1. International Trade Agreements Economics 11 Stewart

2. Terms of Trade  The rate at which a country a country’s exports are exchanged for its imports  Terms of trade establish an international price for one product in terms of another product

3. Arguments for Restriction of Trade  Negative effects on domestic employment: Importing goods, without increasing exports, results in the exporting of jobs  Retaliation: Domestic producers argue that we should not let foreign goods into our country if our goods are excluded from their markets

4. Arguments for Restriction of Trade  Prevents Dumping: The deliberate practice of selling a product abroad at a lower price than the domestic price  Protection: Trade restrictions offer protection to “vital” industries (ex. Military equipment, nuclear technology) and can also be used to protect developing or “infant” industries from foreign competition

5. Barriers to Trade Present barriers to trade include:  Tariffs (import duties): These are special taxes placed on certain imported goods  Subsidies: Gov’t payments to domestic producers (ex. Softwood lumber industry)  Trade Sanctions and embargoes: Gov’t may impose trade sanctions on a nation whose political practices are unacceptable (ex. South Africa during Aparthied, Cuba and the United States

6. Visible vs Invisible Trade  Visible trade refers to tangible goods being traded  Non-merchandise (or invisible trade) is the exchange of services, tourism, investment incomes and other funds. Invisible trade consists of money flows often without tangible products traded in return.

7. Canadian Trade Policy  During the past 150 years, trade restrictions have decreased globally in general  The US has greatly influenced Canadian National Trade Policy  Why?  The US is Canada’s major trading partner

8. General Agreement on Tariffs and Trade (GATT)  This was an international agreement developed in 1947 designed to reduce trade barriers among member nations  In 1995 The World Trade Organization (WTO) replaced GATT and grew to 132 members (countries)  Since 1995, 12 more countries have joined the WTO and average tariffs have continued to fall

9. Free Trade  Within a free trade area, trade between member nations is conducted without tariffs  The North America Free Trade Agreement (NAFTA) established in 1994 allowed for free trade between Canada, the US and Mexico

10. NAFTA  Advocates of NAFTA pointed out that the Canadian economy would suffer if it did not freely trade with the US  Opponents of NAFTA warned of the potential job loss that could occur if businesses were to relocate to Mexico to take advantage of lower wages and lower standards for worker safety and environment