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Trade Diversification Away from the U.S. or North American Customs Union? A Review of Canada’s Trade Policy Options

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  • Patrick Georges

    ()
    (Graduate School of Public and International Affairs,University of Ottawa, Ottawa, ON)

Abstract

This study examines Canada’s key strategic trade policy options – whether pushing for further economic integration with the U.S., or diversifying to non-U.S. markets and reducing the degree to which Canada’s economy depends on the U.S. In particular, this study compares the economic benefits of implementing a North American customs union with the benefits of increasing Canada’s trade with either emerging countries (e.g., India, China, Brazil) or with advanced partners such as Europe and Japan. The main conclusion is that there may be considerable benefit to Canada of diversifying some of its trade away from the United States provided that countries with more youthful populations and rapid growth, such as India, are targeted. Diversification to older countries such as Europe and Japan would not be beneficial. The analysis is based on a series of recent policy-modeling studies by the authors examining the economic impacts of diverse trade policies options in global economy models, taking also into consideration an important feature of the 21st century, the demographic changes around the world that accompany the globalization process for goods and services, capital and labor.

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Bibliographic Info

Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 1205E.

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Length: 54 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:ott:wpaper:1205e

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Keywords: Canadian Trade Policy; Geographical Trade Diversification; Population Ageing; Globalization.;

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References

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  1. Cadot, Olivier & Kukenova, Madina & Strauss-Kahn, Vanessa, 2010. "OECD imports : diversification and quality search," Policy Research Working Paper Series 5285, The World Bank.
  2. Patricia Augier & Michael Gasiorek & Charles Lai Tong, 2005. "The impact of rules of origin on trade flows," Economic Policy, CEPR & CES & MSH, vol. 20(43), pages 567-624, 07.
  3. Karl Meilke & James Rude & Steven Zahniser, 2008. "Is 'NAFTA Plus' an Option in the North American Agrifood Sector?," The World Economy, Wiley Blackwell, vol. 31(7), pages 925-946, 07.
  4. Rod Falvey & Geoff Reed, 2002. "Rules of Origin as Commercial Policy Instruments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 393-408, May.
  5. P. J. Lloyd, 1993. "A Tariff Substitute for Rules of Origin in Free Trade Areas," The World Economy, Wiley Blackwell, vol. 16(6), pages 699-712, November.
  6. William B.P. Robson, 2007. "Stuck on a Spoke: Proliferating Bilateral Trade Deals are a Dangerous Game for Canada," e-briefs 47, C.D. Howe Institute.
  7. Anne O. Krueger, 1995. "Free Trade Agreements versus Customs Unions," NBER Working Papers 5084, National Bureau of Economic Research, Inc.
  8. Patrick Georges, 2008. "Liberalizing NAFTA Rules of Origin: A Dynamic CGE Analysis," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 672-691, 09.
  9. Patrick Georges, 2007. "Toward a North American Customs Union Rules of Origin Liberalization Matters More than a Common External Tariff for Canada," Working Papers 0704E, University of Ottawa, Department of Economics.
  10. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2004. "Aging, Pension Reform, and Capital Flows:," Sonderforschungsbereich 504 Publications 04-65, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  11. Fougere, Maxime & Mercenier, Jean & Merette, Marcel, 2007. "A sectoral and occupational analysis of population ageing in Canada using a dynamic CGE overlapping generations model," Economic Modelling, Elsevier, vol. 24(4), pages 690-711, July.
  12. Patrick Georges & Marcel Mérette & Qi Zhang, 2012. "Toward a North American Security Perimeter? Assessing the Trade and FDI Impacts of Liberalizing 9/11 Security Measures," Working Papers 1204E, University of Ottawa, Department of Economics.
  13. Anne O. Krueger, 1993. "Free Trade Agreements as Protectionist Devices: Rules of Origin," NBER Working Papers 4352, National Bureau of Economic Research, Inc.
  14. Ghosh, Madanmohan & Rao, Someshwar, 2005. "A Canada-U.S. customs union: Potential economic impacts in NAFTA countries," Journal of Policy Modeling, Elsevier, vol. 27(7), pages 805-827, October.
  15. Patrick Georges & Marcel Mérette & Aylin Seckin§, 2009. "Should Canada Diversify its Trade Pattern? An Overlapping- Generations CGE Analysis of Trade and Ageing," Working Papers 0906E, University of Ottawa, Department of Economics.
  16. Kala Krishna & Anne Krueger, 1995. "Implementing Free Trade Areas: Rules of Origin and Hidden Protection," NBER Working Papers 4983, National Bureau of Economic Research, Inc.
  17. Patrick Georges, 2010. "Dispensing with NAFTA Rules of Origin? Some Policy Options," The World Economy, Wiley Blackwell, vol. 33(11), pages 1606-1637, November.
  18. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  19. Kala Krishna, 2005. "Understanding Rules of Origin," NBER Working Papers 11150, National Bureau of Economic Research, Inc.
  20. Hans Fehr & Sabine Jokisch & Laurence J. Kotlikoff, 2005. "Will China Eat Our Lunch or Take Us Out to Dinner? Simulating the Transition Paths of the U.S., EU, Japan, and China," NBER Working Papers 11668, National Bureau of Economic Research, Inc.
  21. Robin Banerjee & William B.P. Robson, 2009. "Faster, Younger, Richer? The Fond Hope and Sobering Reality of Immigration's Impact on Canada's Demographic and Economic Future," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 291, July.
  22. Mérette Marcel & Georges Patrick, 2010. "Demographic Changes and the Gains from Globalisation: An Analysis of Ageing, Capital Flows, and International Trade," Global Economy Journal, De Gruyter, vol. 10(3), pages 1-39, October.
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