UBC Theses and Dissertations

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UBC Theses and Dissertations

Two papers in international trade Fullerton, John Michael


This thesis presents two papers dealing with international trade policy in North America. The first is "An Empirical Analysis of Protectionist Forces in the United States and Canada" and the second is "Imports as a Cause of Injury: the Case of the 1986 Softwood Lumber Dispute". The first paper addresses the question of what motivates firms and industries to initiate "less than fair value" (LFV) complaints. The theory of rent-seeking is tested by analyzing data on the frequency of countervailing duty and antidumping complaints from 1975 to 1987 in both Canada and the U.S. A reduced form model is specified that expUcitly incorporates factors that are assumed to affect the supply and demand for protection, including federal elections, business cycles, and statutory changes to laws governing antidumping and countervailing duty procedures. The results indicate that the frequency of LFV cases, in both the U.S. and Canada, rise during low points in the business cycle, and when relative competitiveness and profitability in manufacturing decline. The second paper takes a specific countervailing duty case, that of the Canada-U.S. softwood lumber dispute of 1986, and addresses the question of whether the U.S. industry suffered injury from the alleged less than fair valued Canadian lumber imports. The relationship between various measures of injury for the U.S. industry and various hypothesized causal factors, including stumpage prices, is analyzed. The six measures of injury are: prices, output, market share, employment, accounting profits, and stock market profits. Structural models are specified and reduced form models tested for the 1975 to 1987 time period. The analysis indicates that stumpage prices, as proxied by B.C. stumpage levels, appear to have had littie effect on any injury sustained by the U.S. industry. Alternative specifications, using "leaked rents" to the B.C. industry as a proxy for the alleged subsidy, also showed little effect on the U.S. industry. Business cycle effects and the exchange rate are the most important determinants of performance. Counterfactual simulations using tiie estimated equations permit the hypothesizing of how the U.S. industry would have fared under alternative economic scenarios. This provides a useful framework for evaluating causes of injury, since one can control for all other factors besides those alleged to be unfair.

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