ECONOMIC-IMPACT AND TRANSITION EFFECTS

A dynamic model of Canada-United States trade is used to simulate the transition effects of the Canada-United States Free Trade Agreement. The model simulations suggest that Canadian real GDP would increase by about four percentage points over a 10 year horizon. The results are shown to be sensitive to assumptions regarding the possibility of U.S. protectionism in the "base case" and the tariff equivalent of the dispute settlement mechanism contained in the Agreement. © 1991.