The Relationship Between Trade Openness and Economic Well-Being in Canada

Abstract

Throughout Canadian history, the pursuit of trade liberalization has been embroiled in controversy. This pursuit has accelerated in the last two decades with Canada's entrance into the FTA and NAFTA. The controversy surrounding trade liberalization is whether increased trade openness has enhanced Canada's economic wellbeing. Well-being is defined by the Index of Economic Well-being (IEWB) and consists of four equally weighted components. Trade openness is defined as trade exposure which is the product of the industrial composition of the labour force engaged in exporting and importing industries; it is further decomposed into Export and Import exposure. Controlling for macroeconomic and secular trends and pooling provincial data from 1981 through to 2000, this research determines the impact of export and import exposure upon the IEWB. The results indicate that while export and import exposure does not necessarily impact the IEWB, they are statistically related to the Index's individual components.