International Trade Agreements

1
International Trade Agreements

• Economics 11
• Stewart

2
Terms of Trade

• The rate at which a country a countrys exports
  are exchanged for its imports
• Terms of trade establish an international price
  for one product in terms of another product

3
Arguments for Restriction of Trade

• Negative effects on domestic employment
  Importing goods, without increasing exports,
  results in the exporting of jobs
• Retaliation Domestic producers argue that we
  should not let foreign goods into our country if
  our goods are excluded from their markets

4
Arguments for Restriction of Trade

• Prevents Dumping The deliberate practice of
  selling a product abroad at a lower price than
  the domestic price
• Protection Trade restrictions offer protection
  to vital industries (ex. Military equipment,
  nuclear technology) and can also be used to
  protect developing or infant industries from
  foreign competition

5
Barriers to Trade

• Present barriers to trade include
• Tariffs (import duties) These are special taxes
  placed on certain imported goods
• Subsidies Govt payments to domestic producers
  (ex. Softwood lumber industry)
• Trade Sanctions and embargoes Govt may impose
  trade sanctions on a nation whose political
  practices are unacceptable (ex. South Africa
  during Aparthied, Cuba and the United States

6
Visible vs Invisible Trade

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

7
Canadian Trade Policy

• During the past 150 years, trade restrictions
  have decreased globally in general
• The US has greatly influenced Canadian National
  Trade Policy
• Why?
• The US is Canadas major trading partner

8
General Agreement on Tariffs and Trade (GATT)

• This was an international agreement developed in
  1947 designed to reduce trade barriers among
  member nations
• In 1995 The World Trade Organization (WTO)
  replaced GATT and grew to 132 members (countries)
• Since 1995, 12 more countries have joined the WTO
  and average tariffs have continued to fall

9
Free Trade

• Within a free trade area, trade between member
  nations is conducted without tariffs
• The North America Free Trade Agreement (NAFTA)
  established in 1994 allowed for free trade
  between Canada, the US and Mexico

10
NAFTA

• Advocates of NAFTA pointed out that the Canadian
  economy would suffer if it did not freely trade
  with the US
• Opponents of NAFTA warned of the potential job
  loss that could occur if businesses were to
  relocate to Mexico to take advantage of lower
  wages and lower standards for worker safety and
  environment