The U. S.-Canada Free Trade Agreement: Impact on the U. S. Steel Industry

Abstract

This study empirically estimates the impact of the U. S.-Canada FTA on specific iron and steel exports and imports using quarterly data for the period January 1981 to December 1990. A single equation multiple linear regression model is used to quantify at the industry and industry segment levels the impact of the agreement. The dependent variables are the quantities of major steel products traded between the two nations. The explanatory variables include foreign price adjusted for the exchange rate and tariff rate, domestic price, and the industrial production index. Results include calculation of price and income elasticities, which vary considerably by industry segments. The impact of free trade, as modeled, varies widely from product to product. As such it has important implications not only for government policy and employment but also for the adjustment problems faced by both the large integrated steel mill and the minimill producers.