Chapter 1International Interdependence

1.1 The Evolution of Global Trade

Self-Sufficiency – the ability to provide for all of your basic needs (food, clothing, shelter, water) without depending on anyone else

Canada’s Aboriginal peoples were largely self-sufficient before the Europeans arrived.

However, they did have trade networks set up between tribes (eg. The Huron trading agri products for fur/meat from northern aboriginals)

Communes – self-sufficient communities – shared responsibility for food prod’n, education, child care.

Intentional Communities – those that attempt to become somewhat self-sufficient (500 in existence today around the world)

Early Trade

Over 3000 years ago, Northern Africans, travelled in camel caravans transporting

Figs

Scented Oils

Rare Woods

The people of Northern Africa traded with the west in return for

Olive Oil

Spices

At the same time China traded

Silk

Tea

For Spices from India

Roman Empire

Greece opened up the Mediterranean to connect the west with goods from China and India

During the ROMAN EMPIRE, merchants supplied Rome with

Wine, honey, marble from Greece

Jewels, marble artifacts, timber from Asia Minor

Silks and spices from China

Dyes, textiles and glass from Arabia

Fruit, gold and wine from Spain

Hides and horses from Germany

Tin, iron and copper from Britain

PEPPER has been the most important spice since Roman times – was used to pay rent, dowries, taxes.

Cities like Alexandria, Genoa and Venice owed their economic success to Pepper

First Trade Regulations

Trade was free during the Roman Empire

However during the Middle Ages, communities, towns began forming around churches and castles. Local rulers began collecting taxes (500-1000)

Eventually states and nations formed (1000-1500)

Merchants and Craftspeople began forming GUILDS which controlled manufacturing and the sale of products.

Guilds

Craftspeople associations – became as powerful as town governments

Guilds controlled manufacturing and sale of products made in the town

Metal work, jewellery, food, cloth and salt were some products controlled by the guilds.

Guilds required a fee (tariff) be paid by any foreign merchant or trader that wanted to enter the town and if the product they were selling already had a manufacturer in the town, they were not permitted entry so as to keep competition away (protectionism)

Guilds eventually were powerful enough to influence a country’s trade policy and pushed for import taxes (tariffs) on all foreign goods

See youtube – medieval guilds

15-16th Centuries

Current trade routes were narrow and dangerous so explorers and navigators set out to find a trade route to Asia via the Atlantic Ocean.

Trade Routes

Wars over Trade Routes

Trade routes that carried SPICES were especially dangerous as spices were used at the time for

Preservation of food

Made food taste better

Healers used spices for medicine

Provided pleasant scents for an unsanitary and foul smelling world

Huge profits went to those who controlled the spice routes and could fill the demand at the time.

1.2 History of Canadian Trade

First export was Canadian Cod Fish – had a large market in Europe – cod was dried, salted

Other ships came from Europe to trade with the Aboriginals for FUR – Beaver was becoming very popular as a material in hats. Beaver fur was water proof and durable

Beaver hats became a fashion rage that lasted more than a century.

Although Canada was not a trade route to Asia, there was still opportunity here; so in the early 1600s Samuel de Champlain established the first permanent settlements for France.

History of Canadian Trade

The British also formed settlements and the competition over the fur trade was fierce.

Settlements attracted more immigration from Europe.

Settlers relied on trade to provide manufactured goods.

Canada did not develop strong manufacturing industries, but rather sent its surplus natural resources to Europe for processing and manufacturing..

Main imports from Europe included – stylish clothing, household furniture, manufactured food, precision tools

The American Connection

In the USA at the same time, it was not the French and English in fierce competition, but rather the English and the Dutch.

Dutch traders worked for the West India Company. The Dutch also saw fur as an opportunity and took up business in what is now New York City.

The influence of the trade with the West Indies through the Dutch made American Trade look much different from Canadian Trade by 1720

Canada’s trade partners were exclusively the English and French. However, the US had a variety of trade partners reaching down to the Caribbean. While Canada’s trade went EAST – WEST, American trade went NORTH - SOUTH

SUGAR

Sugar was so important, it was called White Gold. New York sent ships of corn, wheat, barley etc and received ships of sugar in return.

