A computable general equilibrium analysis of the United States-Canada 2006 softwood lumber agreement

Abstract

We use a global dynamic multiregional computable general equilibrium model to analyze the comparative economic impacts of the 2006 softwood lumber agreement between Canada and the United States over the 2007–2013 period and the extent to which Canadian Provinces made a favorable choice of export tax border measure options. Results show that the agreement was effective in curtailing Canada’s softwood lumber entry into the United States market. It benefited the United States producers through increased stumpage rates, whereas the United States consumers lost marginally in welfare due to increased price index while gaining in household income. Canadian producers compensated for their loss of market share in the United States by redirecting their exports to rest of the world market. All Canadian Provinces except Saskatchewan and Ontario made a favorable choice of the export tax border measure options from a consumer welfare perspective. However, alternative export border control measure choices could have had more favorable impacts on other economic variables in these and other Provinces.