The Canada-US softwood lumber dispute: lessons in managed trade

Abstract

The North American Softwood Lumber market has been extremely dynamic over the past 30 years with significant growth and contraction over this time. This thesis presents a methodical examination of this market and its development over this period. This research provides an in-depth overview of the evolution of this conflict as well as a theoretical explanation of the various trade instruments used. It then explores the welfare implications of these managed trade regimes by first estimating supply and demand elasticities then simulating the hypothetical effects of each regime using the estimated elasticities in combination with reference prices and quantities for the U.S. and Canada. This paper finds that the new softwood lumber agreements economic implications are far more complex than its predecessors and may lead to further price volatility. This paper also reinforces the view that managed trade agreements are rarely favorable to all parties involved but, through careful identification of priorities, potential disruptions can be minimized.