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Economic Analysis of the Canada–United States Softwood Lumber Dispute: Playing the Quota Game

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Abstract:

The Canada–U.S. Softwood Lumber Agreement (SLA) was the latest measure to restrict Canadian exports of softwood lumber to the United States. Rather than a countervail duty or export tax, SLA employed a quota that provides a large windfall (quota) rent to Canadian lumber producers in addition to extra quasi-rents to U.S. producers, all at the expense of U.S. consumers. However, Canadian producers have not taken full advantage of the quota regime to maximize their overall gains, which exceed what they could earn under free trade or an export/import tax. This is demonstrated using a theoretical framework and numerical illustration. It is shown that the net gain to Canadian producers does not occur when the quota rent is maximized, but rather when the sum of producer surplus and quota rent is maximized. It is also argued that the existence of resource rents from logging does not constitute a subsidy to lumber producers. It is concluded that, from Canada's perspective, export quotas are preferred to both free trade or an export/import tax, at least in the short run, but only if all provinces and all softwood lumber products are included in the Agreement and a means for sharing the windfall rents can be found. For. Sci. 48(4):712–721.

Keywords: Softwood lumber trade; environmental management; forest; forest management; forest policy; forest resources; forestry; forestry research; forestry science; natural resource management; natural resources; quota regimes; types of rents in forestry

Document Type: Miscellaneous

Affiliations: Department of Economics, University of Victoria, Victoria, Canada, VPW 2Y2, Phone: (250) 721-8539; Fax: (250) 721-6214 kooten@uvic.ca

Publication date: 2002-11-01

More about this publication?
  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
    Forest Science is published bimonthly in February, April, June, August, October, and December.

    2015 Impact Factor: 1.702
    Ranking: 16 of 66 in forestry

    Also published by SAF:
    Journal of Forestry
    Other SAF Publications
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