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NAFTA and the geography of North American trade

  • Howard J. Wall

Debates over the desirability a preferential trading area (PTA) begin with the supposition that it will have two effects on trade: it will increase trade between PTA members, and decrease trade between members and non-members. This paper demonstrates, however, that at the regional level the effects of NAFTA have been much more complicated than what is normally supposed. Specifically, I find that NAFTA has meant (i) less trade between Eastern Canada and the United States and Mexico, (ii) more trade between Central Canada and the United States and Mexico, and (iii) more trade between Western Canada and Mexico, but no change in the volume of trade between Western Canada and the United States. I also find that NAFTA has decreased trade between Canadian regions and both Europe and Asia, while increasing Mexico's trade with Asia.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2000-017.

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Date of creation: 2002
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Publication status: Published in Federal Reserve Bank of St. Louis Review, March 01, 2003, 85 (2), pp. 13-26
Handle: RePEc:fip:fedlwp:2000-017
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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Cletus C. Coughlin & Howard J. Wall, 2002. "NAFTA and the changing pattern of state exports," Working Papers 2000-029, Federal Reserve Bank of St. Louis.
  3. Krugman, Paul, 1998. "What's New about the New Economic Geography?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 7-17, Summer.
  4. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
  5. Wylie, Peter J., 1995. "Partial equilibrium estimates of manufacturing trade creation and diversion due to NAFTA," The North American Journal of Economics and Finance, Elsevier, vol. 6(1), pages 65-84.
  6. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  7. Michael R. Pakko & Howard J. Wall, 2001. "Reconsidering the trade-creating effects of a currency union," Review, Federal Reserve Bank of St. Louis, issue May, pages 37-46.
  8. Tamim Bayoumi & Barry Eichengreen, 1997. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 141-168 National Bureau of Economic Research, Inc.
  9. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  10. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  11. 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.
  12. Hanson, Gordon H., 1996. "Economic integration, intraindustry trade, and frontier regions," European Economic Review, Elsevier, vol. 40(3-5), pages 941-949, April.
  13. John F. Helliwell, 1995. "Do National Borders Matter for Quebec's Trade?," NBER Working Papers 5215, National Bureau of Economic Research, Inc.
  14. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
  15. repec:kap:jeczfn:v:82:y:2003:i:4:p:427-450 is not listed on IDEAS
  16. Anne O. Krueger, 1999. "Trade Creation and Trade Diversion Under NAFTA," NBER Working Papers 7429, National Bureau of Economic Research, Inc.
  17. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  18. Deardorff, Alan V., 1984. "Testing trade theories and predicting trade flows," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 10, pages 467-517 Elsevier.
  19. Devadoss, Stephen & Kropf, Jurgen & Wahl, Thomas I., 1995. "Trade Creation And Diversion Effects Of The North American Free Trade Agreement Of U.S. Sugar Imports From Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(02), December.
  20. Karemera, David & Ojah, Kalu, 1998. "An Industrial Analysis of Trade Creation and Diversion Effects of NAFTA," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 400-425.
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