1. Impacts of a Tariff on the U.S.-Canadian Softwood Lumber Trade
Patrick Shannon
January 30, 2008

2. Background
Ongoing U.S.–Canada softwood lumber dispute for over 50 years
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
Softwood – evergreens used for 2x4s mostly
CA govt. owns majority of land
Stumpage fee is price charged to companies to log trees

3. The Softwood Lumber Agreement
U.S. trade laws state foreign goods benefiting from subsidies can be subject to a countervailing duty tariff to offset the subsidy and bring the price of the product back up to market rates
In 2002, the U.S. imposed a 27.2% tariff on all Canadian softwood lumber imports

4. Policy Goals of Tariff
Primary: To offset alleged unfair Canadian cost advantages in the market
Potential to force reductions in Canadian old-growth forest harvest

5. What are the projected market impacts and resource tradeoffs?
Title: “Market and Resource Impacts of a Canadian Lumber Tariff”
Author: Darius M. Adams
Journal: Journal of Forestry. 2003, 101: 48-52

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

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

8. Supply and Demand Projections

9. Market Impacts: Canada U.S.
Results in lower prices and exports
Decrease in lumber production
Hurts producers
Good for consumers
Increase in U.S. price
Increase in production on private lands
Good for producers
Hurts consumers

10. Market Impacts

11. Policy Implications – U.S.
Tariff benefits U.S. producers increasing production to 115 mcf/yr on average over 10 years
U.S. consumers loose – 3.9% increase in expenditures
Increase in U.S. private land harvest, not old-growth

12. Policy Implications - Canada
Hurts Canadian producers, reduction in 150 mcf/yr over 10 years
Canadian consumers gain from lower prices
Reduction in Canadian old-growth harvest

13. Conclusion
Models predict the tariff helps U.S. private land producers, hurts consumers
Does reduce the amount of old-growth harvested in Canada

14. Questions?