Foreign Trade and Trade Agreements

Trade is an important part of Canada’s economy and our number 1 trade partner is the USA; they buy about 90% of the products produced in Canada When the value of exports is greater than imports, a trade surplus is created (good thing). If imports are higher than exports, a trade deficit is created (bad thing)

Foreign trade is the exchange or purchase of goods and/or services between countries. Goods and services are either IMPORTED to or EXPORTED from a country. IMPORT – Product or service that is brought into a country from another country. EXPORT – Product or service produced in one country for sale in another country.

Canadian Imports – High technology products (e.g., computers, cameras and televisions from many countries including Japan, Taiwan, South Korea, Germany, USA). – Motor vehicle parts from USA, Mexico and Japan – Goods produced only in warmer climates (e,g., coffee, sugar, citrus fruits, mahogany imported from countries nearer to the equator such as Kenya, Columbia, Brazil and India) – Low-cost goods (e.g., clothing, toys, books from countries where labour costs are low such as China, India, Vietnam, Cambodia and Thailand) – ? Business services (e.g., movies, fast food chains, Superbowl)

Canadian Exports – Products based on our natural resources (e.g., lumber, metal ores, oil, fish, live animals, grains, energy) – Motor vehicles with most Canadian assembly plants located in Southwestern Ontario – Specialized manufactured goods (e.g., a ircraft, electronics)

Importance of Exports Why does Canada export goods? To pay for our imports- the money made from exports is used to buy luxury items or others we don’t have in this country To keep our economy healthy- if exports were lower, there would be less jobs and we would make less money To lower prices of Canadian made goods- the more you make, the cheaper the item

Free Trade vs. Protectionism Protectionism Canada places a tax on certain imported goods, called a TARIFF. When this occurs, it becomes more expensive to buy products from other countries and makes the purchase of Canadian goods more attractive. A tariff may encourage buying Canadian-made products. Tariffs may protect the Canadian producers ? PROTECTIONISM – Policy of trying to protect the industries of a country by having high tariffs.

TARIFF – Tax charged on good imported to Canada in order to protect Canadian industries.

Free Trade FREE TRADE –the removal of all tariffs and other laws that restrict trades. Foreign products can be sold for the same prices as domestic ones Many countries around the world have decided that tariffs do not benefit their country so they have entered into FREE TRADE AGREEMENTS: General Agreement on Tariffs and Trade (GATT) North American Free Trade Agreement (NAFTA) European Union (EU)

NAFTA Stands for the North American Free Trade Agreement Signed between Canada and the USA, with Mexico joining later, started in 1988 Allowed for freer trade between Canada and the USA, with almost complete removal of tariffs and taxes