Trade Creation and Diversion under NAFTA: The North American Strawberry Market

Youngjae Lee and Lynn Kennedy

No 235428, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: In order to identify the effect on trade creation and diversion of NAFTA in the North American strawberry market, this study conducts a partial equilibrium analysis by using the CES utility and production functions of Dixit and Stiglitz which provide necessary equations to estimate unobservable final prices of imported strawberries and non-tariff trade costs. Based on the results of this study, we could confirm that 1) the effect on trade creation of NAFTA is greater than the effect on trade diversion, which leads to positive effect of NAFTA on the North American strawberry market, 2) the difference between the local price and the imported price might be due to high non-tariff trade costs that exist between borders, 3) market integration simulation shows trade creation of 453% and no trade diversion, and 4) market segregation simulation shows that trade volume in the regional market decreases by 26% and trade volume out of regional market increases by 1045%.

Keywords: Agricultural and Food Policy; Demand and Price Analysis; International Relations/Trade (search for similar items in EconPapers)
Pages: 32
Date: 2016-07-31
New Economics Papers: this item is included in nep-cmp and nep-int
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235428

DOI: 10.22004/ag.econ.235428

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