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Global softwood lumber trade : a spatial equilibrium model

University of British Columbia

This study uses a partial spatial equilibrium model to analyze changes in global softwood lumber trade. Based on work by Adams and Haynes (1980) and Cardellichio et al. (1990), trade flows from 15 different regions are analyzed using elasticity estimates and production, trade and price data from the year 1987. Unlike the earlier models, this one focuses on British Columbia (BC) and how proposed changes in the Annual Allowable Cut (AAC) will impact trade flows and prices. The model establishes a base case of expected future conditions from which a variety of different scenarios are tested. Prices, production, consumption and trade flows are calculated over a 38 year time period, 1987-2025. The results of the model indicate that changes in BC production cause an increase in the world average price until production responds to this shortage. As BC experiences a decline in production, exports to the United States are replaced by the increased production in the US South. However, BC continues to increase its exports to Japan and Interior Canada as demand for softwood lumber grows over time. Increases in transportation costs affect production and trade flows by forcing many importers to increase production and supply their domestic market. BC exports to Japan increase in response to this redistribution of trade. Welfare results indicate that, in the long-term, BC is better-off with a reduduction in AAC. A decline in production in BC causes world prices to rise, therby causing producer surplus to increase in the BC market. This comes at relatively small cost to the BC domestic consumer. These results suggest that provincial forest companies are not jointly maximizing returns from lumber production.

Thesis/Dissertation

application/pdf

2009-01-26

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http://hdl.handle.net/2429/3895

Agricultural Economics

University of British Columbia

UBCV

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