Free Trade Agreements: Benefits and Consequences

Trade Agreements: Why are they necessary? They promote a positive relationship between

countries, especially neighbouring countries. They allow for exotic and rare goods to be traded

with out high tariffs. Trade agreements allow corporations to be very

profitable and employ a large number of people.

North American Free Trade Agreement (NAFTA) This agreement was signed in 1994 between Canada-

U.S.A.-Mexico. What did it do for these countries?

It eliminated all tariffs on goods traded between these countries.

All import/export quotas (limits) were eliminated. Allowed companies to invest in/buy companies in any of

the countries involved in the agreement. Intellectual property – music and movies have copyright

protection . Auto industry – Mexico removes quotas and duties/taxes

on cars and parts from Canada and the U.S.A.

NAFTA – Benefits for Canada Allows Canadian companies to sell their

goods/services without tariffs in the American and Mexican economies.

It makes goods imported from the U.S. cheaper for Canadian shoppers (No tariffs = lower prices).

It keeps Canada’s economic strength competitive when compared to other trade blocs and regions (ex. European Union)

NAFTA – Negatives for Canada Canadian jobs would be lost or relocated to the US

and Mexico. This would put pressure on Canadian companies to cuts workers’ wages.

Social programs (healthcare, EI, education) might be threatened as companies push to lower taxes.

US culture would become even more dominant over Canadian culture.

Important Economic VocabularyLook up and define each term/phrase:

Tariff Quota Direct Investment Trade Bloc Intellectual Property GNP Standard of Living

Free Trade Questions1. Look at the map on page 307. Using the figures

provided, work out the per capita GNP rates for Canada, US, and Mexico. What does this tell you about each country’s standard of living?

2. Examine the maps on page 310, which show the value of Canada’s Exports and Imports.

a) Considering the total dollar amount of exports/imports did Canada enjoy a favourable or unfavourable balance of trade? Explain.

b) Canada’s trade with most African countries is quite uneventful. Explain why this might be so.