A position paper released by the Fraser Institute.
Abstract: This paper develops a partial equilibrium trade model that reflects the BC Coastal log market and the international market for BC logs to analyze three possible policy options: a ban on exports, an export quota, and free trade in logs. Using 2011 market data, the model suggests that an export quota that restricts log exports to current levels is more beneficial to British Columbia than an export ban or free trade. The intuition behind this result is that limiting BC log exports allows BC log owners, as a group, to exercise market power in the international market. Sensitivity analysis suggests that the results partially hinge on how substitutable BC logs are for logs from other jurisdictions: if BC logs are very substitutable, then free trade in logs is more beneficial than an export quota.
One thing is exceedingly clear from the analysis: an outright prohibi- tion on log exports from British Columbia, as advocated by many pundits, politicians, and interest groups, is very costly compared to all alternatives. Both free trade in logs and a quota policy allowing limited log exports are preferable to a ban on exports.
Although free trade in logs is not the preferred policy from a BC per- spective, it certainly is from a global perspective. Chinese, Japanese, and Korean log consumers directly benefit from British Columbia allowing more log exports. This presents an opportunity. Canada is currently in talks to join the Trans Pacific Partnership, which includes Japan. There have also been calls in the media and policy circles for the commencement of trade negotiations with China in the future. It is possible that removing all restrictions on log exports as part of a trade agreement could leverage concessions of a similar size that would benefit British Columbia and Canada.
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