The impacts of NAFTA on U.S. and Canadian forest product exports to Mexico

Abstract

The North American Free Trade Agreement (NAFTA) will lower barriers to trade and investment across the continent. This paper presents predictions of the effects of NAFTA on Mexico's imports of intermediate wood products, scrap and waste paper, pulp, and newsprint from the United States and Canada. Predictions were made with a partial equilibrium model. Model development involved estimating (i) elasticities of Mexico's import demand with respect to price and demand shifters and (ii) elasticities of prices with respect to their determinants, and then predicting, with these elasticities, the impacts of NAFTA on imports and prices. The effects of NAFTA on the exogenous variables affecting import demand and prices were summarized for three scenarios, based on the predictions of broader studies of the agreement. The results suggest that the full long-term impact of the NAFTA would be to increase the value of all Mexican imports from the United States and Canada by 21 to 85%. The effect would vary greatly by product and country of origin. Mexican imports of particleboard, hardwood veneer, scrap and waste paper, and wood pulp would be the least affected, mainly because of their smaller tariffs and inelastic price responses. Imports of Douglas-fir (Pseudotsugamenziesii (Mirb.) Franco) lumber, hardwood lumber, softwood plywood, and newsprint from the United States would increase the most under NAFTA.