U.s.-canada Trade Liberalization and Mnc Production Location
نویسندگان
چکیده
Using con dential rm-level panel data from the Bureau of Economic Analysis, we examine how the bilateral trade ows of U.S. multinational corporations (MNCs) and their Canadian af liates responded to U.S.-Canadian tariff reductions from 1983 to 1992. We nd that Canadian af liate sales to the United States are negatively correlated with Canadian tariffs, but U.S. parent sales to Canadian af liates 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 nd substantial heterogeneity in MNC responses to tariff changes within narrowly de ned manufacturing industries. Overall, bilateral trade liberalization is trade-creating, as U.S. MNCs integrated their North American production such that Canadian af liates increased sales to the United States and reduced domestic sales.
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