How free is free-trade?

United States	United States	Canada	Canada
Beef	Cars	Beef	Cars
1600	0	0	800
1200	200	100	600
800	400	200	400
400	600	300	200
0	800	400	0

Questions

1. If you are Canada, would you make the following trade? Why?

2. If you are the US, would you make the following trade? Why?

TRADE: US gives 400 beef and Canada gives back 400 cars

1. If you are Canada, would you make the following trade? Why?

2. If you are the US, would you make the following trade? Why?

TRADE: US gives 400 beef and Canada gives back 400 cars

More questions

3. What if Canada eliminated 200 beef jobs and the other 200 were put into car jobs, what would the total look like before the trade. What would it look like after the trade?

4. If you object to such an elimination of 200 jobs, explain the grounds for doing so. If you agree, explain the grounds for your answer.

5. If you were a beef worker/owner of farms explain what you would ask for from the government?

3. What if Canada eliminated 200 beef jobs and the other 200 were put into car jobs, what would the total look like before the trade. What would it look like after the trade?

4. If you object to such an elimination of 200 jobs, explain the grounds for doing so. If you agree, explain the grounds for your answer.

5. If you were a beef worker/owner of farms explain what you would ask for from the government?

Helpful Vocabulary

Comparative Advantage:law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

Liberalization:in terms of trade, itmeans to allow companies from other countries to compete in a certain industry and/or sell their goods in that country. For example, South Korea is negotiating to liberalize their auto industry and allow US companies to sell cars in South Korea.

Comparative Advantage:law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

Liberalization:in terms of trade, itmeans to allow companies from other countries to compete in a certain industry and/or sell their goods in that country. For example, South Korea is negotiating to liberalize their auto industry and allow US companies to sell cars in South Korea.

Two principles offree trade agreements

1.National Treatment: The nondiscrimination principle stipulates that both trade restrictions and proposals to reduce trade restrictions should apply to all of a country's trading partners equally, and that imported goods and services will not be treated differently than domestic ones.

Exceptions include:protection of "public morals;" protects for human, plant, and animal life; products of prison labor; protection of natural resources and historical artifacts; issues dealing with imports/exports associated with a government stabilization plan, and others.

2. Most-Favoured-Nation:the receiving nation will be given all the trade advantages (i.e. lower tariffs) that any other nation receives (who is a member of GATT/WTO).

1.National Treatment: The nondiscrimination principle stipulates that both trade restrictions and proposals to reduce trade restrictions should apply to all of a country's trading partners equally, and that imported goods and services will not be treated differently than domestic ones.

Exceptions include:protection of "public morals;" protects for human, plant, and animal life; products of prison labor; protection of natural resources and historical artifacts; issues dealing with imports/exports associated with a government stabilization plan, and others.

2. Most-Favoured-Nation:the receiving nation will be given all the trade advantages (i.e. lower tariffs) that any other nation receives (who is a member of GATT/WTO).

WTO also insists on...

Freer trade

Binding agreements

Predictability and transparency

fair competition

Freer trade

Binding agreements

Predictability and transparency

fair competition

Optimist view of economic globalization

Economic globalization can enter developing economies in several ways.Multinational Corporations (MNCs)andfinancial investorsbecome involved in the economies throughforeign direct investment (FDI), especially once trade is well established and secure

FDIconsists of multinational corporations building plants in another country or acquiring a controlling interest (more than 10% of stock) in an existing overseas company. FDI is generally thought of as a long-term investment.

For example, Grupo Bimbo, Mexico's largest bread company, recently acquired a controlling interest (90%) in Canada Bread (Dempsters, formally owned by Maple Leaf Foods). Essentially, Mexico now owns Canada's bread.

In short, states want Foreign Direct Investment and they will compete against one another to get it, especially when they have established free trade

So what does a state like Canada have to do come out on top?

Economic globalization can enter developing economies in several ways.Multinational Corporations (MNCs)andfinancial investorsbecome involved in the economies throughforeign direct investment (FDI), especially once trade is well established and secure

FDIconsists of multinational corporations building plants in another country or acquiring a controlling interest (more than 10% of stock) in an existing overseas company. FDI is generally thought of as a long-term investment.

For example, Grupo Bimbo, Mexico's largest bread company, recently acquired a controlling interest (90%) in Canada Bread (Dempsters, formally owned by Maple Leaf Foods). Essentially, Mexico now owns Canada's bread.

In short, states want Foreign Direct Investment and they will compete against one another to get it, especially when they have established free trade

So what does a state like Canada have to do come out on top?

Pessimistic view of economic globalization

The pessimistic or anti-globalization view sees economic globalization as a threat to the well-being of less developed countries. Some argue that it creates the classic situation of the rich get richer while the poor get poorer. While global standards of living have risen overall as industrialization takes root in less developed countries, the income gap between the rich and the poor has, in many cases, grown wider.

Critics of globalization assert that the implementation ofneoliberal market ideologymakes states less capable or willing to carry out traditional societal tasks such as providing a social safety net and enforcing worker safety standards. When the state decreases its role in the economy it relinquishes its responsibilities regarding the provision of education, heath, water, and other social services to its citizens

The pessimistic or anti-globalization view sees economic globalization as a threat to the well-being of less developed countries. Some argue that it creates the classic situation of the rich get richer while the poor get poorer. While global standards of living have risen overall as industrialization takes root in less developed countries, the income gap between the rich and the poor has, in many cases, grown wider.

Critics of globalization assert that the implementation ofneoliberal market ideologymakes states less capable or willing to carry out traditional societal tasks such as providing a social safety net and enforcing worker safety standards. When the state decreases its role in the economy it relinquishes its responsibilities regarding the provision of education, heath, water, and other social services to its citizens

How can states regulate trade?

Quotas: quantitative restrictions on the import of certain goods and services

Subsidies: government hand-outs, (i.e. monetary contributions, in-kind contributions such as equipment, reduced taxes, etc)

Tariff:A list of taxes or customs duties payable on imports or exports

Quotas: quantitative restrictions on the import of certain goods and services

Subsidies: government hand-outs, (i.e. monetary contributions, in-kind contributions such as equipment, reduced taxes, etc)

Tariff:A list of taxes or customs duties payable on imports or exports

Problems

1. American Magazines/online media in Canada (cultural protection)

2. Soft-lumber dispute (US industry protection)

3. the COOL dispute (Mexico and Canada fight for fair competition practices)country of origin labels

1. American Magazines/online media in Canada (cultural protection)

2. Soft-lumber dispute (US industry protection)

3. the COOL dispute (Mexico and Canada fight for fair competition practices)country of origin labels

If time permits: economic development ad democracy

"According to the pro-globalization school, economic growth owing to participation in the global trade and financial markets will translate into greater democracy and respect for human rights in developing countries"

Economic growth empowers workers, who become less dependent on the authorities, which then leads to decentralized power and demands for the protection of human rights

"According to the pro-globalization school, economic growth owing to participation in the global trade and financial markets will translate into greater democracy and respect for human rights in developing countries"

Economic growth empowers workers, who become less dependent on the authorities, which then leads to decentralized power and demands for the protection of human rights

Question

Take a position: Free trade is harmful to ________ (United States or Canada)

Take a position: Free trade is harmful to ________ (United States or Canada)