Module 2 Assignment
Knowledge
1. List 4 ways that you are dependent upon foreign businesses. Explain in detail.
a) The vehicle I use is manufactured through foreign businesses. With the primary
stage of production done through multiple foreign businesses, the secondary stage is
done in Japan. After the vehicle was assembled there, it was shipped to the United
States where it was processed and distributed. I relied on these foreign businesses to
gain a vehicle I am able to use.
b) The coffee I drink everyday is produced through foreign businesses as well. The
primary resources, coffee beans, are harvested in Brazil, which is then exported to
Switzerland. In Switzerland the secondary manufacturing takes place and the beans are
turned into the actual coffee. The product is then exported to and distributed in Canada.
c) The phone I use is also manufactured through foreign businesses. The primary
resources and manufacturing phase takes place in China, while the distribution takes
place from the United States.
d) A lot of medical supplies used are also manufactured through foreign businesses.
Vicks, for example, is a medical company which is US-based. Sambucol, another
medical company, is France-based, and the primary stage of manufacturing takes place
there as well.
Thinking
2. Explain, using factual examples, why Canada is a trading nation.
A trading nation is a nation whose economy heavily relies on international trade.
Canada has been a trading nation and remains to be one to this day. Canada started its
life as a trade nation in the 18th century when it started providing Europeans with raw
materials, such as wood and fur. Towards the end of the same century, it then moved
towards the United States, before finally expanding towards Asia in the 20th century.
According to Statistics Canada, almost a third of Canada’s gross profit as an economy
came through trade in 2020.
3. One of Canada's major imports is pharmaceuticals. Explain how a Canadian's life
would be altered if these products were not imported.
Despite Canada producing many of its own medial products, it still relies heavily on
foreign companies for pharmaceutical needs, such as the United States and China. If
these foreign pharmaceutical companies did not import their goods to Canada, life
would be relatively difficult for Canadians. For example, insulin imports to Canada come
mainly from three companies, Sanofi, a French company, Nova Nordisk, a Danish
company, and Eli Lilly, a US owned company. Insulin is a major product required by
some 2 million Canadians suffering from diabetes, and if it weren’t for these foreign
businesses, diabetic patients would be at risk due to low supplies of vital medications.
4. Think of a business that you believe might be totally domestic. Investigate the
business and explain in detail whether you were right or wrong.
Assumption: Petrol is an important product Canadians rely on, and Canada should not
rely on foreign businesses to provide this product to their citizens.
Reality: Canada has one of the worlds largest oil productions and is the main provider of
oil to the United States, with over 90% of total exports going to the United States. There
are 17 refineries producing oil and gasoline situated in multiple different provinces.
Despite this, Canada still imports large amounts of oil and petroleum from foreign
businesses. These countries include the Kingdom of Saudi Arabia, the United Kingdom,
Nigeria, Azerbaijan, and others. Canada spent approximately $19 billion to import
foreign oils in 2019.
5. What is the difference between foreign direct investment and portfolio investment?
Portfolio investments refers to investing in financial assets, such as stocks and bonds.
These are usually considered to be short-term investments and are hard to use for
keeping an economy stable long-term. Foreign direct investments refer to investing in
more tangible assets, such as buying or building warehouses, buildings, or factories in
other countries. This is seen to be more of a long-term investment and requires a larger
input than in portfolio investment. Due to this, foreign direct investments are usually
done by larger companies and businesses who already have their own businesses
established nationally.
6. Give one reason why businesses in Canada trade with the following countries. Try
to give a different reason for each country.
Japan
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is a
trade agreement between many countries, including Japan and Canada. This
agreement requires all tariffs on wood products imported to Japan to be removed. This
makes it a lot easier for Canada to export their raw wood materials to Japan, making the
latter Canada’s top customer for raw wood materials.
The United States
Canada is the third largest producer of oil in the world but is slightly isolated from many
other countries. Due to this, Canada’s pipelines run throughout the United States. Since
this is the closest and simplest option, over 90% of Canada’s oil supply is given to the
United States.
China
China is one of the biggest economies in the world and is among Canada’s top five
trading partners. Trading with China helps increase the diversity in imports Canada
receives and that can potentially widen the market for Canada and create new business
opportunities.
