1. 15.1 - Canada's Foreign Trade  Globalization: the trend of growing foreign trade and investment and the spread of international businesses and markets  Costs of computing power keep decreasing  Costs of long-distance communication keep decreasing  Between 2000 and 2010, rich Western countries fell from being responsible for 2/3 of the global GDP to just over ½  By 2020, it’s predicted that this number will fall to 40%  Emerging economies will, by then, control more than half the global output

2. The Importance of Trade  Since the early 1950s, businesses are more likely to buy resources and sell products internationally  EX. A business has its:  Headquarters in Canada  Borrows from Japanese savers  Purchases German-made machinery  Employs Mexican workers  Sells the bulk of its output in the United States  Within this international trend, Canada has a heavy reliance on trade

3. The Importance of Trade cont’d  Canada’s exports = 35% of GDP  United States’ exports = 12% of GDP  Japan’s exports = 18% of GDP  Japan and the USA’s economies are large and diversified which allows them to be less dependent on imports and exports  Canada’s reliance on foreign trade is still better than some small industrialized countries, such as Belgium  Belgium’s exports = 92% of GDP

4. Exports as a Percentage of GDP

5. Canada’s Trading Partners  Who is Canada’s principle trading partner?  The United States  In 2010, 73% of Canada’s merchandise exports went to the USA and 63% of its imports came from the USA  While Canada’s export to other countries is still modest, it is expanding rapidly  e.g. between 1990 – 2010, Canadian exports to India and China more than doubled

6. Canada’s Trade Patterns  Canada’s merchandise trade is made up of exports and imports of both natural resources and manufactured products  In 2010, Canada’s merchandise exports included almost equal portions of raw/processed natural resources (agricultural products, forest products, minerals, metals) and manufactured products (machines, equipment, automobile products)

7. Canada’s Trade Patterns  Canada also trades services  Travel  Transportation  Commercial & government services

8. What is Traded  In general, when a country can produce something efficiently, they export it  They import products that they cannot produce efficiently  Producing something efficiently depends on:  Country’s resources  Market size  Climate  Sometimes chance

9. What is Traded cont’d  Resources:  Canada has many rich and plentiful natural resources  This is why it is a major exporter of paper, wheat & natural gas  Belgium has little natural resources so they are major importers of unprocessed products  Bangladesh has a huge pool of labour and little capital resources, so they are major exporters of labour-intensive goods

10. What is Traded cont’d  Market Size:  Recall that the production of some items exhibits increasing returns to scale (costs more per each additional unit of output)  These items tend to be produced in settings where businesses can take advantage of increasing returns to scale  e.g. cars are produced in countries where people buy cars, not in countries where few people own cars

11. What is Traded cont’d  Climate:  Although we could grow tropical foods in Canada in a greenhouse with its climate controlled, it is actually cheaper to import tropical fruit internationally  This is why we can eat “summer fruit” in the winter