Freeing Trade: Why a Unilateral Approach Makes Sense for Canada

Abstract

The realization that competitiveness depends on having access to low-cost inputs has led Canada along with many other countries to slash tariffs unilaterally in order to enhance their own competitiveness. The present study builds on and updates a 2014 study of possible unilateral free trade being adopted by Canada, by re-simulating a policy of unilateral liberalization using this time a dynamic model that incorporates FDI, on an updated data set, and in an updated trade policy context that takes into account the new FTAs that Canada has negotiated, and the increase in in its general for developing countries. In addition to tariff elimination, it also includes liberalization of services and investment policy designed to improve Canada’s attractiveness as a global production hub.

Keywords: Canada, unilateral liberalization, CGE model, production hub

JEL Classification: F13, F14