Toward a North American Security Perimeter? Assessing the Trade and FDI Impacts of Liberalizing 9/11 Security Measures

Patrick Georges, Marcel Mérette and Qi Zhang
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Marcel Mérette: Department of Economics, University of Ottawa, 55 Laurier E., Ottawa, Ontario
Qi Zhang: Department of Economics, University of Ottawa, 55 Laurier E., Ottawa, Ontario

No 1204E, Working Papers from University of Ottawa, Department of Economics

Abstract: This paper examines, for the first time, the trade and FDI impacts of a North American Security Perimeter that would liberalize the post 9/11 security measures at the Canada-US border. First, the study estimates econometrically the impact of post 9/11 security measures on bilateral (US-Canada) trade flows using a gravity model. Second, using these econometric estimates together with a three-region nine-sector general equilibrium model, we compute sectoral tariff rates “equivalent” to the 9/11 security measures. Finally, we assess the (general equilibrium) impacts on trade and FDI of a change of security paradigm toward a North American Security Perimeter. The paper shows that the economic opportunity gains occurring to Canada and the US from the liberalization of the 9/11 security measures amount to US$20 billion annually. This figure, once added to the direct administrative costs of the post 9/11 security measures, warrants serious consideration in policy discussions of a North American Security Perimeter.

Keywords: Foreign Direct Investment; Trade Flows; Post 9/11 Security Measures; North American Security Perimeter; Gravity Model; General Equilibrium Modelling. (search for similar items in EconPapers)
JEL-codes: C2 C6 F1 F2 F5 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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