DO NATIONAL BORDERS MATTER FOR QUEBEC TRADE

Using a gravity model of 1988-90 merchandise trade flows among Canadia n provinces and between Canadian provinces and U.S. states, this paper , building on earlier work by McCallum, shows that Quebec trades twent y times more with other provinces than it does with U.S. states of sim ilar size and distance. Comparison with survey evidence shows that the se internal trade linkages are far stronger than previously was though t. The possible implications for Quebec separation, and for internatio nal economics, are considerable. If more broadly confirmed, the result s imply that the fabric of national economies is far tighter than that of the global trading system, even for countries operating without su bstantial trade barriers.