Growing Preferential Trade Agreements Across the Globe: Lessons for Canada

Abstract

With many countries in Asia signing preferential trade agreements (PTAs) with each other, there is considerable debate on whether Canada should join the race to sign up partners. This paper looks at two issues that should play into this debate: do PTAs between economies that are trading partners of Canada divert trade away from Canada; and what has been the impact of PTAs Canada has signed in the past. The study finds that there is no simple answer to the first question. It depends on the relative comparative advantage of the economies involved. However, in the case of the five PTAs examined in which Canada is a partner – with the US, Mexico, Chile, Costa Rica and Israel – bilateral trade has increased on average by 90%.