Free Trade and Fair Trade Global Trade Free Trade and Fair Trade

Global Trade Global trade is the act of buying and selling between nations to satisfy absent needs and wants Nations can acquire wealth to develop human and natural resources

Why Trade Because of Earth’s geography – climate and land forms determine distribution of resources Countries will have surpluses of some resources and a lack of others – countries trade what they have in abundance

Factors Affecting Trade Specialization Climate, location, and resources determine how people of a particular country make a living Canada’s coastline and continental shelf gives us an abundance of fish Complementary Countries with contrasting features are more likely to trade Countries with a specialization in one good will trade with countries lacking that same good

Why Trade? Politics Distance Some countries trade with one country and not another because of ideological bias USA does not trade with Cuba and discourages other nations from doing so as well Distance Proximity to trading partners is convenient and reduces transportation costs Canada and USA are each others greatest trading partners

Benefits of Global Trade Bargains Maximize profits and minimize expenses Sell what you can make easily and cheaply and buy what you cannot produce Canada sell grains and lumber and buy tropical fruit and manufactured goods Greater Efficiency Avoids spreading a nation’s resources thinly Importing tropical fruits is more efficient than using valuable energy to power climate controlled greenhouses Nations involved in trade are competing with other nations

Costs of Global Trade Soil erosion and dependency on chemical fertilizers. Industrial accidents including oil spills and train derailments. Increased CO2 emissions, loss of farmland and risk of radioactive accidents. Lack of sustainable development. Global warming, ozone depletion and air pollution. Increased demand for food and pressure on agricultural resources result in increased soil erosion and dependency on chemical fertilizers. Monoculture farming does not allow the crop rotation necessary for the soil to renourish. The increase movement of good leads to accidents during transportation. The demand for energy has led to higher consumption of fossil fuels and more CO2 emissions, loss of farmland because of hydroelectric projects. Greater demand for resources results in over mining, foresting, fishing and harvesting with minimal replenishment. …caused by a greater demand for manufactured goods and improved standard of living. READ ALOUD: Exxon Valdez Oil Disaster pg 296-98.

Regionalization of Trade Trade Blocs are countries geographically located together who trade with each other Examples: NAFTA, European Union, and Asia Pacific Trade Blocs make it easier for countries to trade and also allows for people products and services to pass freely across boarders Elimination of tariffs – a special tax that a country can place on imported products to ensure they are not cheaper than a countries own products

Globalized Trade World Trade Organization Formerly known as GATT Group of Eight (G8) Canada, US, Germany, Japan, Great Britain, France, Italy, Russia (and European Union) Although it is good to trade with your neighbours it is important to have relations in all corners of the world…again, don’t put all your eggs in one basket. GATT:General Agreement on Tariffs and Trade – was created following WWII as an agency of the UN to regulate trade between nations including agreements focused on reducing tariffs and to act as a mediator in trade disputes between nations. READ ALOUD “Split-run magazines” – pg 312 G8 – 8 most economically advanced countries in the world READ ALOUD G8 and Less Developed Countries pg 314-15. MNC’s – largest General Motors of Detroit Michigan – is in 190 countries and has an annual revenue greater than the GNP of all but approximatley 15 of the world’s countries. Multinational Corporations Large, wealthy companies operating in more than one country

Multinational Corporations Benefits Direct employment Multiplier effect Increased export levels Costs Environmental pollution Slave Labour Poor working conditions Majority of profits leave country. Set up shop in LDC’s because of tax breaks and slack employee and environmental rules. Multiplier effect – jobs created as a result of the initial jobs giving people money to spend and governments tax dollars. Working conditions - cheap wages, long hours in unsafe and unsanitary conditions (see video on Thursday) and the bulk of profits return to shareholders in MDC’s

Free Trade No interference from government Prices reflect supply and demand. This determines where resources are sent No taxes or trading barriers such as quotas between the countries that are trading Allows faster and more business between those countries (benefiting them).

 

Cons of Free Trade Jobs losses occur in the country that gets all its supplies from other countries (they aren’t getting stuff from their own country) Reduced costs in transportation because of technological advances (plains, boats, trains, etc) Workers in other countries are being exploited and harmed (working conditions) Environmental impact in developed countries

Fair Trade Aimed to help producers in developing countries and promote sustainability Allows payment of a higher price to producers Improves standards in the areas that are related to the production of the good If focuses on exports from developing countries to developed countries

International Fair trade Certification Mark

Fair Trade Certified Mark (USA & Canada)

WFTO Fair Trade Organization Mark World Fair Trade Organization (WFTO)

Fair Trade Items

Fair Trade Clothing

Fair Trade Jewellery

Pros and Cons of Fair Trade Creates opportunities for less developed countries (now people are coming to them for food production) Provides fair pay to the producers Women’s work is properly valued and rewarded (equality) Safe and healthy working environment for producers Encourages better environmental practices Companies will move operations to non fair trade regions – workers to be protected loses job Monitoring bodies have no legal backing Higher prices for consumers