TOPIC #7

Canada and International Trade Agreements

International Trade AgreementsInternational Trade Agreements

International Trade AgreementInternational Trade Agreement Legal contract between or amongst nations who voluntarily Legal contract between or amongst nations who voluntarily

agree to conduct business affairs in each other’s country agree to conduct business affairs in each other’s country based on the terms set out in the agreement.based on the terms set out in the agreement.

Common terms outlined in the agreements include:Common terms outlined in the agreements include: Reducing tariffs and custom duties on various products to Reducing tariffs and custom duties on various products to

reduce trade barriers;reduce trade barriers; When and why people will be able to work across When and why people will be able to work across

international borders;international borders; What qualifications one will need to work in another What qualifications one will need to work in another

country;country; How business trade secrets will be protected (intellectual How business trade secrets will be protected (intellectual

property);property); Process for resolving trade disputes amongst the Process for resolving trade disputes amongst the

participating countries in the agreement.participating countries in the agreement.

Advantages of Reducing Trade BarriersAdvantages of Reducing Trade Barriers

Two main advantages:Two main advantages:

Canadian businesses or other domesticCanadian businesses or other domestic businesses are able to sell their products and businesses are able to sell their products and services to international markets at lower services to international markets at lower prices because additional tariffs on exported prices because additional tariffs on exported products are reduced or eliminated. products are reduced or eliminated.

Increased competition motivates companiesIncreased competition motivates companies to improve their quality or reduce their prices to improve their quality or reduce their prices in order to compete with imported goods. in order to compete with imported goods. (Great for the consumer) (Great for the consumer)

History of the WTOHistory of the WTO

WTO developed out of an international trade agreement WTO developed out of an international trade agreement called the General Agreement on Tariffs and Trade called the General Agreement on Tariffs and Trade (GATT).(GATT).

GATT came into effect in 1948GATT came into effect in 1948 GATT was signed by Canada and 22 other nations who GATT was signed by Canada and 22 other nations who

were allies during World War II. were allies during World War II. An international organization was set up to help GATT An international organization was set up to help GATT

nations negotiate trade deals, resolve problems and nations negotiate trade deals, resolve problems and collect data about world trade.collect data about world trade.

In 1995, the WTO replaced the initial GATT organization.In 1995, the WTO replaced the initial GATT organization. The WTO currently has 139 member countries.The WTO currently has 139 member countries.

World Trade OrganizationWorld Trade OrganizationWTO TodayWTO Today Main international organization that deals with the rules of trade between Main international organization that deals with the rules of trade between

nations.nations.

The WTO provides a forum for negotiating agreements aimed at reducing The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all;obstacles to international trade and ensuring a level playing field for all;

Contributes to global economic growth and development. Contributes to global economic growth and development.

The WTO also provides a legal and institutional framework for the The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. disputes arising from their interpretation and application.

The current body of trade agreements comprising the WTO consists of 16 The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are two different plurilateral agreements (to which only some WTO members are parties).parties).

Governs approximately 97% of all world tradeGoverns approximately 97% of all world trade

Source: World Trade Organization http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htmSource: World Trade Organization http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm

International Trade AgreementsInternational Trade Agreements

General Agreement on Trade in ServicesGeneral Agreement on Trade in Services GATS came into effect in 1995GATS came into effect in 1995 Sets guidelines for the trade of services Sets guidelines for the trade of services

such as banking across international such as banking across international borders.borders.

International Trade AgreementsInternational Trade AgreementsThe Canada-US Free Trade AgreementThe Canada-US Free Trade Agreement Commonly known as FTA came into effect in January 1989.Commonly known as FTA came into effect in January 1989. Intended to gradually phase out (get rid of) a number of tariff barriers between the two Intended to gradually phase out (get rid of) a number of tariff barriers between the two

countriescountries

Issues dealt with under the agreementIssues dealt with under the agreement

Canada’s wishes:Canada’s wishes: wanted stable access to U.S. Marketswanted stable access to U.S. Markets Wanted to bid on US government contractsWanted to bid on US government contracts wanted to create a dispute settlement tribunalwanted to create a dispute settlement tribunal To increase exports to the USTo increase exports to the US Exemptions included dairy and poultryExemptions included dairy and poultry

US Wishes:US Wishes: Wanted to increase their exports to CanadaWanted to increase their exports to Canada Wanted clarification regarding rules of intellectual propertyWanted clarification regarding rules of intellectual property To reduce restrictions on US investment in Canadian industriesTo reduce restrictions on US investment in Canadian industries Exemptions: sugar, diary, peanuts, and cottonExemptions: sugar, diary, peanuts, and cotton

All products other than exemptions are duty-free if produced within the free-All products other than exemptions are duty-free if produced within the free-trade zone.trade zone.

