THE UNITED-STATES-CANADA FREE-TRADE AGREEMENT - IMPACTS ON UNITED-STATES STATES AND CANADIAN PROVINCES

The U.S.-Canada Free Trade Agreement initiated in 1989 will remove mos t of the remaining barriers to trade and will have substantial impacts on regional economies in both nations. The economic effects of this F ree Trade Agreement are analyzed using a three-stage approach. First t he origin states and provinces of exports from each nation to the othe r are approximated using weights derived from local output by industry as a share of national totals. Second, commodity-specific analyses of tariffs and nontariff barriers, as well as price and income elasticit ies of demand, are used to estimate changes in exports from regions in both nations. Third, a series of state- and province-specific input-o utput analyses are used to model the effects of export increases. The output and employment gains attributable to the Free Trade Agreement i ndicate that while the largest increases are likely to occur in the tr aditional manufacturing cores of both nations, relative export gains w ill be dispersed in a complex patchwork of regions in both nations.