GAUGING THE RECENT EFFECTS OF THE NORTH AMERICAN FREE TRADE AGREEMENT

The impacts of the North American Free Trade Agreement (NAFTA) on North American trade are described and analyzed using a variant of a gravity model. Controlling for the effects of real gross domestic product (GDP) and real exchange rates, the impacts of NAFTA on trade flows are statistically significant and positive in all but one case. Growth in real GDP has contributed to positive trade flows while real exchange rates have also affected trade flows in statistically discernible ways. In general, manufactured goods as well as machinery and transport equipment have benefited most from NAFTA while agricultural products have displayed less dynamic growth