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

Daniel Trefler

1,069 citations0/0 files storedAmerican Economic Review

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Global trade and economics Labor market dynamics and wage inequality Canadian Policy and Governance

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).

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References

2001Econometric Analysis of Cross Section and Panel Data 2000Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence 2002Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants 2000Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?1995Exporters, Jobs, and Wages in U.S. Manufacturing: 1976-1987

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