International Trade International Trade AgreementsAgreementsEconomics 11Economics 11

StewartStewart

Terms of TradeTerms of Trade

The rate at which a country a country’s The rate at which a country a country’s exports are exchanged for its importsexports are exchanged for its imports

Terms of trade establish an international Terms of trade establish an international price for one product in terms of another price for one product in terms of another productproduct

Arguments for Arguments for Restriction of TradeRestriction of Trade

Negative effects on domestic Negative effects on domestic employment: Importing goods, without employment: Importing goods, without increasing exports, results in the increasing exports, results in the exporting of jobsexporting of jobs

Retaliation: Domestic producers argue Retaliation: Domestic producers argue that we should not let foreign goods into that we should not let foreign goods into our country if our goods are excluded our country if our goods are excluded from their marketsfrom their markets

Arguments for Arguments for Restriction of TradeRestriction of Trade

Prevents Dumping: The deliberate Prevents Dumping: The deliberate practice of selling a product abroad at a practice of selling a product abroad at a lower price than the domestic pricelower price than the domestic price

Protection: Trade restrictions offer Protection: Trade restrictions offer protection to “vital” industries (ex. Military protection to “vital” industries (ex. Military equipment, nuclear technology) and can equipment, nuclear technology) and can also be used to protect developing or also be used to protect developing or “infant” industries from foreign “infant” industries from foreign competitioncompetition

Barriers to TradeBarriers to TradePresent barriers to trade include:Present barriers to trade include:Tariffs (import duties): These are special Tariffs (import duties): These are special

taxes placed on certain imported goodstaxes placed on certain imported goodsSubsidies: Gov’t payments to domestic Subsidies: Gov’t payments to domestic

producers (ex. Softwood lumber industry)producers (ex. Softwood lumber industry)Trade Sanctions and embargoes: Gov’t Trade Sanctions and embargoes: Gov’t

may impose trade sanctions on a nation may impose trade sanctions on a nation whose political practices are unacceptable whose political practices are unacceptable (ex. South Africa during Aparthied, Cuba (ex. South Africa during Aparthied, Cuba and the United Statesand the United States

Visible vs Invisible TradeVisible vs Invisible Trade

Visible trade refers to tangible goods Visible trade refers to tangible goods being traded being traded

Non-merchandise (or invisible trade) is Non-merchandise (or invisible trade) is the exchange of services, tourism, the exchange of services, tourism, investment incomes and other funds. investment incomes and other funds. Invisible trade consists of money flows Invisible trade consists of money flows often without tangible products traded in often without tangible products traded in return.return.

Canadian Trade PolicyCanadian Trade Policy

During the past 150 years, trade During the past 150 years, trade restrictions have decreased globally in restrictions have decreased globally in generalgeneral

The US has greatly influenced Canadian The US has greatly influenced Canadian National Trade PolicyNational Trade Policy

Why?Why? The US is Canada’s major trading The US is Canada’s major trading

partnerpartner

General Agreement on General Agreement on Tariffs and Trade (GATT)Tariffs and Trade (GATT) This was an international agreement This was an international agreement

developed in 1947 designed to reduce developed in 1947 designed to reduce trade barriers among member nationstrade barriers among member nations

In 1995 The World Trade Organization In 1995 The World Trade Organization (WTO) replaced GATT and grew to 132 (WTO) replaced GATT and grew to 132 members (countries)members (countries)

Since 1995, 12 more countries have joined Since 1995, 12 more countries have joined the WTO and average tariffs have the WTO and average tariffs have continued to fallcontinued to fall

Free TradeFree Trade

Within a free trade area, trade between Within a free trade area, trade between member nations is conducted without member nations is conducted without tariffstariffs

The North America Free Trade The North America Free Trade Agreement (NAFTA) established in 1994 Agreement (NAFTA) established in 1994 allowed for free trade between Canada, allowed for free trade between Canada, the US and Mexicothe US and Mexico

NAFTANAFTA Advocates of NAFTA pointed out that the Advocates of NAFTA pointed out that the

Canadian economy would suffer if it did Canadian economy would suffer if it did not freely trade with the US not freely trade with the US

Opponents of NAFTA warned of the Opponents of NAFTA warned of the potential job loss that could occur if potential job loss that could occur if businesses were to relocate to Mexico to businesses were to relocate to Mexico to take advantage of lower wages and lower take advantage of lower wages and lower standards for worker safety and standards for worker safety and environmentenvironment