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Why Is Interprovincial Trade Down and International Trade Up?


  • Grady, Patrick
  • Macmillan, Kathleen


The drop in the share of interprovincial exports in GDP can be fully explained by several factors: the reductions in Canadian tariffs that have opened up the domestic market to foreign competition; the slower growth of that market compared with the U.S.; and relatively low increases in the prices of goods traded interprovincially. Those concerned about the weakening of the Canadian internal market should take some comfort that, except for the relatively small increases in the prices of interprovincial exports, these factors should have run their course and are unlikely to cause any further declines in the share of interprovincial exports in GDP. Even more encouraging, there is some evidence the AIT has helped to increase interprovincial exports. The jump in international exports can be fully explained by improved Canadian labor costs relative to the U.S., reductions in tariffs paid on U.S. imports from Canada almost entirely as a result of the FTA/NAFTA, and, most importantly, the U.S.’s prodigious growing appetite for imports, some of which may be unsustainable given the recent magnitude of the U.S. current account deficit. The increase in Canada’s international exports, remarkable as it was, would have been even larger if it had not been for the decline in their price relative to the price of GDP.

Suggested Citation

  • Grady, Patrick & Macmillan, Kathleen, 1998. "Why Is Interprovincial Trade Down and International Trade Up?," MPRA Paper 8710, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:8710

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    References listed on IDEAS

    1. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
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    Cited by:

    1. Gu, Wulong & Sawchuk, Gary, 2001. "Canada's growing market integration with the U.S.--with a focus on trade," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 283-300, November.
    2. Brown, W. Mark, 2003. "Overcoming Distance, Overcoming Borders: Comparing North American Regional Trade," Economic Analysis (EA) Research Paper Series 2003008e, Statistics Canada, Analytical Studies Branch.
    3. Brown, W. Mark, 2003. "Vaincre les distances, vaincre les frontieres : comparaison des echanges regionaux en Amerique du Nord," Serie de documents de recherche sur l'analyse economique (AE) 2003008f, Statistics Canada, Direction des etudes analytiques.
    4. Grady, Patrick, 2009. "Were Canadian Exports to the U.S. Curtailed by the Post-9/11 Thickening of the U.S. Border?," MPRA Paper 21047, University Library of Munich, Germany.
    5. Courchene, Thomas J. & Harris, Richard G., 2000. "North American Monetary Union: analytical principles and operational guidelines," The North American Journal of Economics and Finance, Elsevier, vol. 11(1), pages 3-18, August.
    6. Grady, Patrick, 2009. "A More Open and Secure Border for Trade, Investment and People," MPRA Paper 17240, University Library of Munich, Germany.

    More about this item


    Interprovincial trade in Canada; Agreement on Internal Trade;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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