1.4 - advantages and disadvantages of international trade

Question 1

what are some major advantages of trade?

Answer 1

1. meeting our needs: with trade, we can export the surplus of things that we don’t need, while importing the things that we don’t have (ex. exporting water, improting oil)
2. job creation: 1 in 3 jobs in canada depend on exports, and 40% of everything we create is exported. wages earned from export companies pay for many other goods in our economy
3. attracting investment: an increase in canadian exported goods leads foreign investors to invest in canada’s economy by building officies, factories, and warehouses here, or using their canadian dollars to buy government stocks and bonds
4. new technology and materials: improved technology increases canadian productivity and competitivity, and allows canadian firms to compete with other countries. it also provides something we can export
5. more diverse goods and services: many goods like tropical fruits cannot be grown in canada so are instead imported. many international banking companies also operate in canada.

Question 2

what are some major disadvantages of trade?

Answer 2

1. support for non-democratic systems: decisions made by corporations or rich government officials regarding resources in developing countries often do not increase the welfare of the general population (ex. north korea, cuba)
2. cultural identity issues: for example, the US exports their culture all over the world which then transmits american beliefs and lifestyle along with it. companies spend 140 billion a year on branding to acquire your mind share.
3. social welfare concerns:
   - canada has minimum safety standards, wage requirements, and health benefits. these benefits cost businesses and government money.

• The increasing trend towards corporate control over the production of food has lowered the prices given to independent farmers in the developing world.
• a large percentage of the revenue earned from goods do not go towards the producers, especially if they are produced in the developing world (ex. 14% for a pair of jeans)

4. environmental issues: while canadian businesses are required by laws to respect nature, many businesses just relocate to where these rules don’t exist.
5. economic considerations: more than $4 trillion changes hands globally, daily. when money is pulled out of a small market, this can be very destructive

an economic divide exists. the top 200 corporations accounts for over 25% of the world’s economic activity but only 1% of its workforce. the income at the top is so much larger than those at the bottom that it is incomprehensible.

6. political issues: political alliances often help corporations rather than people. for example: haliburton, an engineering/construction company, has admitted that one of its subsidiaries paid bribes totalling $2.4 million to a
   Nigerian tax official to obtain favourable tax treatment.

• additionally, war can occur over a struggle for national resources like diamonds or oil.