Alberta’S Export Experience Under Free Trade Agreements, 1989-2008: Twenty Years Of Free Trade

The period of free trade from 1989 to 2008 coincided with a strong expansion of Alberta’s exports. Our review shows that several factors contributed to this success. In addition to favorable trends in energy and commodity prices, the improved access to the US and Mexican markets that resulted from the CUSFTA and NAFTA are shown to be major causes of the positive development of Alberta’s exports. In particular, the significant increase in manufacturing exports can be attributed to the free trade agreements because manufacturing products face higher tariffs in export markets than do raw materials and energy products. Alberta’s manufacturing sector, therefore, emerges as a major beneficiary of freer trade. As a result, Alberta’s economy has become more diversified into higher value-added export products. Even though this diversification is still related to the energy sector, it represents increased technological sophistication and human-capital intensity, and this is welcome. Alberta’s export success has made it more dependent on NAFTA markets and, therefore, more susceptible to economic downturns originating in the US, as recent experience has shown. Protectionism and difficulties at the US border are the challenges that now loom. Yet, the opportunities that freer trade brought and that led to Alberta’s export success over the last 20 years have been a very good news story for all Albertans. The benefits of freer trade are, of course, much higher than just the additional export revenue and the related job creation. A full compilation of the benefits of freer trade would have to include the increased purchasing power of Alberta households that derived from access to lower priced imported products. That task, however, is beyond our mandated focus on exports.