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CHAPTER 1
1.1 Evolution of Global
Trade
• Business - The manufacturing and/or sale of
goods and/or services to satisfy the wants and
needs of consumers to make a profit.
• Transaction - An exchange of things of value.
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1.1 Evolution of Global
Trade
• Domestic business - A business that makes most
of its transactions within the borders of the
country in which it is based.
• A domestic business in Canada is: owned by
Canadians, relies on Canadian products and
services, sells products and services to Canadians
• International business - The economic system of
transactions conducted between businesses
located in different countries.
1.1 Evolution of Global
Trade
Domestic transactions are made between two
Canadian companies.
International transactions involve a Canadian
company and a non-Canadian company.
Chapter 1:
WHAT IS TRADE?
1.1 Evolution of Global
Trade
• Domestic market - The customers of a business who live
in the country where the business operates.
• Foreign market - The customers of a business who live in
a different country than the one where the business
operates.
• Trading partner - When a business in Canada develops a
relationship with a business in another country, that
country becomes a trading partner with Canada
Chapter 1:
WHAT IS TRADE?
1.1 Evolution of Global
Trade
Five ways for a business to be considered
an international business:
1.
Own a retail or distribution outlet in another country
2.
Own a manufacturing plant in another country
3.
Export to businesses in another country
4. Import from businesses in another country
5.
Invest in businesses in another country
Chapter 1:
WHAT IS TRADE?
1.1 Evolution of Global
Trade
• SELF-SUFFICIENCY – The abiity to provide for
all your basic needs, such as food, clothing,
shelter, and water, without relying on anyone
else.
• intentional communities, are set up to be
somewhat self-sufficient. There are over 500
in the world; they include Eco-villages, student
co-ops, and urban housing cooperatives. They
are often based on shared values or themes
such as environmentally sustainable living.
1.1 Evolution of Global
Trade
• Trade had been free for the most part
• Guilds (associations of merchants and/or
craftspeople) : they controlled the
manufacturing and sale of the products made
by the people of the town
• No goods could be imported into town if they
competed with local products and foreign
merchants/traders had to pay a fee to trade un
town
1.2 History of Canadian
Trade
• Explorers from France and England landed in what is
now Canada in the 1600s
• Traded with First Nations people, especially the Ojibwa
and the Cree, for fur and food, then sent goods back to
Europe
• The success of this international business led to the
establishment of colonies and outposts in Canada,
notably the Hudson’s Bay Company and the North West
Company
Chapter 1:
WHAT IS TRADE?
1.2 History of Canadian
Trade
Trade with the United States
• United States declared independence from Britain in late 1700s
• Needed to become self-reliant
• Invention of steam engine, cotton gin helped rapid growth of
American industry
• Canada supplied raw materials that were needed in the United
States
• United States became Canada’s largest trading partner—this
remains true today
Chapter 1:
WHAT IS TRADE?
1.2 History of Canadian
Trade
Trade with Asia
• Canada began trading with Japan after
World War II
• Japan became known for high-quality
electronics and automobiles
• China has more recently become a trading
partner
• Chinese-made products are inexpensive
and well made, and popular with North
American retailers
Chapter 1:
WHAT IS TRADE?
History of Canadian
Trade
Trade with Mexico
• Developed since signing NAFTA in 1993
• Goods made in Mexico and the United States now
enter Canada duty-free
• Mexico has become one of Canada’s top five trading
partners since 2000
Chapter 1:
WHAT IS TRADE?
History of Canadian
Trade
Trade with Emerging Markets
The Middle East
• Has traditionally centred on oil, but this
commodity is not sustainable
• Political instability, lack of industrialization in much
of the region has limited trade
• United Arab Emirates (Dubai), Israel, and Egypt
have established trading relationships with
Canadian businesses that do not depend on oil
Chapter 1:
WHAT IS TRADE?
History of Canadian
Trade
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Trade with Emerging Markets
India
• Population of over one billion people
• Workforce generally young and well
educated
• Has become major centre of outsourcing and
manufacturing
• Lack of infrastructure and widespread
corruption are persistent problems
• Indian companies are aggressively expanding
into international markets
Chapter 1:
WHAT IS TRADE?
Trade with Emerging Markets
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History of Canadian
Trade
Africa
• African imports to Canada are very low
• Business opportunities limited by unstable
governments, lack of infrastructure, rural economies
• Rich in primary resources
• Some countries (Morocco, South Africa) are beginning
to emerge as major trading partners
Chapter 1:
WHAT IS TRADE?
1.3 Canada’s Economic
Identity
• Interdependence - The reliance of two or more
nations on each other for products or services.
• Three main areas of interdependence:
1. Primary/Extracting industries
2. Secondary/Manufacturing industries
3. Tertiary/Service industries
1.3 Canada’s Economic
Identity
Primary industries
The sector of the economy characterized by the
extraction of natural resources from the earth or sea.
Five major primary industries:
• agriculture
• fishing, hunting, and trapping
• forestry and logging
• energy
• Mining
In Canada, water is sometimes included in this list as well
Chapter 1:
WHAT IS TRADE?
Secondary Industries
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1.3 Canada’s Economic
Identity
Industries that create a
finished, usable product.
Secondary manufacturing produces capital goods (products
used by businesses) and consumer goods (products
purchased by individuals).
Chapter 1:
WHAT IS TRADE?
1.3 Canada’s Economic
Identity
Tertiary industries (service sector)
Industries that do not make a product or extract
resources from the earth, but provide necessary
services to consumers and other businesses.
Examples include banking, construction,
communications, transportation, and retail sales.
Chapter 1:
WHAT IS TRADE?
1.4 Advantages of International Trade
• Meeting Needs
• Job Creation
• Attracting Investment
• New Technology & Materials
• Diverse Products & Services
Chapter 1:
WHAT IS TRADE?
1.4 Disadvantages of
International trade
• Support of Non-Democratic Systems
• Cultural Identity Issues
• Social Welfare Issues
• Environmental Issues
• Political Issues
1.5 Barriers to
International Trade
• TARIFFS
• CURRENCY FLUCTUATION
• INVESTMENT REGULATIONS
• ENVIRONMENTAL RESTRICTIONS
• FOREIGN RELATIONS AND TRADE SANCTIONS
1.5 Barriers to
International Trade
• SAFETY REGULATIONS
• IMMIGRATION POLICIES