Industrial Organization and Trade Modelling

The Canada-U.S. bilateral free trade (BFT) agreement is an event of considerable importance, especially to the smaller economy. Canada does around three quarters of its trade with the United States, and is the biggest single market for that country’s exports. It is not surprising, then, that the prospect of a free trade agreement spurred a great deal of interest amongst economists, especially in Canada, where relations with the giant to the south have been a perennial area of controversy. Economic analysis of the impact of free trade on Canada progressed quickly from informal ‘back of the envelope’ calculations (e.g. the Wonnacotts, 1982) to application of the current state-of-the-art technology — full scale ‘computable general quilibrium’ models.