 yit  2 yUSt  3disti  4 RUSt  5SLA  6 NSLA  7 Ext  uit
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xit is log exports from province i to the US (annual)
yit and yUSt are logs of GDP province and in US
disti is the log of distance from province i to the US
RUSt is the US rate of interest
SLA is dummy for SLA provinces - 1996-2001
NSLA is a dummy for non-SLA provinces - 1996-2001,
Ext is the US-Canada exchange rate
Annual data used from 1990-2002.
Table 1: Gravity Model for Softwood Lumber Exports
(Canadian provinces to the US)
Table 2: Gravity Model for Softwood Lumber Exports
(Canadian provinces to the US)
Table 2: Gravity Model for Softwood Lumber Exports
(Canadian provinces to the US)