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Responses to Trade Liberalization: Changes in Product Diversification in Foreign- and Domestic-controlled Plants

John Baldwin

Economic Analysis (EA) Research Paper Series from Statistics Canada, Analytical Studies Branch

Abstract: This paper studies the impact that a small country joining a regional trade agreement, but particularly a small country, might be expected to gain from the exploitation of scale economies. It makes use of the experience of Canada when it entered into the Canada-United States Free Trade Agreement (FTA) in the early 1990s. It finds that there was a general increase in the pace of plant commodity specialization around the time of implementation of the Free Trade Agreement. At the time of the treaty, plant diversity was found to be higher in larger plants and in industries with assets that are associated with scope economies. Diversity was also higher in industries that had higher rates of tariff protection. Over the 1980s and 1990s, plant diversity decreased with reductions in both U.S. and Canadian tariffs. And the decline was greater during the post FTA era than before, thereby suggesting that this treaty had an impact above and beyond that just engendered by the tariff reductions that were associated with it. The study also found that foreign-controlled plants tended to adjust more over the entire period.

Keywords: Business performance and ownership; International trade; Business adaptation and adjustment; Trade patterns (search for similar items in EconPapers)
Date: 2005-03-24
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (14) Track citations by RSS feed

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http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=11F0027M2005031&lang=eng (application/pdf)

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