International Trade Agreements BBI2O

Protectionism WWWWhen the government imposes policies designed to protect domestic producers by giving them an advantage over foreign imports Ex: Tariffs, Quotas

Tariffs AAAAn import tax on foreign goods AAAArtificially raises the price of imports to make Canadian products more competitive Ex: French jam carries an 8.5% tariff, so if it normally sells for $1.80 per jar, the landed cost becomes $1.95 TTTThe more the gov’t wants to protect an industry, the higher the tariff

Quotas WWWWhen a country imposes a limit on the amount of goods being imported or exported MMMMight be a specific quantity or a $ value Limits competition from foreign goods Allows greater control of supply, and therefore price

Is Protectionism Good? TTTTariffs and quotas are designed to protect domestic industries, so that’s good right? IIIIf every country had heavily protectionist policies in place, the flow of international business would grind to a halt What would this mean for countries like Canada?

International Business GGGGood things: More access to a variety of goods/services Access to cheaper or higher quality goods than can be produced domestically Access to goods we can’t produce domestically Creates jobs and opportunities for Canadian companies to grow and profit

International Business BBBBad things: Foreign competition can drive Canadian companies out of business Jobs move overseas Foreign goods may be made using unethical practices (human rights, environmental standards)

Free Trade Agreements IIIIn general, countries want goods to flow freely for the benefits of their citizens and businesses CCCCountries sign agreements stating that when they trade with one another, they will not use protectionist policies

The Breton Woods Institutions FFFFormed after WWII by the “winners” in order to ensure that the global economy would recover as quickly as possible GGGGoal is to minimize global trade barriers in order to maximize international trade OOOOne of these institutions was the General Agreement on Tariffs and Trade (GATT)

The WTO TTTThe GATT become the World Trade Organization in 1995 HHHHas over 140 member countries IIIIt’s rules govern 90% of international trade

Canada-U.S. trade agreements TTTThe Autopact (1960s) – dropped trade barriers for cars, but also required for every car sold in Canada one had to be made in Canada NNNNorth American Free Trade Agreement (NAFTA) – an extension of the 1988 Canada-US Free Trade Agreement to include Mexico (1994)

NAFTA SSSSome agricultural products are excluded from the agreement OOOOnly applies to goods produced within the borders of the member countries RRRResult: increased trade with US by 80%, with Mexico by 100% NNNNext: Free Trade Area of the Americas? (FTAA)

Other Free Trade Agreements EEEEuropean Union (EU) AAAAsia-Pacific Economic Cooperation (APEC) MMMMany countries have bilateral agreements (Canada has free trade agreements with Chile and Israel for example)

Questions WWWWhat are the pros and cons of international trade? WWWWhat is protectionism? WWWWhy do countries sign free trade agreements? WWWWhat are some examples of trade agreements?