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The Long and Short of the Canada-U.S. Free Trade Agreement

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  • Daniel Trefler

Abstract

The Canada-U.S. Free Trade Agreement (FTA) provides a unique windowonto the effects of a reciprocal trade agreement on an industrializedeconomy (Canada). For industries that experienced the deepest Canadiantariff cuts, employment fell by 12 percent and labour productivity rose by 15percent as low-productivity plants contracted. For industries that receivedthe largest U.S. tariff cuts, there were no employment gains, but plant-levellabour productivity soared by 14 percent. These results highlight the conflictbetween those who bore the short-run adjustment costs (displaced workersand struggling plants) and those who are garnering the long-run gains(consumers and efficient plants). Finally, a simple welfare analysis providesevidence of aggregate welfare gains.

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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economics of Industry Papers with number 41.

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Date of creation: Jan 2006
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Handle: RePEc:cep:stieip:41

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

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