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

differs from the mainstream literature analyzing FTAs. As far as we know, our paper is
among the first few that carries out a detailed empirical analysis of the effect of FTA on
agriculture.⁷

This study is also timely given the news of new FTA’s being signed by US and Canada
and the long list of pending negotiations. It informs a debate on whether countries should
sign or negotiate further FTAs (Becker, 2001). Many of these studies ask, what is the effect of
an FTA on overall bilateral trade, and whether both partners benefit from these agreements
in terms of ‘trade creation.’ As mentioned earlier, not many studies take a more detailed
look at the effect of an FTA specifically on agricultural industries.

We structure this paper as follows. In subsection 1.1, we describe the bilateral trade
between Canada and Chile and the changing patterns over time. In section 2, we provide a
brief literature review. In section 3, we describe in detail the methodology and the various
econometric models used to analyze the impact of CCFTA, and present the results. We
conclude in section 4.

1.1 Canada-Chile Trade

The Canada-Chile Free Trade Agreement provides immediate elimination of tariffs for most
products. It immediately eliminated 69 percent of tariffs set by Canada and 44 percent of
tariffs set by Chile, and for most other products tariffs were to be phased out gradually. The
grace period for most sensitive products, in the Canadian tariff schedule, was set between 5
to 10 years with the exception of beef, sugar and milling wheat, cases in which tariffs were

⁷ Others that have studied the effect of trade agreements on agriculture trade have done so for specific
subsectors (Vollrath and co-authors (2006)) or have concentrated on other issues like transprtation costs
(Prentice et al (1998)) or border effects.

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