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Estimating Export Response in Canadian Provinces to the US-Canada Softwood Lumber Agreement

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.

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Estimating Export Response in Canadian Provinces to the US-Canada Softwood Lumber Agreement

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

  2. 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.

  3. 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

  4. Provincial Effects • Provinces paying tariff (SLA) • Alberta • British Columbia • Ontario • Quebec • Export Growth Rates

  5. Preliminary Test: A Gravity Model • A cross-section ‘gravity’ equation • 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.

  6. Table 1: Gravity Model for Softwood Lumber Exports (Canadian provinces to the US)

  7. Table 2: Gravity Model for Softwood Lumber Exports (Canadian provinces to the US)

  8. Table 2: Gravity Model for Softwood Lumber Exports (Canadian provinces to the US)

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