Analyzing the Agricultural Trade Impacts of the Canada-Chile Free Trade Agreement

While the CCFTA stimulated Chilean farmers to increase their sales to Canada, we found
no effect of the CCFTA tariff preferences on Canadian agricultural exports to Chile. This
result is robust to the inclusion of other controls and confirms the predictions found in the
difference-in-difference analysis of the CCFTA on Canadian trade with Chile.

4 Conclusion

In this paper we estimated the effect of the Canada-Chile Free Trade Agreement on the vol-
ume of agricultural trade between member countries. Since the CCFTA was implemented in
1997, the value of Chilean agricultural exports to Canada steadily increased, while Canadian
exports to Chile shrank. In the first part of the analysis we estimated the trade effect of the
CCFTA using a difference-in-difference approach, based on a gravity model and controlling
for different factors that may affect the bilateral volume of trade such as appreciation of
the Canadian dollar. We found that the introduction of the CCFTA has increased bilateral
trade, especially Chilean exports to Canada: exports of an average industry increased by an
additional 25 - 35 percent as a result of the FTA. At the same time, we found no evidence
of the CCFTA effect on the value of Canadian exports to Chile.

In the second part of the analysis we measured the sensitivity of bilateral trade flows to
tariff preferences proposed by CCFTA and found similar results: each one percent of Cana-
dian tariff preferences granted to Chile raised Chilean exports to Canada, while Canadian
exports of agricultural products have not responded to tariff preferences received in Chilean
markets. ¹⁵

¹⁵ In the absence of the CCFTA agreement would Canadian exports to Chile have fallen more than
they did? The point is well understood by the Canadian Wheat Board. Quoting from a news arti-
cle (http://www.bilaterals.org/article.php3?id_article=5981) Spokesperson [of the Canadian Wheat Board]
Maureen Fitzhenry says that Canada need only look at countries where it doesnt have agreements to grasp

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