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GTAP Resource #1453

"ECONOMIC IMPACTS OF A POSSIBLE CANADA-U.S. CUSTOMS UNION: SIMULATION RESULTS FROM A DYNAMIC CGE MODEL"
by Ghosh, Madanmohan and Someshwar Rao


Abstract
In this paper we analyze the implication of a possible Canada-U.S. customs union on trade flows, real output and investment both at the aggregate and industry levels in Canada, using a multi-sector, multi-region dynamic computable general equilibrium model. The model is calibrated to the GTAP Database (version 5, 1997). Our scenario for a possible Customs Union with the U.S. assumes the harmonization of Canadian and U.S. tariffs against the non-NAFTA countries (common external tariffs) as well as the elimination of the Rules- of- Origin provisions of the NAFTA. Our simulation results suggest that the overall economic gain to Canada from a Customs Union between Canada and the U.S. could be as much as 1% of GDP. Canada’s trade could expand by almost 20 %. American trade will also increases significantly, but at a slower pace than that of Canada. Much of the increase in trade flows and GDP are the result of the elimination of the Rules-of-Origin provisions. All Canadian industries, except food and beverages, gain from a Canada-U.S. Customs Union. The big beneficiaries are transportation equipment, electronics, and machinery and equipment. Services and resource-based industries gain the least.

Key words: Customs union, Dynamic general equilibrium, Rules-of-origin.
JEL classification No: C61, C68


Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Version: March
Created: Ghosh, M. (4/28/2004)
Updated: Ahmed, S. (9/13/2004)
Visits: 2,956
No keywords have been specified.


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