International Trade
Agreements
BBI2O
Protectionism

When the government imposes
policies designed to protect domestic
producers by giving them an
advantage over foreign imports
• Ex: Tariffs, Quotas
Tariffs
An import tax on foreign goods
 Artificially raises the price of imports
to make Canadian products more
competitive

• Ex: French jam carries an 8.5% tariff,
so if it normally sells for $1.80 per jar,
the landed cost becomes $1.95

The more the gov’t wants to protect
an industry, the higher the tariff
Quotas
When a country imposes a limit on
the amount of goods being imported
or exported
 Might be a specific quantity or a $
value

• Limits competition from foreign goods
• Allows greater control of supply, and
therefore price
Is Protectionism Good?
Tariffs and quotas are designed to
protect domestic industries, so that’s
good right?
 If every country had heavily
protectionist policies in place, the
flow of international business would
grind to a halt

• What would this mean for countries like
Canada?
International Business

Good things:
• More access to a variety of
goods/services
• Access to cheaper or higher quality
goods than can be produced
domestically
• Access to goods we can’t produce
domestically
• Creates jobs and opportunities for
Canadian companies to grow and profit
International Business

Bad things:
• Foreign competition can drive Canadian
companies out of business
• Jobs move overseas
• Foreign goods may be made using
unethical practices (human rights,
environmental standards)
Free Trade Agreements
In general, countries want goods to
flow freely for the benefits of their
citizens and businesses
 Countries sign agreements stating
that when they trade with one
another, they will not use
protectionist policies

The Breton Woods Institutions



Formed after WWII by the “winners” in
order to ensure that the global economy
would recover as quickly as possible
Goal is to minimize global trade barriers in
order to maximize international trade
One of these institutions was the General
Agreement on Tariffs and Trade (GATT)
The WTO
The GATT become the World Trade
Organization in 1995
 Has over 140 member countries
 It’s rules govern 90% of international
trade

Canada-U.S. trade agreements
The Autopact (1960s) – dropped
trade barriers for cars, but also
required for every car sold in Canada
one had to be made in Canada
 North American Free Trade
Agreement (NAFTA) – an extension
of the 1988 Canada-US Free Trade
Agreement to include Mexico (1994)

NAFTA
Some agricultural products are
excluded from the agreement
 Only applies to goods produced
within the borders of the member
countries
 Result: increased trade with US by
80%, with Mexico by 100%
 Next: Free Trade Area of the
Americas? (FTAA)

Other Free Trade Agreements
European Union (EU)
 Asia-Pacific Economic Cooperation
(APEC)
 Many countries have bilateral
agreements (Canada has free trade
agreements with Chile and Israel for
example)

Questions
What are the pros and cons of
international trade?
 What is protectionism?
 Why do countries sign free trade
agreements?
 What are some examples of trade
agreements?
