Do National Borders Really Matter? Canada-US Regional Trade Reconsidered

Michael A Anderson and Stephen Smith ()

Review of International Economics, 1999, vol. 7, issue 2, 219-27

Abstract: This paper reconsiders the Canada-US border's effect on trade. The authors first test whether the findings of McCallum (1995) and Helliwell (1996)--that the border substantially decreases trade--change when better data are used. It is found that the "border effect" may be substantially less than previously measured--up to 50% smaller--but remains surprisingly large. An explanation of the border's effect is sought. Transportation equipment offers a natural experiment, as North American trade has been completely liberalized for several decades. A higher border effect is found for these freely traded goods, which rules out standard protection as the border effect's cause. Copyright 1999 by Blackwell Publishing Ltd.

Date: 1999
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