Archived — Perspectives on North American Free Trade Series Number 01—Can Small-Country Manufacturing Survive Trade Liberalization?: Evidence from the Canada-U.S. Free Trade Agreement, April 1999
Strategic Policy Sector
Economic Research and Policy Analysis Branch
This study considers whether the effects of the FTA will benefit or harm small country manufacturing. It shows that the lack of full integration of North American markets for manufacturing goods has limited the impact of tariff reductions in Canadian industries. The authors conclude that the Canadian manufacturing sector can prosper under trade liberalization provided we remain competitive and close the productivity gap. First, they argue, Canada continues to be a net exporter of manufactured products to the United States. Moreover, primary products are diminishing in their share of total exports since the FTA began. Second, home market size effects appear to be small or non-existent. In other words, there is no proof that a large home market confers an advantage in export markets that is reinforced by trade liberalization. And finally, non-tariff trade barriers still insulate Canadian firms significantly from import competition.
Catalogue number: C21-28/2-1999
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