TOPIC #7 Canada and International Trade Agreements

International Trade Agreements International Trade Agreement Legal contract between or amongst nations who voluntarily agree to conduct business affairs in each other’s country based on the terms set out in the agreement. Legal contract between or amongst nations who voluntarily agree to conduct business affairs in each other’s country based on the terms set out in the agreement. Common terms outlined in the agreements include: Reducing tariffs and custom duties on various products to reduce trade barriers; Reducing tariffs and custom duties on various products to reduce trade barriers; When and why people will be able to work across international borders; When and why people will be able to work across international borders; What qualifications one will need to work in another country; What qualifications one will need to work in another country; How business trade secrets will be protected (intellectual property); How business trade secrets will be protected (intellectual property); Process for resolving trade disputes amongst the participating countries in the agreement. Process for resolving trade disputes amongst the participating countries in the agreement.

Advantages of Reducing Trade Barriers Two main advantages: Canadian businesses or other domestic businesses are able to sell their products and services to international markets at lower prices because additional tariffs on exported products are reduced or eliminated. Canadian businesses or other domestic businesses are able to sell their products and services to international markets at lower prices because additional tariffs on exported products are reduced or eliminated. Increased competition motivates companies to improve their quality or reduce their prices in order to compete with imported goods. (Great for the consumer) Increased competition motivates companies to improve their quality or reduce their prices in order to compete with imported goods. (Great for the consumer)

History of the WTO WTO developed out of an international trade agreement called the General Agreement on Tariffs and Trade (GATT). WTO developed out of an international trade agreement called the General Agreement on Tariffs and Trade (GATT). GATT came into effect in 1948 GATT came into effect in 1948 GATT was signed by Canada and 22 other nations who were allies during World War II. GATT was signed by Canada and 22 other nations who were allies during World War II. An international organization was set up to help GATT nations negotiate trade deals, resolve problems and collect data about world trade. An international organization was set up to help GATT nations negotiate trade deals, resolve problems and collect data about world trade. In 1995, the WTO replaced the initial GATT organization. In 1995, the WTO replaced the initial GATT organization. The WTO currently has 139 member countries. The WTO currently has 139 member countries.

World Trade Organization WTO Today Main international organization that deals with the rules of trade between nations. Main international organization that deals with the rules of trade between nations. The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all; The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all; Contributes to global economic growth and development. Contributes to global economic growth and development. The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties). The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties). Governs approximately 97% of all world trade Governs approximately 97% of all world trade Source: World Trade Organization

International Trade Agreements General Agreement on Trade in Services GATS came into effect in 1995 GATS came into effect in 1995 Sets guidelines for the trade of services such as banking across international borders. Sets guidelines for the trade of services such as banking across international borders.

International Trade Agreements The Canada-US Free Trade Agreement Commonly known as FTA came into effect in January Commonly known as FTA came into effect in January Intended to gradually phase out (get rid of) a number of tariff barriers between the two countries Intended to gradually phase out (get rid of) a number of tariff barriers between the two countries Issues dealt with under the agreement Canada’s wishes: wanted stable access to U.S. Markets wanted stable access to U.S. Markets Wanted to bid on US government contracts Wanted to bid on US government contracts wanted to create a dispute settlement tribunal wanted to create a dispute settlement tribunal To increase exports to the US To increase exports to the US Exemptions included dairy and poultry Exemptions included dairy and poultry US Wishes: Wanted to increase their exports to Canada Wanted to increase their exports to Canada Wanted clarification regarding rules of intellectual property Wanted clarification regarding rules of intellectual property To reduce restrictions on US investment in Canadian industries To reduce restrictions on US investment in Canadian industries Exemptions: sugar, diary, peanuts, and cotton Exemptions: sugar, diary, peanuts, and cotton All products other than exemptions are duty-free if produced within the free- trade zone.

International Trade Agreements North American Free Trade Agreement Commonly known as NAFTA Commonly known as NAFTA Came into effect in 1994 Came into effect in 1994 Trade between Canada, US and Mexico is tariff free for all products produced in the free-trade zone except for exemptions mentioned. Trade between Canada, US and Mexico is tariff free for all products produced in the free-trade zone except for exemptions mentioned. Each day NAFTA countries conduct $1.7 billion in trilateral trade. Each day NAFTA countries conduct $1.7 billion in trilateral trade.

NAFTA CanadaUSMexico Economic Growth (E.G.) ( ) E.G. is up 30.9% since 1994 Export sales have increased by 104% Export sales to US have increased by 250% E.G is up 38% since 1994 E.G. is up 30% Concerns Expressed Depletion of Canada’s natural resources as US and Mexico have to much access Canada’s cultural industries (book, magazine, and TV) are becoming Americanized. Canada and Mexico are perceived to be taking away jobs from Americans Wealthier northern countries are perceived as exploiting Mexico for its low wages. Trade agreements give businesses power over elected governments, and in time, these agreements will erode democracy.

Canada and Other Free Trade Agreements Regional Trade Agreements Trade agreements involving groups of countries Trade agreements involving groups of countries Bilateral Trade Agreements Trade agreements involving Canada and one other country or group Trade agreements involving Canada and one other country or group Trading Bloc Group of countries that share the same trading interests Group of countries that share the same trading interests

Other International Organizations G8G20

G8 Group of Eight (G8) Eight of the world’s largest and most powerful industrialized democracies meet annually and work together to deal with major economic and political issues facing their individual and collective countries. Eight of the world’s largest and most powerful industrialized democracies meet annually and work together to deal with major economic and political issues facing their individual and collective countries. Topics dealt with at major G8 summits include: Topics dealt with at major G8 summits include: Energy Employment EnvironmentEnergy Employment Environment Human rights Arms ControlHuman rights Arms Control Seek to provide guidance and support to established international organizations Seek to provide guidance and support to established international organizations Countries include Britain, France, Germany, Italy, Canada, US, Japan, and Russia Countries include Britain, France, Germany, Italy, Canada, US, Japan, and Russia

G20 What is the G-20? Established in 1999 Established in 1999 The Group of Twenty (G-20) Finance Ministers and Central Bank Governors of important industrialized and developing economies to discuss key issues in the global economy. The Group of Twenty (G-20) Finance Ministers and Central Bank Governors of important industrialized and developing economies to discuss key issues in the global economy.Mandate The G-20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. The G-20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. To help support growth and development across the globe by contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial institutions To help support growth and development across the globe by contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial institutions Source: About G20. [Online] Available:

Other Free Trade Agreements Free Trade Area of the Americas Free Trade Area of the Americas Central American Free Trade Agreement (2004) Central American Free Trade Agreement (2004) European Free Trade Association (1960) European Free Trade Association (1960) Asia-Pacific Economic Cooperation (1989) Asia-Pacific Economic Cooperation (1989)