The 1988 Canada-United States Free Trade Agreement: A Dynamic General Equilibrium Evaluation of the Transition Effects
The Canada America Free Trade Agreement is to be phased in over a ten year period, which began in January 1, 1989. The most significant element is the phased-in reduction of tariffs on bilateral trade, plus the removal of some significant non-tariff barriers. This paper reports some estimates of the transition effect of the agreement using a sequenced general equilibrium model incorporating imperfect competition, and some labour market rigidities. Entry and exit dynamics are also explicitly modelled. The results suggest that it is important in applied policy analysis to pay attention to adjustment and dynamics.
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