NAFTA's and CUSFTA's Impact on International Trade

John Romalis

NBER Working Paper No. 11059
Issued in January 2005
NBER Program(s):   ITI

This paper identifies the effects of preferential trade agreements on trade volumes and prices using detailed trade and tariff data. It identifies demand elasticities by developing a difference in differences based method that exploits the fact that the additional wedge driven between consumption patterns in a liberalizing versus a non-liberalizing country is directly related to the tariff reduction. Supply elasticities are identified by using tariffs as instruments for observed quantities. Analysis of world-wide trade data for 5,000 commodities shows that NAFTA and CUSFTA have had a substantial impact on international trade volumes, but a modest effect on prices and welfare. NAFTA and CUSFTA increased North American output and prices in many highly-protected sectors by driving out imports from non-member countries.

(612 K)

Published: Romalis, John. "NAFTA's and CUSFTA's Impact on International Trade." Review of Economics and Statistics 89, 3 (August 2007): 416-35.

This paper is available as PDF (612 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX