Simulation of future trade in wood pulp between Canada and the United States

Abstract

A model of the North American pulp and paper industry developed previously by the authors was used to simulate the trade of wood pulp between various regions of Canada and the United States, to the year 2000, under three different scenarios. The base simulation assumed no change in trade policies or cost competitiveness between regions, concentrating on the effects of changes in population and income. Under these assumptions, it was found that Canadian exports to the United States would remain approximately constant until 1990, but then double by the year 2000, reaching 5 million tons per year. Meanwhile, exports to the rest of the world would decline by 40 percent, to 2.5 million tons. Total Canadian exports would increase by some 15 percent over the next 20 years. In the second set of simulations, an ad valorem tariff on Canadian pulp was assumed. This led to a sharp reduction in U.S. imports. However, this decrease of Canadian exports to the United States would be compensated to a large extent by increased Canadian exports to Western Europe. The third simulation assumed a sustained rise in manufacturing costs for the entire pulp and paper sector in Canada. This resulted, unexpectedly, to a rise in exports of pulp to the United States. The reason was a rise in paper and newsprint production in the United States that made it advantageous for U.,S. producers to import more Canadian chemical pulp.