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

Daniel Trefler
The American Economic Review
Vol. 94, No. 4 (Sep., 2004), pp. 870-895
Stable URL: http://www.jstor.org/stable/3592797
Page Count: 26
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The Long and Short of the Canada-U.S. Free Trade Agreement
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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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