Internationaland Interprovincial Trade
Internationaland Interprovincial Trade
Thefocus of the article by Serge Coulombe of the University of Ottawafocuses of distinguishing between the two types of revenue-generatingtrade in Canada and their progression over the years. Bothinternational and interprovincial trades have a key impact on theCanadian regional growth. However, after the 90s, economists advocatethat there be a balanced difference between the two due tospecialization of production and deficiency in factor inputs.According to the author, a nation can only produce within the linesof its resources (Coulombe& C.I.C 2003).However, with international trade, nations have a window to acquirematerials, products, and other resources necessary to sustaininternal national affairs. The article compares the two trade typesagainst each pro and cons. Serge shines light on the Canada-US borderand its economic effect on the two (Clausing2001).
Sergeuses the L-curve effect to show the long-term and short-term effectsof interprovincial and international trade. The Canadianeconomy lies on the verge of recovering from inflationpressure and economic strain as the deep recession, an overvaluedlocal dollar, and a galloping public debt. Since the early 90s, thenation operates severe structural changes to attain a full recovery(Coulombe& C.I.C 2003).With an empirical approach, the study braces a wide period to get aclear forecast on the long run outcome of border trade effect. Thestudy focuses on the period with rich innovations in the tradeindustry and economy.
Theauthor places the position of Canada as threatened by internationaltrade. Canadian analysts mention the threat that international tradeposes to the nation as an infiltration to the Canadian way of life(McAusland& Millimet 2013).Additionally, the rise of international trade poses a threat to thenation’s economic and political independence. Serge points out thatupon a rise in international trade, national economic and politicalfactors as the foreign and securities market and leadership regimeswill solely depend on international aggregate demand and supplyforces and legal frameworks (Coulombe& C.I.C 2003).
Sergecomes in to enhance the voluminous literature in the growth and tradeeconomics. The author uses the conditional-convergence framework tomeasure the effect of openness on the growth economics in thecross-provincial level. It studies long-run disparities among theCanadian provinces. Here, the study concludes that the ripple effectsof interprovincial trade are only job opportunities and notproductivity (Coulombe& C.I.C 2003).Contrary to interprovincial trade, international trade creates aplatform for development of job opportunities and productivitylevels. According to the Gross Development Product measures,productivity stretches along the lines of labor and employment toconverge into economic integration. A rise in international level oftrade is directly proportional to regional standards of living (Darku2011).
Sergementions that specific that Canada is well off as a single economy ascompared to individual provincial economies. The simple explanationis that as a single production front, it has better command on theircurrency as compared to individual provincial economies (Clausing2001).Following Free Trade Area policies in Canada in the 90s, marks adepreciating trend over time on interprovincial market share(Coulombe& C.I.C 2003).The author’s conclusion raises a question on the future ofinterprovincial trade.
Certainissues in the discussion that arise from the study include theconcept of sigma-convergence that describes the development of theaverage variances between provincial economies (Coulombe& C.I.C 2003).Sigma-convergence refers to the propensity of deviation to diminishover time. Held against the beta-convergence, it holds a bettereffect to the nation as it is both necessary and sufficient tosustain productivity (McAusland& Millimet 2013).
Clausing,K. A. (2001). Trade creation and trade diversion in the Canada–UnitedStates free trade agreement. CanadianJournal of Economics/Revue canadienne d`économique, 34(3),677-696.
Coulombe,S., & Canada. Industry Canada. (2003). Internationaltrade, interprovincial trade, and Canadian provincial growth.Ottawa, ON: Industry Canada.
Darku,A. B. (2011). The impact of trade liberalization and the fiscalequalization transfer policy on provincial income disparities inCanada: an application of GMM estimation. AppliedEconomics, 43(13),1679-1689.
McAusland,C., & Millimet, D. L. (2013). Do national borders matter?Intranational trade, international trade, and theenvironment. Journalof Environmental Economics and Management, 65(3),411-437.