Abstract
Using confidential firm-level panel data from the Bureau of Economic Analysis, we examine how the bilateral trade flows of U.S. multinational corporations (MNCs) and their Canadian affiliates responded to U.S.-Canadian tariff reductions from 1983 to 1992. We find that Canadian affiliate sales to the United States are negatively correlated with Canadian tariffs, but U.S. parent sales to Canadian affiliates have little association with Canadian tariffs. These results contradict the notion that Canadian tariff reductions would lead to a ‘hollowing out’ of Canadian manufacturing. We also find substantial heterogeneity in MNC responses to tariff changes within narrowly defined manufacturing industries. Overall, bilateral trade liberalization is trade-creating, as U.S. MNCs integrated their North American production such that Canadian affiliates increased sales to the United States and reduced domestic sales.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.