Erratum: Welfare impacts of the 1996 United States – Canada Softwood Lumber (trade) Agreement

Abstract

Note: Values are in millions of 1997 U.S. dollars. This change in Canadian producer surplus only accounts for Canadian exports to the U.S. market and does not cover Canadian domestic and other foreign markets for Canadian softwood lumber. In theory, the SLA should reduce softwood lumber prices in the two (domestic and other foreign) markets, which in turn lower producer surplus (and raises the amount of consumer surplus) in these markets. Since the primary focus of this paper is on U.S. market, we merely point out that a full welfare analysis for Canadian producers must include all three markets. Thus, the net Canadian producer surplus, including all three markets, should be lower than what we have estimated in this paper. At one extreme, Canadian producers could experience a net decrease in well-being as result of decrease in price and output of their softwood lumber in their own domestic and other exporting markets, even they are better off in the U.S. market with the SLA. Although this extreme scenario is not likely to be true because the U.S. market (accounts for 65% Canadian production) is the largest of the three markets for Canadian softwood lumber, a further study could clarify this issue. This number is calculated based on data in Table 1. Other producer surplus is the gain of Canadian exporters in provinces that are not covered by the SLA and of exporters from other countries that supply softwood lumber in the U.S. market. Table 5. Estimated welfare impacts for the first 4 years under SLA.