The Impacts of Free Trade Agreements on the Intensive and Extensive Margins of Canadian Agri-food Trade
We add to the empirical trade literature by testing the impacts of Canada’s Free Trade Agreements (FTAs) on the intensive and extensive margins of agri-food trade. The agri-food sector is an important to the Canadian economy and export markets continue to be a source of growth. FTAs are designed to reduce trade barriers and increase trade amongst member nations. We use an augmented gravity model with disaggregated trade data from the UN Comtrade Database spanning from 1988-2018 to conduct our analysis. Our study observes trade stimulating effects for 11 of Canada’s 14 FTAs. On the trade creating effect, we find that FTAs have heterogeneous impact on both the intensive and extensive margins. Agreements that reduce variable trade costs (such as tariffs) are not reduced to competitive levels have a negative intensive margin effect. Our study also concludes that time is a key indicator of trade growth along the extensive margin.