Estimating Export Response in Canadian Provinces to the US- Canada Softwood Lumber Agreement Sumeet Gulati and Nisha Malhotra

The Softwood Lumber Agreement US Claim  Artificially low stumpage fees  Countervailable subsidies. 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. Other provinces- Unrestricted access to the US market.

Timeline for the SLA Softwood Lumber I: 1982  US authorities decided no subsidy Softwood Lumber II: 1986  15% provisional duty  Replaced by 15% export tax in MOU 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 Provinces paying tariff (SLA)  Alberta  British Columbia  Ontario  Quebec Export Growth Rates All Years ( ) Before SLA ( ) After SLA ( SLA Provinces147%119%-8% Non-SLA Provinces 513%155%56%

Preliminary Test: A Gravity Model A cross-section ‘gravity’ equation x it is log exports from province i to the US (annual) y it and y USt are logs of GDP province and in US dist i is the log of distance from province i to the US R USt is the US rate of interest SLA is dummy for SLA provinces NSLA is a dummy for non-SLA provinces , E xt is the US-Canada exchange rate Annual data used from

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)