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Phase Out Tariffs, Phase In Trade?

James Lake (), Tibor Besedes () and Tristan Kohl ()

No 1903, Departmental Working Papers from Southern Methodist University, Department of Economics

Abstract: What causes U.S. trade with Mexico and Canada to continue growing faster, for up to a decade, relative to countries with which the U.S. does not have a free trade agreement? Baier and Bergstrand (2007) suggest that tariff phase-out and delayed pass-through of tariffs into import prices could cause such prolonged differential import growth. We examine how tariff cuts negotiated under the Canada-US Free Trade Agreement and the North American Free Trade Agreement (NAFTA) affected U.S. import growth in 1989�2016 using detailed product-level data on tariff phase-out in the original treaties. We find essentially no evidence for the tariff phase-out or delayed pass through explanations. Rather, we find evidence for an important role played by NAFTA tariff cuts reducing the impacts of frictions at various extensive margins.

Keywords: Free Trade Agreements; CUSFTA; NAFTA; trade; phase-out; tariffs; extensive margin. (search for similar items in EconPapers)
JEL-codes: F1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2019-04
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