Sugar was processed into refined table sugar, which was made into candy or sold in bags.

The residue of sugar refining was Molasses, which was distilled into RUM.

Finished products were traded to Europe or sent back to the West Indies

American trade quickly became more varied than Canadian trade and much more processing done in the US.

Political Alliance with USA?

By 1840, silk became the fabric of choice and the demand for beaver declined and never again regained its significance.

Due to the Rocky Mountains, trade began flowing North – South with the US as opposed to East – West with Western Canada.

Canada became a nation in 1867 partially due to fear of US domination.

By 1885 the CPR was completed, which allowed goods to be shipped west and brought BC into Confederation.

The Pacific Rim Connection

Trade between Canada and Asia was not until after the Second World War.

When the war ended, Japan’s industries were destroyed

With N. American aid, factories were rebuilt, modernized to high standards.

By 1950, Japan entered the N. American market with

Inexpensive Toys

Novelties

Electronic Equipment

For a decade “Made in Japan” was synonymous with “cheap”

Japanese Brands

Japan

Companies like Canon and Nikon tries to counter this image; however it was Sony that became the most famous Japanese company in the world.

Japan led the way for other Pacific Rim countries into international trade and is now one of Canada’s major trading partners.

Mexico and the Americas

1993 Canada signs the NAFTA and began the work of eliminating all tariff barriers between Canada/USA/Mexico.

Mexico’s large consumer market provides new opportunities for the sale of Canadian products.

Canadian branch plants located in Mexico can take advantage of lower wage rates.

The success of this agreement began talks to unite the Americas in an agreement called FTAA (Free Trade Area of the Americas) which would include all N and S American countries except Cuba (communist). 34 democracies in total

1.3 Canada’s Economic Identity

Historically, Canada has traded its Primary Resources to countries that use them in manufacturing.

Capital Intensive – industries that require a large investment of money and machinery – require little labour.

Labour Intensive – industries that use a large number of skilled workers

Canada has tried to correct this imbalance and worked towards a high percentage of its exports being semi-manufactured or end-product exports.

Quiz

The ability to provide for all your basic needs is called S_______ S_________

When trade first began what was the mode of transportation?

Ships

Camels

Trains

Pidgeons

Quiz

Asia traded ______ with Europeans to get clothing in return.

True or False – During the Roman Empire trade was free

In the Middle Ages _______ were formed which grouped tradespeople together (bakers, builders, artisans) and trained them and protected them from competition from outside the town.

Since trade brought wealth to merchants, the routes they travelled were very ________________

Quiz

Two of Canada’s first resources that were traded to Britain were: F__________ and F__________

Canada’s trade went North South or East West

In the US trade was controlled by the British and the ________________

True or False: The US had more variety in trade partners than Canada

What was White Gold? _______________

Quiz

When did trade begin between Canada and the Pacific Rim? What country led the way?

Name 5 brand names that are synonymous with Japan.

How has Japanese entertainment invaded our culture?

What does the NA stand for in NAFTA?

When was NAFTA signed?

Name 1 primary industry in Canada.

Chemicals/Plastics/Textiles/Food Processing are all considered M_____________________

Name 1 Service Industry in Canada

Advantages of International Trade

The fundamental reason for trade is to sell something that we don’t need (surplus) and buy something that we do need.

This leads to other benefits…

Job creation

Attacts foreign investment

Attracts new technologies

Offers Canadians a wider selection of products/services

Business

Jobs

Wages/Salaries

Taxes

Government Programs

Business Loans/Loan

Guarantees/Tax Incentives

New or Expanded Business

Savings

Capital Markets (banks)

Bank Loans to Business and Consumers

Consumer Spending

Demand

1.4 Advantages and Disadvantages of

International TradeAdvantages

Meeting our Needs – goods that we cannot grow due to our climate – pineapples and bananas

Job Creation – Canada must produce a surplus to trade. Every $1billion in exports translates into 6000 jobs

Attracting Investment – Foreign companies invest in office space, factories, storage in Canada

New Technologies and Materials – Competition relies on technology to produce faster, cheaper. R&D

Diverse Products and Services – Foreign trade opens us up to high fashion, wide range of foods, new inventions.

