1. Global Trade Chapter 12

2. Global Trade Define as “the act of buying and selling between nations”Define as “the act of buying and selling between nations” Do this because they either need or want something they do not haveDo this because they either need or want something they do not have

3. Why do countries trade? Why aren’t countries trying to be self-sufficient?Why aren’t countries trying to be self-sufficient? The physical geography of the worldThe physical geography of the world Climate and land forms determine the distribution of resources around the worldClimate and land forms determine the distribution of resources around the world Some countries will have a surplus of some resources but lack others they need to survive and growSome countries will have a surplus of some resources but lack others they need to survive and grow Eg. Canada can only have fresh vegetables in the summer, in the winter we rely on countries in the Southern hemisphere to supply us with theseEg. Canada can only have fresh vegetables in the summer, in the winter we rely on countries in the Southern hemisphere to supply us with these

4. Factors Affecting Trade 1. Specialization- regions tend to limit their economic activities to supplying the goods and services best suited to the regions resource base Eg. the Maritimes are surrounded by water, therefore have a resource base of fish. A large sector of our employment is in fishing industryEg. the Maritimes are surrounded by water, therefore have a resource base of fish. A large sector of our employment is in fishing industry

5. 2. Complementarity- characteristics of land can be present in one region but absent from another Eg. oil reserves in Saudi Arabia allow them to specialize in oil production, Japan does not have this therefore rely on Saudi Arabia for their oilEg. oil reserves in Saudi Arabia allow them to specialize in oil production, Japan does not have this therefore rely on Saudi Arabia for their oil Complementarity exists when specialization in production of a good in one area is matched by a shortage of that good in another region, result = global tradeComplementarity exists when specialization in production of a good in one area is matched by a shortage of that good in another region, result = global trade

6. Case Study Pg. 291 in textbooksPg. 291 in textbooks Read the case study “Complementarity between Sri Lanka and Great Britian”Read the case study “Complementarity between Sri Lanka and Great Britian” Answer the following questions:Answer the following questions: –What is Sri Lanka’s specialization? Why has that industry developed? –Why do they have complementarity with Great Britian? What other countries do they have complentarity with?

7. 3. Politics- differences in political opinions can influence a countries trading habits with another one Eg. US (democracy) will not trade with Cuba (communism) due to political differences and strained relations during the Cold WarEg. US (democracy) will not trade with Cuba (communism) due to political differences and strained relations during the Cold War

8. 4. Distance- proximity to your trading partner is an important factor when considering trade. The closer they are the less $ for transportation Eg. Canada and the US main trading partnersEg. Canada and the US main trading partners

9. Benefits of Global Trade 1. Keeps costs of goods and services low for the public –Without specialization in economy the prices of goods and services would increase due to the $ needed to develop them –Thanks to specialization and global trade a country can produce what their land allows them to produce with low costs and trade with other countries for the other things they need

10. 2. Efficiency –If specialization did not exist, then the countries resources (eg. money, technology) would have to be spread more thinly to produce every thing it would need –Specialization has allowed countries to focus their resources more efficiently on the things they produce with ease

11. Environmental Impacts of Global Trade As demand for product increases the volume of goods traded increases leading to different environmental consequencesAs demand for product increases the volume of goods traded increases leading to different environmental consequences Types of environmental consequences include:Types of environmental consequences include: –Soil depletion- increasing demand for food puts pressure on the soil to full fill this need –Industrial accidents and spills- more movement of goods means more chances to have accidents that degrade the enviro

12. Increased CO2 emissions- more need for electricity (creates CO2 when produced), more demand for manufactured goods and improved living conditionsIncreased CO2 emissions- more need for electricity (creates CO2 when produced), more demand for manufactured goods and improved living conditions Resource exploitation- demand for natural resources increases the pressure to produce them. May exploit resources beyond sustainabilityResource exploitation- demand for natural resources increases the pressure to produce them. May exploit resources beyond sustainability

13. Case Study Page # 296Page # 296 Case study on the Exxon Valdez oil spillCase study on the Exxon Valdez oil spill Answer the following questions:Answer the following questions: –How do you think this disaster could have been avoided? –What areas of the world’s economy/ environment did it effect? –Do you think the transportation of oil is worth this risk?

