Embrace or not? An empirical study of the impact of globalization on the country's sustainability in the case of NAFTA

Abstract

This paper investigates the international trade role in economic development and sustainability. Specifically, a trade agreement is one of the most popular ways for a country to participate in trade, therefore we aim to estimate the relationship between a free trade agreement (FTA) and economic development on a country level, using the North American Free Trade Agreement as an example. Sustainability on an industrial level is also discussed in parallel. To achieve this, a counterfactual analysis is used to generate the welfare with and without the trade agreement to draw inference on the sustainability analysis. We find that the FTA does facilitate a country's sustainability. However, it is less clear on an industrial level. This finding provides important evidence relating to a country's sustainable development and has broadened the study scope regarding the impact of participating in an FTA with regard to economic sustainability.