TRADE BARRIERS
TARIFFS – taxes or duties put on imported products or services
 Most common
 Raises the cost of imported goods so that consumers will purchase locally
manufactured products
 Shielding against foreign competition is known as protectionism
 Advantages: increase in revenue/government collects the money it
generates
 Canada generally favours the eradication or reduction of tariffs – when
one country implements a tariff, trading partner will retaliate with a tariff
 The North American Free Trade Agreement (NAFTA) is a trade
agreement that eliminates trade barriers, such as tariffs, between Canada,
the U.S. and Mexico
Tariff Winners and Losers
Winners
Domestic governments - taxes
Local producers – goods are more
competitively priced
Local employees – people working in
local companies get to keep their jobs
Losers
Foreign producers – goods and services
more $
Consumers – the price of products go
up and consumers are forced to pay
higher prices
Foreign employees – people working in
companies overseas lose out on
opportunities
TRADE QUOTAS – government imposed limit on amount of product that can be
imported during a certain period of time
 Another form of protectionism
 Canadian exporters are faced with trade quotas in the U.S
 Example Canada has a quota of 14.5 million kg of peanut butter it can export to
U.S
 Other Canadian products subject to U.S. quotas include; chicken, pork, dairy
products, firearms, softwood lumber, and textiles
 Canada holds quotas on many products it imports including, agricultural products,
firearms, steel, textiles, and clothing
 Exports under this amount subject to lower tariff rates/higher amounts have
higher tariff rates
TRADE EMBARGOES – a ban on trading a specific product or within a specific
country
 Often declared to pressure foreign governments to change their policies or to
protest human rights violations
 A trade embargo declared by Canada affects Canadians by increasing the need for
domestic products that become unavailable as imports – price may go up as
supply decreases
 If another country imposes a trade embargo on Canadian exports, there is a
surplus of domestic supply, causing companies to either find alternate markets,
decrease production and possibly close factories
 2003 – Canada suffered a major economic blow when 30 countries issued a trade
embargo on Canadian beef exports – BSE or Mad Cow Disease was discovered in
a cow in Alberta – industry suffered billions of dollars in lost sales and the govn’t
had to implement assistance programs to cattle ranchers
OTHER TRADE BARRIERS
TRADE SANCTIONS - Economic action taken by a country to coerce another to
conform to an international agreement or norms of conduct
Examples:
1. No Canadian is allowed to trade arms with anyone from Iraq
2. Historically, Canada limited trade with South Africa to put pressure on the country to
dismantle its apartheid system – lifted in 1993 when apartheid came to an end
3. U.S. has strict guidelines for doing business in Cuba – will continue until Cuba begins
to change to a democracy
FOREIGN INVESTMENT RESTRICTIONS - restrictions imposed and made into
laws that are routinely reviewed that affect foreign investment. Purpose is to ensure that
the investments benefit Canada (other countries also review investments)
Example:
The Transportation Act limits foreign ownership of a Canadian airline to 25 percent. It
also allows only Canadian owned airlines to provide domestic flights within Canada
STANDARDS – trade barriers exist when countries have different standards for products
Examples:
1. Voltage in electronic devices vary across countries, which means that one product
may have to be modified for another market – this must be taken into account if
they want to produce them for different markets
2. Health and safety standards – vary again, so some products may not make it to
Canada if they don’t pass our health and safety standards, and vice versa (I know
some products are on the Canadian market that are not allowed in the European
market)
The ISO (International Safety Organization) is an NGO established to set quality
regulations. Over 1 million companies conform to the ISO 9001 quality standards. The
ISO 14001 certification assesses the company’s environmental standards.
Use the following website to find three (3) examples of current countries with which
Canada has a trade sanction or embargo.
http://www.international.gc.ca/sanctions/index.aspx?view=d
1. Identify the country/sanction or embargo
2. Identify the reason specified
Canada Border Services Agency
http://www.cbsa.gc.ca/
Use the website above to identify the personal exemptions for bringing goods into
Canada.
Use the internet to find three (3) reasons to support protectionism and three (3) reasons to