Canada and Barbacoa signed a bi-lateral free-trade agreement. The agreement allows for trade in goods and services between the two countries without tariffs or quotas to restrict trade across most, but not all, industries. The governments in both countries hope that such agreements will raise living standards in both countries but, in particular, in Barbacoa which is a developing economy. The call center service business is an example of an industry that falls under the free trade agreement. Specifically, some companies require call center services to help with issues their customers may have (e.g. need help after the sale of a product/service, warranty problems, need replacement parts, etc.). Call centers employ customer service representatives (CSRs) to take calls from customers. These types of workers require patience, possess basic problem solving skills and require strong verbal/written communications skills in the languages their customers speak/write. As a former colony of both Britain and France, Barbacoa's citizens are generally fluent in both English and French As such, Barbacoan workers are well suited to work in the call center industry despite the fact that, generally speaking, they have less educational attainment than Canadian workers. The two countries marginal productivity equations for CSRS are as follows: Customer Service Representative MP Equations Canada: MP 17- 0.6L Barbacoa: MP 11 -0.8L Where L represents the number of workers measures in thousands. Use the above information to answer the questions below. a) Footloose Call Centers (FCC) provides call center services for large multi-national companies that do not want to hire their own employees to provide the service. FCC has operations in both Canada and Barbacoa. Currently, FCC employs 10,000 CSRs in Canada at wage rate of $20 per hour while employing 5,000 CSR's in Barbacoa at $10 per hour. FCC is thinking of transferring some of the work from Canada to Barbacoa. Should FCC do this? If so, how many jobs should FCC transfer from Canada to Barbacoa? Why? b) How should the Government of Canada respond to the potential loss of jobs to other countries (either with free trade agreements or not)? Hint: discuss the policy options available that were examined in class. Canada and Barbacoa signed a bi-lateral free-trade agreement. The agreement allows for trade in goods and services between the two countries without tariffs or quotas to restrict trade across most, but not all, industries. The governments in both countries hope that such agreements will raise living standards in both countries but, in particular, in Barbacoa which is a developing economy. The call center service business is an example of an industry that falls under the free trade agreement. Specifically, some companies require call center services to help with issues their customers may have (e.g. need help after the sale of a product/service, warranty problems, need replacement parts, etc.). Call centers employ customer service representatives (CSRs) to take calls from customers. These types of workers require patience, possess basic problem solving skills and require strong verbal/written communications skills in the languages their customers speak/write. As a former colony of both Britain and France, Barbacoa's citizens are generally fluent in both English and French As such, Barbacoan workers are well suited to work in the call center industry despite the fact that, generally speaking, they have less educational attainment than Canadian workers. The two countries marginal productivity equations for CSRS are as follows: Customer Service Representative MP Equations Canada: MP 17- 0.6L Barbacoa: MP 11 -0.8L Where L represents the number of workers measures in thousands. Use the above information to answer the questions below. a) Footloose Call Centers (FCC) provides call center services for large multi-national companies that do not want to hire their own employees to provide the service. FCC has operations in both Canada and Barbacoa. Currently, FCC employs 10,000 CSRs in Canada at wage rate of $20 per hour while employing 5,000 CSR's in Barbacoa at $10 per hour. FCC is thinking of transferring some of the work from Canada to Barbacoa. Should FCC do this? If so, how many jobs should FCC transfer from Canada to Barbacoa? Why? b) How should the Government of Canada respond to the potential loss of jobs to other countries (either with free trade agreements or not)? Hint: discuss the policy options available that were examined in class