International Trade AgreementsInternational Trade Agreements

North American Free Trade AgreementNorth American Free Trade Agreement

Commonly known as NAFTACommonly known as NAFTA

Came into effect in 1994Came into effect in 1994

Trade between Canada, US and Mexico is Trade between Canada, US and Mexico is tariff free for all products produced in the tariff free for all products produced in the free-trade zone except for exemptions free-trade zone except for exemptions mentioned.mentioned.

Each day NAFTA countries conduct $1.7 Each day NAFTA countries conduct $1.7 billion in trilateral trade.billion in trilateral trade.

NAFTA NAFTA

Canada US MexicoEconomic Growth (E.G.) (1994-2003)

• E.G. is up 30.9% since 1994• Export sales have increased by 104%• Export sales to US have increased by 250%

• E.G is up 38% since 1994

• E.G. is up 30%

Concerns Expressed

• Depletion of Canada’s natural resources as US and Mexico have to much access• Canada’s cultural industries (book, magazine, and TV) are becoming Americanized.

• Canada and Mexico are perceived to be taking away jobs from Americans

• Wealthier northern countries are perceived as exploiting Mexico for its low wages.

Trade agreements give businesses power over elected governments, and in time, these agreements will erode democracy.

Canada and Other Free Trade Canada and Other Free Trade Agreements Agreements

Regional Trade AgreementsRegional Trade Agreements Trade agreements involving groups of Trade agreements involving groups of

countriescountries

Bilateral Trade AgreementsBilateral Trade Agreements Trade agreements involving Canada and Trade agreements involving Canada and

one other country or groupone other country or group

Trading BlocTrading Bloc Group of countries that share the same Group of countries that share the same

trading intereststrading interests

Other International OrganizationsOther International Organizations

G8G8

G20G20

G8G8

Group of Eight (G8)Group of Eight (G8)

Eight of the world’s largest and most powerful Eight of the world’s largest and most powerful industrialized democracies meet annually and work industrialized democracies meet annually and work together to deal with major economic and political issues together to deal with major economic and political issues facing their individual and collective countries. facing their individual and collective countries.

Topics dealt with at major G8 summits include:Topics dealt with at major G8 summits include:

• Energy • Employment • EnvironmentEnergy • Employment • Environment

• Human rights • Arms ControlHuman rights • Arms Control

Seek to provide guidance and support to established Seek to provide guidance and support to established international organizationsinternational organizations

Countries include Britain, France, Germany, Italy, Canada, Countries include Britain, France, Germany, Italy, Canada, US, Japan, and RussiaUS, Japan, and Russia

G20G20

What is the G-20?What is the G-20? Established in 1999Established in 1999 The Group of Twenty (G-20) Finance Ministers and Central Bank The Group of Twenty (G-20) Finance Ministers and Central Bank

Governors of important industrialized and developing economies to Governors of important industrialized and developing economies to discuss key issues in the global economy. discuss key issues in the global economy.

MandateMandate The G-20 is an informal forum that promotes open and constructive The G-20 is an informal forum that promotes open and constructive

discussion between industrial and emerging-market countries on discussion between industrial and emerging-market countries on key issues related to global economic stability. key issues related to global economic stability.

To help support growth and development across the globe by To help support growth and development across the globe by contributing to the strengthening of the international financial contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial policies, international co-operation, and international financial institutionsinstitutions

Source: About G20. [Online] Available: http://www.g20.org/about_what_is_g20.aspxSource: About G20. [Online] Available: http://www.g20.org/about_what_is_g20.aspx

Other Free Trade AgreementsOther Free Trade Agreements

Free Trade Area of the AmericasFree Trade Area of the Americas

Central American Free TradeCentral American Free Trade Agreement (2004) Agreement (2004)

European Free Trade AssociationEuropean Free Trade Association (1960) (1960)

Asia-Pacific Economic CooperationAsia-Pacific Economic Cooperation (1989) (1989)