Canada’s Foreign Trade (Goods)
Each year, Canadians import (bring into the country) a certain amount of goods.
2007 – 406 B
2008 – 536 B
2009 – 463 B
2010 – 403 B
Each year, Canadians export (take out of the country) a certain amount of goods.
2007 – 450 B
2008 – 560 B
2009 – 436 B
2010 – 399 B
If exports exceed imports, the difference between them is called the trade
surplus.
If imports exceed exports, the difference between them is called the trade deficit.
In 2010, Canada had a trade deficit of 403B – 399 B = 4 B
The Importance of Exporting
1) To pay for the things that we import.
2) To keep our economy healthy. With fewer exports, we would produce less and
unemployment would therefore be higher and the people poorer.
3) To lower the prices of Canadian-made goods for Canadians. When products
are made in higher quantity, (for export and for local purchase) they can be sold
cheaper.
Trade in Services
Usually when one speaks of trade, we think of the trade of goods, as above.
However, trade involves services as well as goods. Canada currently has a trade
deficit of about $6B. These services include travel, transportation, business, and
government. Of these, travel services hurt us most. For example, Canadian tends
to travel to other countries more often then foreigners come to Canada. Canadian
spend elsewhere (e.g. Buffalo) while foreigners give us little.
Free Trade Versus Protectionism
Tariffs – is a tax placed on an imported product.
- Significance? -Tariffs will increase the cost of an imported item (e.g. BMW,
VW)
-Tariffs may increase cost to the point where a country does not
want the goods anymore (remember, this could affect Canadian
goods being allowed into another country as well as goods
being allowed into our own.
Protectionism – is the government’s policy of using tariffs and having rules to limit
imports.
- Significance? -Done to give Canadian companies an advantage over foreign
companies who are often larger and can produce goods cheaper.
Free Trade – is the governments policy of eliminating tariffs and rules designed to
restrict trade.
- Significance? -Supposed to enhance trade among nations which is supposed
to be good for everyone involved.
General Agreement of Tariffs and Trade (GATT)
- An agreement made in 1947
- The agreement was made to avoid previous trade protections that helped lead to the
great depression.
- Now includes over 120 nations
- The latest edition to GATT in 1995 was the developed of the World Trade
Organization (WTO) which is supposed to resolves disputes under GATT.
North American Free Trade Agreement (NAFTA)
- An agreement for even “freer” trade then previously developed in GATT
- Began as an agreement in 1988 with the USA, then Mexico in 1993.
- This was and continues to be a controversial topic.