The Canada-US Softwood Lumber Dispute

Abstract

The Canada-us softwood lumber dispute A test case for the development of international trade rules THE EXCHANGE OF GOODS AND SERVICES between Canada and the United States constitutes the largest trading relationship between two sovereign states. Each country is the other's main trading partner. In 2000, the value of Canada-US trade amounted to nearly CDN$700 billion; now, over CDN$1.5 billion of merchandise crosses the border daily.' The overwhelming proportion (95 per cent) of this bilateral trade takes place smoothly and free of tensions. When disputes have arisen, the two countries have held the positions of plaintiff and defendant in almost equal proportions. Tensions and conflicts have tended to involve issues of essentially circumscribed economic and political scope.Canadas exports of softwood lumber to the United States represents a notable exception to this generally harmonious trading relationship. The softwood lumber dispute has proven the most significant between the two countries in terms of trade volume, complexity, procedures, politicization and duration. Superlatives abound in references to this conflict: "the largest trading dispute in the largest trading relationship in the world." Canada is highly dependent on the American market,

The Law of One Price in global coniferous sawlog markets

“…The US side suggests that stumpage prices set by provincial governments in Canada are artificially low, amounting to a subsidy which results in higher lumber exports to the US. This dispute has been often analyzed by researchers (Zhang 2001;Gagné 2003;Kinnucan and Zhang 2004;Stennes and Wilson 2005;Luckert 2007;Baek 2012). While many authors analyzed the conflict in terms of economic welfare implications for both countries (Zhang 2001;Kinnucan and Zhang 2004;Stennes and Wilson 2005), others analyzed it in terms of identifying policy explanations to this trade conflict (Gagné 2003;Luckert 2007).…”

“…This dispute has been often analyzed by researchers (Zhang 2001;Gagné 2003;Kinnucan and Zhang 2004;Stennes and Wilson 2005;Luckert 2007;Baek 2012). While many authors analyzed the conflict in terms of economic welfare implications for both countries (Zhang 2001;Kinnucan and Zhang 2004;Stennes and Wilson 2005), others analyzed it in terms of identifying policy explanations to this trade conflict (Gagné 2003;Luckert 2007). This study focused on delivered (at the mill gate) sawlog prices and while the data indicate that the delivered sawlog prices in the US were higher than in Canada, there are many other factors that need to be examined before any implications of the SLA on these markets can be ascertained (Gagné 2003;Luckert 2007).…”

“…While many authors analyzed the conflict in terms of economic welfare implications for both countries (Zhang 2001;Kinnucan and Zhang 2004;Stennes and Wilson 2005), others analyzed it in terms of identifying policy explanations to this trade conflict (Gagné 2003;Luckert 2007). This study focused on delivered (at the mill gate) sawlog prices and while the data indicate that the delivered sawlog prices in the US were higher than in Canada, there are many other factors that need to be examined before any implications of the SLA on these markets can be ascertained (Gagné 2003;Luckert 2007). The impact of the SLA imposition on the excess supply and lumber prices, as developed by Kinnucan and Zhang (2004), may be useful in interpreting this result.…”

“…This trade dispute dates back to the early 1980s when the US claimed that Canada's lumber exports were subsidized because stumpage fees were set by provincial governments (rather than markets) at artificially low levels (Gagné 2003;Luckert 2007) The cointegration analyses were conducted for 1995-2012 and then for shorter periods when necessitated by limited data availability. For 1995-2012, the following countries were included in pairwise analyses: Norway, Sweden, Finland, Brazil, Chile, and Germany.…”

The Canada-United States softwood lumber dispute: A look at the state of certain economic and political indicators and their relationship to the outcome of disputes.

“…Gagne (1999) including those that concern alleged subsidies such as softwood lumber (Gagne, 1999, p. 85). …”