relative to other countries. Table 4 reports the estimation results for specification (1) with
different control groups (group of countries as comparison). Table 4 only reports the co-
efficient estimates on the FTA dummy (β2) for the equation with Canadian imports. We
differentiate the control group with respect to geographic area and income level, following
the World Bank classification. Chilean agricultural exporters to Canada improved their per-
formance relative to those from richer countries with higher income levels. In particular, the
CCFTA improved the comparative advantage of Chilean agriculture relative to European,
East Asian, and, to some extent,12 Central and South American countries. At the same
time, Chile gained no trade advantage over countries with lower income level or African
countries. These results are consistent with the hypothesis that free trade agreements crowd
out the least productive competing importers, which are presumed to be concentrated in
high income countries with specialization in manufacturing goods.
Turning to the specification with Canadian exports in Table 5, the results for the basic
specifications (1) and (2) show that Canadian agricultural exports to Chile prior to the FTA
were not substantially different from that to the average country (insignificant β1). The
coefficient β2 is also always insignificant, meaning that Canadian exports to Chile were not
affected by the trade agreement. This result is robust to the inclusion of other variables
in columns (3) to (6). The coefficient on GDP is positive and significant, implying that
Canada sells more of its agricultural exports to larger countries. A positive coefficient on
agricultural land area leads to the same conclusion. The effect of the exchange rate on the
value of exports is positive, which implies that the appreciation of Canadian dollar tends
12 The coefficient on ‘Central and South America’ dummie is the higher one but its large standard error
indicate high variance in this effect across countries from comparative group.
13