14. Questions Page #298 in textbooksPage #298 in textbooks Under statistical analysis #1 (a,b,c,e,f)Under statistical analysis #1 (a,b,c,e,f) Under document analysis #2 (a,b,c,d,e)Under document analysis #2 (a,b,c,d,e) Under focus on the facts # 4, 5, 6Under focus on the facts # 4, 5, 6

15. Policies Surrounding Global Trade North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) –Began between Canada and the US in ’89 as the free trade agreement –Encouraged trading between 2 countries by eliminating most tariffs and trade restrictions –Tariffs = special tax which countries can put on certain products being imported so they are not cheaper to buy then the same product made in that country

16. In ’94 this agreement was extended to include Mexico making it the North American Free trade agreementIn ’94 this agreement was extended to include Mexico making it the North American Free trade agreement To sign on to this agreement meant you were signing on to these factors:To sign on to this agreement meant you were signing on to these factors: –All tariffs will be eliminated by 2008 –Export and import quotes are eliminated (how much they needed to produce) –Each country is allowed to invest in the others with fewer restrictions (eg. buy a business, invest in banks or energy plants) –Intellectual property (eg. music recordings and movies) are copyrighted for a min. of 50 years –Auto industries can sell in each country with fewer restrictions

17. Advantages of NAFTA Grants access to the huge American market without tariffs for Canada and MexicoGrants access to the huge American market without tariffs for Canada and Mexico Makes US goods cheaper for the Canadian consumerMakes US goods cheaper for the Canadian consumer Can keep Canada more competitive in the global economyCan keep Canada more competitive in the global economy

18. Disadvantages to NAFTA Loss of jobs in Canada as companies move to US and Mexico where labour costs are cheaperLoss of jobs in Canada as companies move to US and Mexico where labour costs are cheaper Pressure on Ottawa to lower taxes so Canadian companies would have more money to be more competitive withPressure on Ottawa to lower taxes so Canadian companies would have more money to be more competitive with US cultural and economic power over Canada might increaseUS cultural and economic power over Canada might increase

19. Global Organizations Organizations which developed to monitor and facilitate trade between countriesOrganizations which developed to monitor and facilitate trade between countries

20. World Trade Organization (WTO) Section of the UNSection of the UN Began in 1946 under the name GATT (General Agreement on Tariffs and Trade)Began in 1946 under the name GATT (General Agreement on Tariffs and Trade) It was formed after WWII between 23 countries to encourage trade againIt was formed after WWII between 23 countries to encourage trade again The goals of GATT were as follows:The goals of GATT were as follows: –Set up regulations for trade between nations –Provide a place where countries could discuss trade issues and negotiate agreements –Serve as a court where trade disputes could be settled

21. In their first year of existence they were able to negotiate 45 000 cuts to tariffs (about $10 billion)In their first year of existence they were able to negotiate 45 000 cuts to tariffs (about $10 billion) Due to their success their membership increasedDue to their success their membership increased In 1995 GATT was renamed as World Trade OrganizationIn 1995 GATT was renamed as World Trade Organization

22. The Group of Eight Also referred to as the G8Also referred to as the G8 Eight most economically advanced countries in the worldEight most economically advanced countries in the world US, Germany, Japan, Great Britain, France, Italy, Canada and RussiaUS, Germany, Japan, Great Britain, France, Italy, Canada and Russia This group of country leaders meet on a fairly regularly bases to discuss economic and political problemsThis group of country leaders meet on a fairly regularly bases to discuss economic and political problems Eg. Met in Halifax in ’95 to discuss environmental concerns and persistent poverty in LDCEg. Met in Halifax in ’95 to discuss environmental concerns and persistent poverty in LDC They will make recommendations to help improve these problemsThey will make recommendations to help improve these problems

23. Examples of the Global Economy Multinational Corporations

24. Multinational Corporations (MNC) Large, wealthy companies that operate in more than one countryLarge, wealthy companies that operate in more than one country Often set up branches of companies in LDC countries because of privileges such as cheaper labor, tax cuts or slack pollution control standardsOften set up branches of companies in LDC countries because of privileges such as cheaper labor, tax cuts or slack pollution control standards MNC will offer jobs to people living thereMNC will offer jobs to people living there Example MNC’s= General Motors, Exxon Oil, Sony, Ford, NikeExample MNC’s= General Motors, Exxon Oil, Sony, Ford, Nike