A Report on the Economic Analysis: Incidence of the 1996 ...

A Report on the Economic Analysis: Incidence of the 1996 ...

Assessment of Quotas, Tariffs and Taxes on the U.S. - Canada Softwood Lumber Dispute Patrick Shannon March 10, 2008 ECON 543 Background U.S. Canada softwood lumber tariffs

since 1840 U.S. claims that the Canadian lumber industry is unfairly subsidized by the federal and provincial governments Stumpage fee is set administratively rather than through a competitive

auction Types of Dispute Mechanisms Tariff on all Canadian imports to U.S. Quota-regulated tariff on all Canadian imports (including tax)

Tariff on Imports Different percentage tariffs in the past 2002, U.S. imposed a 27.2% tariff on all Canadian imports of softwood lumber

Based on a countervailing and antidumping duty Projected Economic Impacts Title: Market and Resource Impacts of a Canadian Lumber Tariff

Author: Darius M. Adams Journal: Journal of Forestry. 2003, 101: 48-52 Analysis Method

Spatial model to calculate projections of production, consumption, prices and trade between the U.S. and Canada Accounts for elasticity and price sensitivity of the markets Compares projections without and with a tariff

Data Source Historical government and industry data Elasticities are based on econometric estimates derived from historical data

Supply and Demand Projections Market Impacts Global Impact of the Tariff Title: A Spatial Equilibrium Analysis of U.S.-Canadian Disputes on the World Softwood Lumber Market

Author: Stephen Devadoss et al. Journal: Canadian Journal of Agricultural Economics. 2005 Analysis Spatial equilibrium model to estimate

supply and demand functions Impacts of the tariff on global prices, demand, supply, total trade volume and bilateral trade flows Welfare analysis

Results Global Trade Impacts Welfare Impacts: Producer Surplus U.S. = $1.92 billion South America = $450 million

All other countries negative Canada = -$932 million Welfare Impacts: Consumer Surplus

U.S. = -$2.90 billion South America = -$366 million European Union = $870 million World Welfare

Total producer and consumer surpluses are negative 27.2% tariff results in -$860 million Quota-Regulated Tariff (Export tax)

1996 Softwood Lumber Agreement Quota of 14.7 billion board feet Exports up to 650 million board feet more assessed a fee of $50 per 1,000 board feet (mbf) Exports exceeding that tier would be assessed $10 per mbf thereafter Economic Analysis

Author: Daowei Zhang Title: Welfare impacts of the 1996 United StatesCanada softwood lumber (trade) agreement

Journal: Canadian Journal of Forestry, 31: 19581967. Welfare Impacts 1996 - 2001 Welfare Impacts U.S. Producers gain = $7.74 billion

Consumers loose = -$12.5 billion Net U.S. loss = -$4.7 billion Welfare Impacts Canada Producers gain = $2.86 billion

Treasury gain = $226 million Net gain = $3.09 billion Conclusions Ongoing trade dispute, solutions hard to find

Quota-regulated tariff benefited Canada and U.S. producers Global lumber trade

World Trade Organization to decide

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