Regional Integration of US Border States with Canada: Evidence from US State Exports, 1996 to 2001

Abstract

This paper examines the nature of regional trade integration between the United States and Canada by using a Similarity Index that summarizes the behavior of exports of states along the US/Canadian border relative to US states that are not on the Canadian border. An export Similarity Index is used to show the considerable importance of industry mix relative to distance. Similarity Index changes suggest that increased export sales between the US and Canada between 1996 and 2001 were not primarily driven by proximity factors that underlie a regional phenomenon. Industry factors independent of location and distance were important contributors to changes in US exports to Canada. The upshot is that global, not regional, factors may underlie increasing trade between the US and Canada. That is, an apparent global phenomenon may have been mistaken for a regional one.