its 1994 expansion into the North American Free Trade Agreement
(NAFTA), which included Mexico. In several broad industrial groups,
including automotive products, machinery, textiles, and forestry products,
both imports and exports increased in each country. What free trade in
Europe and North America did was to allow a proliferation of
differentiated products, with different countries each specializing in
different subproduct lines and reaping the benefits of the scale economies
in production. Consumers have shown by their expenditures that they
value this enormous increase in the range of choice among differentiated
products, and producers have gained economies by being able to operate
at a larger scale.
Wine is a good example of an industry in which there is much intra-
industry trade. Canada, for example, imports wine from many countries
but also exports Canadian-made wine to the same countries.
Jack Sullivan/Alamy Stock Photo