Mexico
Mexico’s economy is consistently stable, with an ever-growing market of diversity. This
means that there is a possibility of lots of people searching for jobs and products, which
makes this a good target for Canada to export raw materials and build businesses.
Great Britain
The United Kingdom is one of Canada’s main sources of foreign direct investment, with
many UK owned businesses investing in Canadian businesses, specifically in the
scientific and technological industries. By 2021, there were more than 900 UK affiliates
located in Canada.
Communication
7. What are your views on globalization? Respond with at least three paragraphs.
Globalization has many pros and cons of its own, all of which need to be weighed and balanced in order
to come to the correct conclusion on how much globalization is needed, if needed at all. Firstly, it needs
to be established how much the world economy relies on foreign business to sustain itself, or, more
clearly, how much individual countries rely on foreign investments to sustain themselves. A good
demonstration of the reliance some countries have on others is the reliance of the United States on
Canada for nearly 50% of its oil imports. Another example would be the reliance of multiple countries,
including Canada, on China and India for foreign direct investments. Factors like these, among others,
point towards the fact that there is a level of globalization that is required for countries to keep
themselves stable. It is inconceivable for a any single country to rely 90-100% on itself for products, raw
or finished.
With the need for globalization established to a certain extent, the pros and cons must be weighed. The
main problem of globalization is the ripple effect that can be created if one economy goes through a bad
period of trade. For example, during the Coronavirus crisis, many supply chains across the world were
disrupted, and countries faced severe losses in their economies and markets. If globalization were not a
factor, such losses could have been prevented. Other examples such as the 2008 oil crisis and multiple
wars that have taken place through history. Other problems that emerge through globalization are
global warming, due to the high emission rates produced through the cross-transportation that takes
place, security issues, and also lack of local business opportunities.
To conclude, while globalization is needed to a certain extent, and many world economies do rely on it,
there has to a limit set. There has to be enough foreign investments to ensure an economy is stable, but
also enough to make sure that the economy is self-sustainable to a certain degree, so that in the case of
any mishaps, the economy won’t collapse due to a ripple effect, or so that local businesses are given a
chance to thrive, creating more local job opportunities. Globalization should also be restricted in a way
that any side effects, such as security issues and global warming, are controlled to the maximum degree
possible.
Application
8. If you were going to invest in one of two new fresh lemonade companies, which one
would you pick: Jones Fresh Lemonade, in Naples, Florida, or Smith Fresh Lemonade
in Toronto, Ontario? Provide a detailed explanation and reasons for your choice.
There are many different factors that need to be taken into consideration before
investing in either of the businesses, such as investigating the location of each
business, the marketing power they possess, and the amount of reach they have. In this
case, Toronto seems to be a better location, since the population density is almost four
times as much as that in Naples, meaning the Toronto location is more likely to have a
larger market, and more marketing opportunities. Therefore, I would choose to invest in
the lemonade company opening up in Toronto, Ontario.
WORKS CITED:
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2021. https://www.international.gc.ca/trade-commerce/economist-economiste/analysisanalyse/china-canada-2020-commerce-chine.aspx?lang=eng.
Canada, Global Affairs. “Government of Canada.” GAC. Government of Canada, November 7,
2019. https://www.international.gc.ca/trade-commerce/trade-agreements-accordscommerciaux/agr-acc/cptpp-ptpgp/countries-pays/japan-japon.aspx?lang=eng.
CAPP. “Markets.” CAPP, February 24, 2022. https://www.capp.ca/energy/markets/.
Duong, Diana. “Expensive Insulin Has Americans Stockpiling and Canadians Worrying. Isn't It
Time for a Generic?” Healthing.ca, 2020. https://www.healthing.ca/diseases-andconditions/diabetes/why-dont-we-have-generic-insulin/.
Government of Canada, Canada Energy Regulator. “Canada Energy Regulator / Régie De
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Government of Canada, Foreign Affairs Trade and Development Canada. Canada and the United
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Government of Canada, Statistics Canada. Gross domestic product (GDP) at basic prices, by
industry, annual average. Government of Canada, Statistics Canada, February 1, 2022.
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“Mortality Due to Diabetes.” The Conference Board of Canada, 2022.
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