WELFARE IMPACTS OF THE CANADA-UNITED-STATES SOFTWOOD LUMBER TRADE DISPUTE - BEGGAR THY CONSUMER TRADE-POLICY

The welfare impacts of the 1987-91 Canadian ''voluntary'' 15% lumber e xport tax and the current 6.51% U.S. import duty are analyzed using a simultaneous equations model of the softwood lumber market. The result s show that U.S. consumers suffer losses 35% to 45% of those endured b y Canadian producers. Canadian national welfare was much higher under the voluntary export tax, indicating the Canadian government erred in unilaterally terminating the agreement. In both instances, the U.S. go vernment pursued policies that benefited domestic producers at the exp ense of U.S. lumber consumers, with no attempt or discussion of compen sation. Thus, this appears to be a case of ''beggar thy consumer'' tra de policy.