Advantages and Disadvantages of International Trade

Question 1

ADVANTAGE OF INTERNATIONAL TRADE

Answer 1

Is to sell something that we don’t need or have a lot of and to buy something we do need!

Question 2

1st advantage

Answer 2

Variety of Products/Meeting our Needs
- Ability for Canadians to purchase products that we don’t produce.

Question 3

2nd Advantage

Answer 3

Lower Prices
- Workers in many developing countries (China & India) are paid lower wages.
- Those “savings” are passed on to the consumer.

Question 4

3rd Advantage

Answer 4

New Markets (more customers)
- Canada’s population is approximately 38 million
- World population is almost at 8 billion!

Question 5

4th Advantage

Answer 5

Job Creation
- New markets = more demand = more jobs
- Exports are critical to the Canadian economy!

Question 6

5th Advantage

Answer 6

Cultural Development
- International business fosters exchange of culture and ideas between countries and promotes diversity.
- Through food, clothing, music (the arts) etc.

Question 7

6th Advantage

Answer 7

Foreign Investment (2 types)
- Direct Investment
Other countries can invest in offices, factories or warehouses ($75.5 billion in 2021).
Has to follow guidelines in The Investment Canada Act
- Portfolio Investment
Purchase of stocks, bonds and other financial securities by Canadian firms.

Question 8

7th Advantage

Answer 8

New Technology and Processes
- Machinery or materials to make better products, faster and cheaper.
- Canadian companies have the ability to research other companies and their technology
- Creates competitiveness and profitability.

Question 9

1st Disadvantage

Answer 9

Support of non-democratic governments
- China
- Vietnam
- Cuba
- Communism, human rights issues

Question 10

2nd Disadvantage

Answer 10

Loss of Canadian culture/identity
- Almost 90% of Canadians live less than 160 km from the border!
- Culture is a major export of the USA.
Television/Movies
Magazines & books
Music

Question 11

3rd Disadvantage

Answer 11

Environmental issues
- Canada has strong environmental rules and regulations. Other countries do not.
- Some companies will move their companies to a less regulated country to save costs.
- Some countries produce goods without concern to the damage it causes to the environment (Mexico, China).

Question 12

4th Disadvantage

Answer 12

Social Welfare Issues
- Maintaining safety standards, minimum wages, worker’s compensation and health benefits cost businesses money.
- If a running shoe is made in a country where these issues are not met then the shoe can be sold for less in Canada and the company makes a higher profit.

Question 13

5th Disadvantage

Answer 13

Increased foreign ownership of companies in Canada
- Only 1% of the 1.3 million corporations in Canada are foreign owned.
- The 1% accounts for 30% of Canada’s business revenue!
Why is this a disadvantage?