An Empty Promise: Average Cost Savings and Scale Economies Among Canadian and American Manufacturers, 1910-1988‪.‬

I. Introduction On January 1, 1989, a bilateral trade agreement between Canada and the United States came into effect. This free-trade agreement (FTA) called for the reduction and eventual removal of Canadian and American tariff barriers on a wide range of goods traded between the two countries. In Canada, at least, there was considerable debate surrounding the negotiation and implementation of this pact. Economists' claims that there would be significant welfare improvements accruing to both Canada and the United States as a result of the exploitation of scale economies, triggered by the removal of tariff protection, played an important role throughout the course of this debate.