Hostname: page-component-8448b6f56d-c4f8m Total loading time: 0 Render date: 2024-04-23T23:19:30.676Z Has data issue: false hasContentIssue false
  • English
  • Français

Trade Creation and Trade Diversion in the North American Free Trade Agreement: The Case of the Agricultural Sector

Published online by Cambridge University Press:  28 April 2015

Dwi Susanto ,
C. Parr Rosson III  and
Flynn J. Adcock
Dwi Susanto
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
C. Parr Rosson III
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
Flynn J. Adcock
Affiliation:
Center for North American Studies (CNAS), Department of Agricultural Economics, Texas A&M University, College Station, Texas
Get access

Abstract

This paper examines the effect of the U.S.-Mexico trade agreement under the North American Free Trade Agreement (NAFTA). The results suggest that U.S. agricultural imports from Mexico have been responsive to tariff rate reductions applied to Mexican products. A one percentage point decrease in tariff rates is associated with an increase in U.S. agricultural imports from Mexico by 5.31% in the first 6 years of NAFTA and by 2.62% in the last 6 years of NAFTA. U.S. imports from Mexico have also been attributable to the pre-NAFTA tariff rates. Overall, the results indicate that the U.S-Mexico trade agreement under NAFTA has been trade creating rather than trade diverting.

Keywords

agricultural sectorNAFTApanel datatariffstrade creationtrade diversionF10F15Q17Q18C31C33
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 39 , Issue 1 , April 2007 , pp. 121 - 134
Copyright
Copyright © Southern Agricultural Economics Association 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Baltagi, B.H.Econometric Analysis of Panel Data, 2nd ed. New York: John Wiley & Sons, 2001.Google Scholar
Beghin, J.C., and Aksoy, A.. “Agricultural Trade and the Doha Round: Lessons from Commodity Studies.” Briefing Paper 03-BP 42, Center for Agricultural and Rural Development, Iowa State University, Ames, 2003.Google Scholar
Bhagwati, J., and Krueger, A.O.. The Dangerous Drift to Preferential Trade Agreements. Washington, DC: AEI Press, 1995.Google Scholar
Burfisher, M., Robinson, S., and Thierfelder, K.. “The Impact of NAFTA on the United States.” Journal of Economic Perspectives 15(2001):125–44.CrossRefGoogle Scholar
Clausing, K. “Trade Creation and Trade Diversion in the Canada-United States Free Trade Agreement.” Canadian Journal of Economics 34(2001):677–96.CrossRefGoogle Scholar
CBO (Congressional Budget Office). “The Effects of NAFTA on US-Mexican Trade and GDP.” A CBO paper, Washington, DC, May 2003.Google Scholar
Fukao, K., Okuba, T., and Stern, R.M.. “An Econometric Analysis of Trade Diversion under NAFTA.” North American Journal of Economics and Finance 14(2003):3–24.CrossRefGoogle Scholar
Gould, D.M. “Has NAFTA Changed North American Trade?” Economic Review of the Federal Reserve Bank of Dallas First Quarter (1998):12–23.Google Scholar
Halvorsen, R., and Palmquist, R.. “The Interpretation of Dummy Variables in Semi Logarithmic Equations.” The American Economic Review 70(1980):474–75.Google Scholar
Hsiao, C.Analysis of Panel Data. New York: Cambridge University Press, 2003.CrossRefGoogle Scholar
Karemera, D., and Koo, W.W.. “Trade Creation and Diversion Effects of the U.S.-Canadian Free Trade Agreement.” Contemporary Economics Policy 12(1994):12–23.CrossRefGoogle Scholar
Kehoe, P.J., and Kehoe, T.J.. “Capturing NAFTA's Impact with Applied General Equilibrium Models.” Federal Reserve Bank of Minneapolis Quarterly Review 18,1 (Spring 1994)Google Scholar
Kehoe, T.J. “An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA.” Research Department Staff Report 320, Federal Reserve Bank of Minneapolis, August 2003.Google Scholar
Kennedy, P.E. “Estimation with Correctly Interpreted Dummy Variables in Semi Logarithmic Equations.” The American Economic Review 71(1981):801.Google Scholar
Kruger, A.O. “Free Trade Agreements versus Customs Unions.” Journal of Development Economics 54(1997):169–87.CrossRefGoogle Scholar
Kruger, A.O. “Trade Creation and Trade Diversion under NAFTA.” Working Paper 7429, National Bureau of Economic Research NBER Working Paper Series, Cambridge, MA, December 1999.CrossRefGoogle Scholar
Kruger, A.O. “NAFTA's Effects: A Preliminary Assessment.” World Economy 33:6(2000):761–75.CrossRefGoogle Scholar
Lederman, D., Maloney, W.F., and Serven, L.. “Lessons from NAFTA for Latin America and the Caribbean Countries: A Summary of Research Findings.” Washington, DC: The World Bank, 2003.Google Scholar
Levy, S., and van, S. Wijnbergen. “Labor Markets, Migration, and Welfare: Agriculture in the North American Free Trade Agreement.” Journal of Development Economics 43(1994):263–78.CrossRefGoogle Scholar
McDaniel, C, and Agama, L.. “The NAFTA Preference and US-Mexico Trade: Aggregate-Level Analysis.” World Economy 6(2003):939–55.CrossRefGoogle Scholar
Miljkovic, D., and Paul, R.. “Agricultural Trade in North America: Trade Creation, Regionalism and Regionalization.” The Australian Journal of Agricultural and Resource Economics 43,3 (2003):349–66.CrossRefGoogle Scholar
Panagariya, A. “Preferential Trade Liberalization: The Traditional Theory and New Developments.” Journal of Economic Literature 38(2000):287–331.CrossRefGoogle Scholar
Romalis, J. “NAFTA's and CUSFTA's Impact on International Trade.” Review of Economics and Statistics, forthcoming, 2007.CrossRefGoogle Scholar
USDA (United States Department of Agriculture): “The Harmonized Tariff Schedule of The United States”, available at: http://www.fas.usda.gov/itp/us-tariffsch.asp (last accessed: February 8, 2007).Google Scholar
Venables, A.J.International Trade: Regional Economic Integration. Manuscript prepared for the “International Encyclopedia of Social and Behavioral Sciences,” July 2000. Internet site: http://econ.lse.ac.uk/~ajv/regenc2.pdf (Accessed February 2006).Google Scholar
Viner, J.The Customs Union Issue. New York: Carnegie Endowment for International Peace, 1950.Google Scholar
Wooldridge, J.M.Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press, 2002.Google Scholar
Zahniser, S.S., Pick, D., Pompelli, G., and Gehlhar, M.J.. “Regionalism in the Western Hemisphere and Its Impact on U. S. Agricultural Exports: A Gravity-Model Analysis.” American Journal of Agricultural Economics 84(2002):791–97.CrossRefGoogle Scholar