Evaluations of Economic Impacts of NAFTA on the Transportation System/Sector of Selected Southern States
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Evaluations of Economic Impacts of NAFTA on the Transportation System/Sector of Selected Southern States

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      The primary objective of this study is to analyze the economic impacts of the North American Free Trade Agreement (NAFTA) on the transportation system/sector and the Arkansas regional economy. The study’s methodology includes trade models and regional input-output modeling. Gravity trade models were used to evaluate and forecast the trade creation and diversion effects of NAFTA. Regional input-output models were used to estimate the economic impacts associated with the NAFTA trade flows. The study’s principal geographical included the states of Arkansas, Louisiana, Missouri, Mississippi, Oklahoma, Tennessee, and Texas. A regional economy was created by combining these states, and is referred to as the Region. This report is divided into five sections. The first section of the report reviews the controversy concerning the success of NAFTA in terms of its benefits and costs on the NAFTA trading partners. Studies shedding a positive light on NAFTA trade at the national level are reviewed as well as other studies suggesting otherwise are reviewed. Several studies review the economic impact of NAFTA at the state level are also reviewed The second section of this report reviews the statistical data that describe NAFTA trade flows between NAFTA trading partners. The availability of data limit this analysis to freight data shipped by land mode of transportation. This data along with industrial-level data are used to estimate the direct economic impacts of these trade flows on the Region. In the third section of the report the findings from an economic impact study of the NAFTA trade flows are reported. Unfortunately, the complexities of the multitude of economic consequences of NAFTA and the lack of reliable data preclude a conclusive estimate of NAFTA impacts on the Arkansas Region. The data necessary to get a complete picture of NAFTA’s economic impacts are not currently available in sufficient detail. In particular, NAFTA import data which would enable the assessment of the consequences of imports on domestic production and consumption are not available. Detailed analysis to the extent the imports are substituted for domestic production and questions concerned with trading flows impacts in areas like employment and income are beyond the scope of this study. Appendix 1 presents a paper that appeared in the Regional Economic Development 2006, that was written as part of the this project.1 NAFTA trade data disaggregated by state, industry, and transportation mode are discussed in the study. The analysis reveals that intra-trade traffic differs widely across states, industries, and transportation modes. Appendix 2 presents a paper that examines industry–level growth since the implementation of NAFTA. Gravity models are estimated to assess trade between NAFTA trading partners at the industry level. The results show large differences in growth rates between states and industries for both exports and imports. The members of the research team that were created to undertake this project are grateful to the Mack-Blackwell National Rural Transportation Center at the University of Arkansas for their financial support. Gratitude is also expressed to the Institute for Economic Advancement by the faculty members in the College of Business, University of Arkansas at Little Rock, who were part of the research team for being given the opportunity to participate in this project.
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