Disadvantages

Support for Non-Democratic Systems – Some government leaders would rather starve their people and ravage natural resources for their own profit.

Cultural Identity Issues – Culture is a major export for the US in terms of movies, television, magazines, brands.

Social Welfare Issues – Maintaining safety standards, minimum wages, health benefits. This all costs Canadian Manufacturers money which may make them uncompetitive with countries that have substandard safety standards

Environmental Issues – Pollution controls in Canada but not elsewhere

Political Issues – Wars and strife often occur because of natural resources – oil, diamond trade.

Blood Diamond

Barriers to International Trade

Tariffs – a tax imposed on an imported good by the local government. Tariffs increase the price of the imported good

Currency Fluctuations – The exchange rate changing, sometimes daily, can result in deals no longer being profitable. If a country’s currency loses strength it is more expensive to buy foreign goods; however other countries can more afford our exports.

Investment Regulations – Investment Canada Act (ICA) reviews all significant foreign investment. Financial Services as well as the sale of uranium companies in Canada is under close government review.

Barriers to International Trade

Environmental Restrictions – Foreign insect control, mad-cow disease. Restrictions on imports are there to protect Canadian industries. Certain vehicles, and hazardous products that do not meet Canadian standards are refused entry.

Foreign Relations and Trade Sanctions – Canada attempts to stop human rights abuses, war, revolution etc by imposing sanctions instead of using force. Sanctions may include limiting travel to or from a country, seizing or freezing assets in Canada and restricting trade.

Barriers to International Trade

Safety Regulations – Canadian Laws to protect consumers – Food and Drug Act, Consumer Packaging and Labelling Act

Imported products must be as safe for consumption as domestic products.

These acts may force foreign exporters to make costly changes.

Emerging Markets

The Middle East – Trade with the Middle East centres around 1 commodity – OIL

The Middle East is politically unstable – Syria, ISIS, Taliban, war in Iraq,Afghanistan.

Oil is a non-renewable resource – Certain Middle Eastern economies are seeking new trade relationships that are not based on oil. Eg. Dubai has become the tourism, real estate and financial centre of the Middle East.

Saudi Arabia

Saudi Arabia – Imports have almost doubled, exports have declined. Trade deficit. http://www.canadainternational.gc.ca/saudi_arabia-arabie_saoudite/bilateral_relations_bilaterales/canada-saudi_arabia_fs-arabie_saoudite_fd.aspx?lang=eng

UAE - Dubai

United Arab Emirates – increasing/steady exports and fluctuating imports. Trade surplus.

http://www.canadainternational.gc.ca/uae-eau/bilateral_relations_bilaterales/fact_sheet-fiche_documentaire.aspx?lang=eng

Egypt

Exports have declined and imports have increased. Trade deficit.

http://www.canadainternational.gc.ca/egypt-egypte/bilateral_relations_bilaterales/fs_egypt-egypte_fd.aspx?lang=eng

Emerging Markets

India – population second to China only – Has become a major centre for outsourcing services – Workforce is young, well educated –

imports –increasing / exports – steady climb

http://www.canadainternational.gc.ca/india-inde/bilateral_relations_bilaterales/fs_india-inde_fd.aspx?lang=eng

Emerging Markets

Africa –

many nations have an unstable or corrupt government.

Enormous social, health and economic problems.

Major infrastructure problems

Manufacturing is scarce

Have an ABUNDANCE of natural resources

Developed countries and multinationals have EXPLOITED resources and people. Riches of each nation were sent back to its ruling nation.

2 Nations Emerging

Morocco – recently has started exporting oil but known primarily for its mandarin oranges.

Imports – increasing Exports - increasing

http://www.canadainternational.gc.ca/morocco-maroc/bilateral_relations_bilaterales/fs_morocco-maroc_fd.aspx?lang=eng

Africa Emerging

South Africa – industrialized nation with a stable government. Major NON-OIL trade with Canada

Trade Deficit – recent decline in both exports and imports

http://www.canadainternational.gc.ca/southafrica-afriquedusud/bilateral_relations_bilaterales/fs_southafrica-afriquedusud_fd.aspx?lang=eng