The Cape Breton Regional Municipality (CBRM) is a beautiful region of approximately 2,400 square kilometres located on Cape Breton Island in the eastern part of Nova Scotia. As is the case with many economic regions in Atlantic Canada, Cape Breton Island has long been characterized by both an aging and declining population. For many decades, each year hundreds of young adults have migrated out of the region for educational and work opportunities in other areas of Nova Scotia and Canada. The result has been a consistent shift in the shape of the CBRM's age pyramid. There have been ever fewer young people, and far more people in the older age cohorts. In 2016, almost 23% of CBRM's total population was aged 65 or older. More broadly, during the 2006 to 2016 period, the share of people across all parts of Nova Scotia aged 65 years of age and older increased by 33%. It is likely that within another decade, approximately one-quarter of the provincial population will be at least 65 years of age.

In terms of the geographical distribution of the population within the CBRM, approximately 72% of the total residents live within small urban and suburban communities with total populations below 30,000 people. Historically, a number of these communities were established around natural resource industries – namely fishing harbours or coal seams/mines. Sydney, founded in 1785, is the largest of the small urban centres and Sydney's principal industry for many decades was steelmaking. In total, these small urban communities account for approximately 4% of the entire land mass of the region. The other 28% of the population is widely scattered about the remaining 2,300 square kilometres. These rural residents have access to relatively little physical public infrastructure.

Within this context, the CBRM is increasingly challenged to identify initiatives and programs that will effectively accommodate and support an aging population. CBRM is among the poorest municipalities in Nova Scotia, and in Canada for that matter (as measured by taxable assessment per capita). This reality has impacted the decisions that have been taken by both the CBRM's municipal council and by the administrative staff.

1. Introduction

This paper discusses and compares both the trade and investment dimensions of the ASEAN Free Trade Agreement (AFTA) and the North American Free Trade Agreement NAFTA). The emphasis is on the difference in objectives, impacts and content.

The literature contrasting AFTA and NAFTA is relatively short, but there are a substantial number of works on each of the two free trade agreements. In the paper, I argue that the objectives underlying these agreements are quite different, as are both the impacts and their content. AFTA involves a largely tariff based integration attempt with some content in services between national economies which were initially linked through a non-trade agreement, ASEAN, rather than a trade agreement. It is also one in which, for these countries, the majority of trade volume (approximately 75 per cent) occurs with third parties outside of the agreement, mostly with countries in the Organization for Economic Cooperation and Development (OECD) and with China. As such, the integration achieved in AFTA is inevitably more limited than is the case with NAFTA. In addition, in terms of manufacturing trade, where the trade liberalization has been concentrated, most of the reductions in trade barriers have been seen as benefiting mainly one country, namely Singapore which, although small in population, is the largest in manufacturing activity in the region. This asymmetry of perceived benefits has made the achievement of deep liberalization much more difficult.

In the NAFTA case, the trade agreement was originally driven by a Canadian request in 1987 for a Canada-United States agreement, motivated by Canadian concerns of security of access to their largest market (the United States) rather than improved access per se. The subsequent Mexican entry to this arrangement in the form of NAFTA at the end of 1993 has generated large trade and investment impacts for Mexico, with large increases in Mexico's exports to the United States and also large impacts on foreign direct investment (FDI) inflows. The theme that the objectives and the impacts of these two trade agreements are sharply different thus comes through centrally in the discussion in the text.

INTRODUCTION

This chapter discusses recent applications of general equilibrium computational methods in the international trade area which are backwards (ex post) rather than forwards (ex ante) focused. The example chosen is the trade and wages debate, where the issue is disentangling the relative importance of multiple influences on wage inequality change (trade surges from low-wage countries and skill-biased technical change). The relevant literature includes Abrego and Whalley (2000, 2001).

In the past, most applied general equilibrium modelling (AGM) of international trade has been forward focussed, attempting to provide some basis of assessment as to what might happen if particular measures are adopted. This includes assessing the effects of NAFTA in advance of its enactment (Francois and Shiells, 1994) and ex ante assessment of the impacts of the Uruguay Round as agreed in the World Trade Organisation (WTO) (Martin and Winters, 1996; Whalley, 2000).

In such exercises, calibration usually takes place around benchmark equilibrium data set for a reference year; counterfactual computations then shed light on what this reference year equilibrium might have looked like if a policy or other change, not yet enacted, had been in place.

In ex post analysis, it is typically the case that calibration to two or more years is needed. The issue is, given a model consistent with observations in both years X and Y, how its equilibrium might look like were only one (or a subset) of the changes actually occurring between the years actually to occur.

This volume honors Herbert Scarf and his contributions to economics. It deals with new developments in applied general equilibrium (AGE) modeling, a field in which Scarf's contributions have played a decisive role. All but two of the chapters in the volume were presented at a conference held at Yale University in April 2002. The chapter by Herbert Scarf and Charles Wilson was written afterward; it demonstrates the uniqueness of equilibrium in an important class of international trade models. The chapter by Lars Ljungqvist and Thomas Sargent is an outgrowth of Sargent's discussion at the conference of the paper presented there by Edward Prescott. The chapters presented here build on a well-known earlier volume in applied general equilibrium, edited by Herbert Scarf and John Shoven in 1984 (Scarf and Shoven 1984), which in turn grew out of Scarf's pioneering contributions in general equilibrium computation in the 1960s and early 1970s (Scarf 1967a, Scarf and Hansen 1973). Kenneth Arrow's chapter in this volume points out that the ability to deploy AGE models is the product of research advances, going back at least 130 years, in which progress in economic theory and vastly improved availability of economic data have played crucial roles. According to Arrow, equally crucial inputs were improvements in computing power and the development of algorithms for computing equilibrium, in which Scarf's (1967b) algorithm based on simplicial subdivisions was the crucial step.

Since the 1980s, applications of AGE have broadened.