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NAFTA's and CUSFTA's Impact on International Trade

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Author Info
John Romalis
Abstract

This paper identifies the effects of preferential trade agreements on trade volumes and prices using detailed trade and tariff data. It identifies demand elasticities by developing a difference in differences based method that exploits the fact that the additional wedge driven between consumption patterns in a liberalizing versus a non-liberalizing country is directly related to the tariff reduction. Supply elasticities are identified by using tariffs as instruments for observed quantities. Analysis of world-wide trade data for 5,000 commodities shows that NAFTA and CUSFTA have had a substantial impact on international trade volumes, but a modest effect on prices and welfare. NAFTA and CUSFTA increased North American output and prices in many highly-protected sectors by driving out imports from non-member countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11059.

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Date of creation: Jan 2005
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Handle: RePEc:nbr:nberwo:11059

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F1 - International Economics - - Trade

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  2. Yeats, Alexander, 1997. "Does Mercosur's trade performance raise concerns about the effects of regional trade arrangements?," Policy Research Working Paper Series 1729, The World Bank. [Downloadable!]
  3. Carolyn L. Evans & James Harrigan, 2004. "Tight Clothing: How the MFA Affects Asian Apparel Exports," NBER Working Papers 10250, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Howard J. Wall, 2002. "NAFTA and the geography of North American trade," Working Papers 2000-017, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  5. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 120-137 National Bureau of Economic Research, Inc. [Downloadable!]
  6. Kimberly A. Clausing, 2001. "Trade creation and trade diversion in the Canada - United States Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 677-696, August. [Downloadable!] (restricted)
  7. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier. [Downloadable!] (restricted)
  8. Anne O. Krueger, 1999. "Trade Creation and Trade Diversion Under NAFTA," NBER Working Papers 7429, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Won Chang & L. Alan Winters, 2002. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," American Economic Review, American Economic Association, vol. 92(4), pages 889-904, September. [Downloadable!]
  10. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April. [Downloadable!] (restricted)
  11. Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Limão, Nuno, 2005. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the US," CEPR Discussion Papers 4884, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Kyle Bagwell & Robert W. Staiger, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March. [Downloadable!] (restricted)
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  14. Sven W. Arndt, 2003. "Global Production Networks and Regional Integration," Working Papers 0301, Lowe Institute of Political Economy. [Downloadable!]
  15. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!]
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  16. David M. Gould, 1998. "Has NAFTA changed North American trade?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 12-23. [Downloadable!]
  17. Fukao, Kyoji & Okubo, Toshihiro & Stern, Robert M., 2003. "An econometric analysis of trade diversion under NAFTA," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 3-24, March. [Downloadable!] (restricted)
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  18. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  21. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Garth Frazer & Johannes Van Biesebroeck, 2007. "Trade Growth under the African Growth and Opportunity Act," Working Papers tecipa-289, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  2. Mark Funk & Erick Elder & Vincent W. Yao & Ashvin Vibhakar, 2006. "Intra-NAFTA trade and surface traffic: a very disaggregated view," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 87-99. [Downloadable!]
  3. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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