International trade and the border effect between Canada and United States
University of New Brunswick
The trade relationship between Canada and the United States is intense under the North American Free Trade Agreement (NAFTA). Canada and the U.S. are mutually the largest trade partners. However, McCallum (1995) stated that trade between provinces is about 20 times larger than trade between any particular province and state. The national border has significant effects on the trade between Canada and the United States. This study follows McCallum’s methodology to explore how border effects changed from 1991 to 2011. Border effects between Canada and the U.S. is declining with the development of economy and policy change. Moreover, New Brunswick surprisingly has lower border effect with states of the U.S. compared to other provinces of Canada.