Trade Specialization and Reciprocal Trading Relationships in Canada and the United States, 1989 and 2001

Abstract

Interregional trade flows of Canada (provinces) and the United States (states), the world's largest bilateral trading partnership, are investigated using a measure of trade specialization similar to the location quotient and using provinces and states as the spatial units of analysis. Past research investigating the clusters in the geography of international trade flows have focused on national units of analysis, despite the fact that subnational units display geographical patterns of trade distinct from their respective nations. Regional trading relationships have evolved since the establishment of free trade between Canada and the United States as the result of decreased costs in accessing foreign markets. These new trading relationships now incorporate more U.S. states and fewer Canadian provinces in most cases.

En este artículo se investigan los flujos comerciales interregionales de Canadá (provincias) y Estados Unidos (estados), la más grande asociación de comercio bilateral del mundo, mediante el uso de una medida de especialización comercial parecida al cociente locacional, y utilizando las provincias y estados como las unidades espaciales de análisis. La investigación dedicada anteriormente al estudio de clusters (apiñamientos) en la geografía de los flujos de comercio internacional basaba sus análisis en unidades nacionales, a pesar del hecho de que las unidades de categoría subnacional pueden desplegar patrones geográficos de comercio distintos de los de sus respectivas naciones. Desde el establecimiento del libre comercio entre Canadá y E.U. han surgido otras relaciones regionales de comercio, como resultado de la disminución de costos al acceder a los mercados extranjeros. En la mayoría de los casos, estas nuevas relaciones comerciales incorporan ahora más estados de E.U. y menos provincias canadienses.

Key Words:

• Canada–U.S. trade
• interregional trade
• location quotient
• region

关键词:

• 加拿大-美国贸易
• 区域间贸易
• 区位商
• 区域

Palabras clave:

• comercio Canadá-E.U.
• comercio interregional
• cociente locacional
• región

Acknowledgment

I would like to thank Trevor Barnes, Michael Buzzelli, Stephen Easton, David Edgington, and Jessie Poon for their comments on earlier drafts of this article. In particular, I am indebted to Trevor Barnes for his support, encouragement, and guidance. Without his support this work would not have been possible. I am also grateful to the three anonymous reviewers for extremely thoughtful and helpful criticism and to Audrey Kobayashi for excellent editorial guidance.

Notes

This positive relationship between economic growth and international trade is not new; however, this more recent reference deals with methodological criticisms of previous research. It should also be noted that although increased international trade may have positive impacts on the well-being of a nation, those benefits may very well be unevenly distributed such that some lose from free trade while others gain. The economic argument here is that the “winners” can compensate the “losers.” Whether they do so is another issue altogether.

There was also the cost savings that emerged from the relatively low value of the Canadian dollar. This advantage, however, has recently disappeared.

See Anastakis (2005) for a discussion of how the Auto Pact represented an alternative to the two extremes of free trade and protectionism that were debated at that time.

The issue of Canada's trade dependency on the United States is hotly debated in the political economy literature. This dependency is generally not considered a positive aspect of Canada's international activity. In response to this trade dependency, the Canadian government has attempted to diversify Canada's trade portfolio since the 1980s with little success.

Mexico initiated negotiations for what was to become the NAFTA but only with the United States. Canada initiated its own involvement after it learned about the Mexico–U.S. negotiations.

Appendix, listing these industrial sectors and their corresponding HTS codes, is provided.

Provincial GDP is obtained from Statistics Canada (2005) and U.S. state GDP is obtained from the U.S. Bureau of Economic Analysis.

Region j may be a country.

The detailed tables of the TLQ indexes are not included for brevity but are available from the author.

As mentioned earlier, 1989 and 2001 are analyzed because they have the earliest and latest high-quality data available. It is important to note that these years are at similar points in the Canadian business cycle, either at or near the bottom of the trough. Consequently, the changes in regions reported here are not expected to be the result of vastly different economic conditions in the years under analysis.

Detailed tables are available from the author.