Free Trade
VS.
Protectionism
Tariffs
• A tariff is a tax on an import. Tariffs cause
foreign items to be more expensive as a
tax is charged to each item that enters
Canada.
Protectionism
•Protectionism is a government policy of
using tariffs and having rules that limit
imports. These tariffs are used to protect
Canadian manufacturers. Similar items
which are imported from other countries
cheaper then Canadian manufactures' can
make, are charged a tax to increase the
price, thus making the foreign product more
expensive , keeping the prices more even.
Free Trade
• Free trade is a government policy that
eliminates tariffs and other laws designed to
restrict trade. The basic idea of Free trade is
that enhanced trade among nations is good for
everyone.
GATT & WTO
After WWII many major trading countries realized they needed to avoid
trading protectionism that was disastrous in the 1930 Depression.
Many countries (more than 120 today) agreed on a set of rules to
govern and encourage trade. The GATT (General Agreement on Tariffs
and Trades) was established in 1947.
The WTO (World trade Organization) was the latest addition to GATT,
which was geared to resolve disputes under GATT rules. This dispute
resolution can be very slow and uncertain. E.G. Softwood Lumber
dispute between USA & Canada.
NAFTA
The North American Free Trade Agreement has
helped free trade across the world. Canada has
pursued Free Trade directly from the USA and
other countries. USA Free trade can be
substantially beneficial to Canada due to our
enormous amount of trading. Recently there
have been discussions to have a free trade for
the Americas with the Pacific Rim. If this were
ever to happen, it could be very lucrative for
Canada.
The Future of Canadian Trade
• International trade has allowed most Canadians to enjoy a high
standard of living. To continue this in the future, we must find the
answers to several critical trade related questions.
• Can we maintain our traditional markets? We are in competition with
developing nations over natural resource based resources.
• Can we export more manufactured goods? Can we develop new
products to create new markets? We must continue to create new
products that are wanted in world markets.
• Can we increase our exports of services? We currently carry a trade
deficit in services. We need to increase this to make a trade
surplus.
• Should we reduce our trade reliance on the USA?
Currently our biggest trading partner is the USA. This
dependence puts our economy at risk by US
protectionist policies, or the US economy.
• Can we compete with NAFTA and beyond? American
companies have enormous power (Microsoft) and
Mexico offers cheap labour. How can we compete with
our partners to tap into economic markets like India &
China?
Do Questions 2, 3, 4a, 5a,d,e,
6a, 7 p 464.