NAFTA and the Geography of North American Trade
FRB of St. Louis Working Paper No. 2000-017B
25 Pages Posted: 1 Jan 2001
Date Written: November 2000
Debates over the desirability a preferential trading area (PTA) begin with the supposition that it will have two effects on the volume of 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.
Keywords: NAFTA, Geography, Trade diversion, trade creation
JEL Classification: F13, R11
Suggested Citation: Suggested Citation