The North American Trade of U.S. States: A Comparative Analysis of Industrial Shipments,1983-91

Abstract

The potential impacts of the North American Free Trade Agreement (NAFTA) is a topic of considerable interest in the United States, particularly with respect to trade with Mexico. Unfortunately, there has been a paucity of information concerning the historical patterns of states' trade with Canada and Mexico. Such knowledge can serve as a baseline from which to assess change as well as provide a useful input to subsequent analyses of economic impacts. Using industrial production and export trade data from U.S. states to Canada and Mexico along with imports data, measures of trade and production exposure reveal significant geographical and sectoral differences. An extended version of shift-share analysis that specifically incorporates states' exports to and imports from Canada and Mexico isolates the contributions of these trade flows to components of state industrial change over the 1983-91 period. The impact of NAFTA-area trade is found to vary significantly across states, although the trade flows are often smaller than commonly assumed, suggesting that the trade impacts of NAFTA may often be overestimated.