the expected signs and are consistent with theoretical predictions. The negative coefficients
on GDP and common language may look odd. However, keeping in mind that the dependent
variable is agricultural imports rather than total trade, larger GDP of a partner country may
indicate its comparative disadvantage in agriculture and as a result lower export intensity in
agricultural sectors. Similarly, countries that speak English or French may be specializing in
production of manufacturing goods. Positive and significant estimates of β6 and β7 support
the main prediction of the Hecksher-Ohlin model that countries that are more endowed with
agricultural land will specialize in agricultural-land-intensive products and hence are more
likely to export to Canada. Countries that use more capital-intensive technologies also ex-
port more agricultural products to Canada, as reflected by positive coefficient β5 .Itisalso
the case that countries that pay higher trade costs, such as more distant countries, island
countries and countries without sea access, trade less agricultural goods with Canada. These
traditional gravity parameters are economically meaningful and statistically significant. Fi-
nally, appreciation of the Canadian dollar relative to the currency of a trading partner has
positive effect on Canadian imports.
Overall, the main gravity model variables have sensible and statistically significant coef-
ficients. Our central focus in this analysis is the pattern of Chilean imports from Canada.
Results from columns (3)-(6) provide further evidence on the trade creating effects of CCFTA
for the Chilean agricultural industry. During the period 1997-2005, Canadian agricultural
imports from Chile became 23 - 34 percent larger than with the average country, controlling
for pre-CCFTA cross-country differences.
The results highlight the very strong effect of CCFTA for Canadian imports from Chile
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