The Long and Short of the Canada-U.S. Free Trade Agreement

Daniel Trefler

doi:10.1257/0002828042002633

American Economic Review Vol. 94 No. 4 2004

The Long and Short of the Canada-U.S. Free Trade Agreement

Joseph L. Rotman School of Management and Department of Economics, University of Toronto, 105 St. George Street, Toronto, Ontario, Canada, M5S 3E6, Canadian Institute for Advanced Research (CIAR), and the National Bureau of Economic Research (NBER).

Abstract

The Canada-U.S. Free Trade Agreement provides a unique window onto the effects of a reciprocal trade agreement on an industrialized economy (Canada). For industries that experienced the deepest Canadian tariff cuts, the contraction of low-productivity plants reduced employment by 12 percent while raising industry-level labor productivity by 15 percent. For industries that experienced the largest U.S. tariff cuts, plant-level labor productivity soared by 14 percent. These results highlight the conflict between those who bore the short-run adjustment costs (displaced workers and struggling plants) and those who are garnering the long-run gains (consumers and efficient plants).

DOI: 10.1257/0002828042002633
Volume: 94
Issue: 4
Pages: 870-895
Language: en
Sources: crossref bibtex:phds-export.bib openalex

The Long and Short of the Canada-U.S. Free Trade Agreement

Abstract

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