Abstract
Leamer (1988:53) argues that permanent trade barriers trigger stronger and more lasting responses than temporary ones. We analyze the effects of U.S. countervailing duties (CVDs) imposed on Canadian hog and pork exports by testing the stability of long run arbitrage/cointegration relations between U.S., Québec and Alberta hog prices. The CVDs induced large deviations from the long run arbitrage relations but these effects vanished with the removal of the pork CVD. Weak exogeneity tests show that the U.S. hog price did not error correct during the dispute period and confirm that CVDs contribute to insulate a large domestic market from foreign competition. [F13]
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