Trade effects of transnational timber legality assurance regimes: Evidence from the lacey act amendment on China’s forest product exports

Abstract

We analyzed the trade effects of transnational timber legality assurance regimes, specifically the impact of the Lacey Act Amendment (LAA), on forest product exports from China to the U.S. The LAA is a strict legal requirement for forest product sources. It was implemented phase-by-phase, beginning in 2008 in the U.S. We applied a staggered difference-in-differences model and a unique and disaggregated dataset from the Chinese Customs Trade Database at the firm–product level from 2000 to 2016. We found that the implementation of the LAA decreased the probability of exporting Chinese forest products to the U.S. by 2.36%, but contributed to an increase of 10.20% in export value. The overall trade effect was positive, owing to an increase in the intensive trade margin (i.e., how much was traded). The LAA exerted lasting but varying effects during different phases of its implementation. In the initial stage, both the extensive and intensive margins decreased significantly. In the second stage, exporters tended to comply with the legal requirements, reducing the negative impact of the LAA. As time went on, the intensive margin became positive. A heterogeneous analysis showed that the negative impact of the LAA was more pronounced for small-scale, single-product, and non-foreign-invested exporters. We discuss the implications of these findings.