CHAPTER 12 Canada in the Global Economy

1
CHAPTER 12Canada in the Global Economy

• OVERVIEW
• Background
• FTA, NAFTA agreements
• After NAFTA
• USA, Canada, Mexico
• Canadian economy
• Current issues

2
CHAPTER 12 Background

• National Policy (1879)
• Protective trade barriers
• Develop manufacturing industry
• Provide government revenue
• Build railroad, east-west trade

3
CHAPTER 12 Background

• Effects of National Policy
• Large manufacturing sector
• Higher prices
• Foreign owned branch plants
• Not internationally competitive

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CHAPTER 12 Free Trade Agreement

• Free Trade Agreement (FTA)
• Signed October 1987 / US and Canada
• Remove tariffs
• Reduce non-tariff barriers
• Free trade in energy products
• Free trade in services
• Reduce subsidies
• Dispute resolution mechanism

Source Macroeconomics, 5th ed, Parkin Bade
5
CHAPTER 12 Free Trade Agreement

• 1. Removal of Tariffs
• Scheduled cuts Jan. 1 1989 Jan. 1 1999
• Countervailing duties
• Offset effects of subsidies
• Antidumping duties
• if products exported at price below cost of
  production

Source Macroeconomics, 5th ed, Parkin Bade
6
CHAPTER 12 Free Trade Agreement

• 2. Reduction of Non-Tariff Barriers
• Preferential purchasing removed
• WTO agricultural quotas removed
• Agriculture
• new tariffs replace old quotas

Source Macroeconomics, 5th ed, Parkin Bade
7
CHAPTER 12 Free Trade Agreement

• 3. Free Trade in Energy
• Existed prior to FTA
• No government intervention during shortages

Source Macroeconomics, 5th ed, Parkin Bade
8
CHAPTER 12 Free Trade Agreement

• 4. Free Trade in Services
• Right to establish branches
• Treat goods, firms and investors as if they were
  operating within its borders

Source Macroeconomics, 5th ed, Parkin Bade
9
CHAPTER 12 Free Trade Agreement

• 5. Reduction of Subsidies
• Agreement allows countervailing dutiesif
  subsidies exist

Source Macroeconomics, 5th ed, Parkin Bade
10
CHAPTER 12 Free Trade Agreement

• 6. Dispute Resolution Mechanism
• Impartial trade experts
• Two mechanisms
• Disputes relating to all aspects of FTA
• Deal with antidumping laws andcountervailing
  duties

Source Macroeconomics, 5th ed, Parkin Bade
11
Canadas Foreign Trade 1971 - 2002
Source Macroeconomics, McConnell, Brue
12
Exports of Goods / Services as GDP
Source Macroeconomics, McConnell, Brue
13
CHAPTER 12 NAFTA

• North American Free Trade Agreement
• Canada, US, Mexico (1994)
• Remove trade barriers
• Promote fair competition
• Increase investment opportunities
• Protect intellectual property rights
• Dispute resolution mechanism
• Framework for expansion of agreement
• Environmental, labour accords

Source Macroeconomics, 5th ed, Parkin Bade