Transcript International Trade Agreements

International Trade
Agreements
Economics 11
Stewart
Terms of Trade
 The rate at which a country a country’s
exports are exchanged for its imports
 Terms of trade establish an international
price for one product in terms of another
product
Arguments for Restriction
of Trade
 Negative effects on domestic
employment: Importing goods, without
increasing exports, results in the
exporting of jobs
 Retaliation: Domestic producers argue
that we should not let foreign goods into
our country if our goods are excluded
from their markets
Arguments for Restriction
of Trade
 Prevents Dumping: The deliberate
practice of selling a product abroad at a
lower price than the domestic price
 Protection: Trade restrictions offer
protection to “vital” industries (ex. Military
equipment, nuclear technology) and can
also be used to protect developing or
“infant” industries from foreign
competition
Barriers to Trade
Present barriers to trade include:
Tariffs (import duties): These are special
taxes placed on certain imported goods
Subsidies: Gov’t payments to domestic
producers (ex. Softwood lumber industry)
Trade Sanctions and embargoes: Gov’t
may impose trade sanctions on a nation
whose political practices are unacceptable
(ex. South Africa during Aparthied, Cuba
and the United States
Visible vs Invisible Trade
 Visible trade refers to tangible goods
being traded
 Non-merchandise (or invisible trade) is
the exchange of services, tourism,
investment incomes and other funds.
Invisible trade consists of money flows
often without tangible products traded in
return.
Canadian Trade Policy
 During the past 150 years, trade
restrictions have decreased globally in
general
 The US has greatly influenced Canadian
National Trade Policy
 Why?
 The US is Canada’s major trading partner
General Agreement on
Tariffs and Trade (GATT)
 This was an international agreement
developed in 1947 designed to reduce
trade barriers among member nations
 In 1995 The World Trade Organization
(WTO) replaced GATT and grew to 132
members (countries)
 Since 1995, 12 more countries have joined
the WTO and average tariffs have
continued to fall
Free Trade
 Within a free trade area, trade between
member nations is conducted without
tariffs
 The North America Free Trade
Agreement (NAFTA) established in 1994
allowed for free trade between Canada,
the US and Mexico
NAFTA
 Advocates of NAFTA pointed out that the
Canadian economy would suffer if it did
not freely trade with the US
 Opponents of NAFTA warned of the
potential job loss that could occur if
businesses were to relocate to Mexico to
take advantage of lower wages and lower
standards for worker safety and
environment