Q1. (30 points) Assume that the market of softwood lumber is in perfect competition.

1)(10 points) In May 2002, the US imposed a countervailing duty and an antidumping duty with a combined average total rate of 27.22% on Canadian softwood lumber exported to the US. Draw a graph to analyze the impact of this US trade policy on the welfare of different interest groups in Canada and Canadian national welfare and employment. (Please be aware that you will have to figure out whether US was a large importing country. You have to find data to support your judgement.)

2)(10 points) Read Article V, VI, and VII of the Softwood Lumber Agreement 2006 (SLA 2006, https://www.treaty-accord.gc.ca/text-texte.aspx?id=105072&lang=eng). What is the key commitment of the US? What is the key commitment of Canada?

(10 points) How Canadian national welfare differ under the countervailing duty and anti-dumping duty by the US as in part 1) and under the SLA 2006? Use graphs to assist your analysis