Toward a North American customs union: Rules of origin liberalization matters more than a common external tariff for Canada

This paper shows that the general equilibrium impacts on Canadian GDPandwelfare, of liberalizingNAFTARulesofOrigin (ROO), largely dominate the small effects of adopting a Common North American External Tariff (CET). Therefore, proposals for a North American CU should not be dismissed solely on the basis that a CET would marginally affect Canada while the negotiation process with the U.S. would be long and difficult—ROO liberalization matters more than a CET for Canada. © 2008 Elsevier Inc. All rights reserved.