Softwood lumber trade and trade restrictions: gravity model.

A gravity trade model can be used to determine the effects of policy on bilateral trade flows. The gravity model is initially explained and then used to determine the effect that U.S. tariffs have on softwood lumber (SWL) imports from Canada, using information from the 2006 Softwood Lumber Agreement. Quarterly data for seven Canadian and three U.S. regions for the period 2007-2017 are used to estimate a gravity model of SWL trade. The model is subsequently expanded to include Japan and China as separate regions, and then as a combined China-Japan region. The model is estimated using OLS and a Poisson Pseudo-Maximum-Likelihood method for trade quantity and value. Findings indicate that: (1) the imposition of a countervailing and/or anti-dumping duty usually has a negative effect on Canada's physical exports, but not in all cases; (2) the value of softwood lumber trade decreases by 26% on average under a tax/tariff compared with no duties; (3) the tax/tariff has a smaller but still significant impact on Canadian exports when China and Japan are included, as SWL exports are diverted from the U.S.; and, not surprisingly, (4) duties affect the value of lumber exports to a much greater extent than quantity.

Global forest products trade model.

This chapter introduces the Global Forest Products Model (GFPM). The general model structure and the mathematical formulation of the GFPM are provided and key differences and similarities to the modeling approaches developed in the previous chapters are highlighted. The usefulness of the GFPM as a forest sector tool for policy analysis is illustrated by summarizing its applications in a wide array of past and ongoing studies. These studies are summarized under four representative groups: (i) forest sector outlook studies; (ii) studies evaluating the consequences of tariff and non-tariff barriers on the international trade of forest products; (iii) studies projecting the impacts of climate change and forest-based climate change mitigation strategies on forests and forest industries; and (iv) other studies dealing with other important questions, such as the effects of the rise in global planted forest area, illegal harvests, and invasive species. Some of the limitations of GFPM, ways to mitigate these limitations, and its overall usefulness as a forest sector policy analysis tool are also examined.

Modeling bilateral forest products trade.

The focus in this chapter is on the development of mathematical programming models used to model bilateral forest products trade. Theoretical outlines are provided of a multi-region, single product trade model and of an integrated, multi-region, multi-product trade model. The objective function and constraints are described mathematically, while the analysis takes into account horizontal and vertical chains and the need to calibrate the model using observed trade flows. Data sources are discussed, and the GAMS code is provided for the uncalibrated and calibrated versions of the model. The Canada-U.S. softwood lumber dispute is the raison d'être for much applied work in modeling forest products trade, especially on Canada's side. In this chapter, we examine several spatial price equilibrium (SPE) trade models that are currently used to investigate the implications of trade barriers imposed on Canadian exports of softwood lumber to the United States. The reason we consider bilateral trade is so that we can determine the impacts of trade restrictions on various regions in North America. We begin in the next section by specifying a general but vertically integrated SPE trade model.

Canada-U.S. softwood lumber dispute: background.

In this chapter, we examine the importance of softwood lumber production to Canada's economy and provide a brief history of the Canada-U.S. softwood lumber dispute and its resolution on various occasions using U.S. countervailing and anti-dumping duties, export taxes or various types of quota regimes, including tariff rate quotas. The construction of excess supply and demand functions is explained, as are the gains from trade. This helps inform the modeling approaches that are identified in later chapters.

Discussion.

The role and purpose of trade modeling in forestry is highlighted, as is the need for greater attention to data needs. Directions for future research are discussed.

Spatial price equilibrium trade modelling: theory.

The theory of measuring economic welfare across horizontal and vertical chains is provided in this chapter. As demonstrated, it underlies the spatial price equilibrium (SPE) trade models. The vertical and horizontal chains involved in a particular trade model, referred to as the REPA model, are described as an illustration.

Canada-U.S. softwood lumber dispute: background.

In this chapter, we examine the importance of softwood lumber production to Canada's economy and provide a brief history of the Canada-U.S. softwood lumber dispute and its resolution on various occasions using U.S. countervailing and anti-dumping duties, export taxes or various types of quota regimes, including tariff rate quotas. The construction of excess supply and demand functions is explained, as are the gains from trade. This helps inform the modeling approaches that are identified in later chapters.

Modeling bilateral forest products trade.

The focus in this chapter is on the development of mathematical programming models used to model bilateral forest products trade. Theoretical outlines are provided of a multi-region, single product trade model and of an integrated, multi-region, multi-product trade model. The objective function and constraints are described mathematically, while the analysis takes into account horizontal and vertical chains and the need to calibrate the model using observed trade flows. Data sources are discussed, and the GAMS code is provided for the uncalibrated and calibrated versions of the model. The Canada-U.S. softwood lumber dispute is the raison d'être for much applied work in modeling forest products trade, especially on Canada's side. In this chapter, we examine several spatial price equilibrium (SPE) trade models that are currently used to investigate the implications of trade barriers imposed on Canadian exports of softwood lumber to the United States. The reason we consider bilateral trade is so that we can determine the impacts of trade restrictions on various regions in North America. We begin in the next section by specifying a general but vertically integrated SPE trade model.

Spatial price equilibrium trade modelling: theory.

The theory of measuring economic welfare across horizontal and vertical chains is provided in this chapter. As demonstrated, it underlies the spatial price equilibrium (SPE) trade models. The vertical and horizontal chains involved in a particular trade model, referred to as the REPA model, are described as an illustration.

Softwood lumber trade and trade restrictions: gravity model.

A gravity trade model can be used to determine the effects of policy on bilateral trade flows. The gravity model is initially explained and then used to determine the effect that U.S. tariffs have on softwood lumber (SWL) imports from Canada, using information from the 2006 Softwood Lumber Agreement. Quarterly data for seven Canadian and three U.S. regions for the period 2007-2017 are used to estimate a gravity model of SWL trade. The model is subsequently expanded to include Japan and China as separate regions, and then as a combined China-Japan region. The model is estimated using OLS and a Poisson Pseudo-Maximum-Likelihood method for trade quantity and value. Findings indicate that: (1) the imposition of a countervailing and/or anti-dumping duty usually has a negative effect on Canada's physical exports, but not in all cases; (2) the value of softwood lumber trade decreases by 26% on average under a tax/tariff compared with no duties; (3) the tax/tariff has a smaller but still significant impact on Canadian exports when China and Japan are included, as SWL exports are diverted from the U.S.; and, not surprisingly, (4) duties affect the value of lumber exports to a much greater extent than quantity.