An Industrial Analysis of Trade Creation and Diversion Effects of NAFTA

David Karemera, Kalu Ojah
1998 Journal of Economic Integration  
We l f a r e effects of economic integration are often studied with aggregate data, and as such provide limited insights about the effects of trade pacts to individual economic agents in the free trade area. In this study a three-digit disaggre g a t e d c o m m o d i t y / i n d u s t r y data grouped under the Standard International Tr a d e Classification is used to empirically assess the economic benefits of the Nort h American Free Trade Agreement (NAFTA). Import demand elasticities from a
more » ... elasticities from a dynamic demand model were used to estimate both trade creation and trade diversion effects of removing all tariff barriers from among NAFTA countries -US, Canada and Mexico. Results show that US imports of crude oil and petro l eum products from Canada and most US imports from Mexico are more sensitive to domestic prices than to bilateral import prices. Furt h e r, results indicate
doi:10.11130/jei.1998.13.3.400 fatcat:jqyvxgveubcixli2e67alm536q