This article and its lesson plan examine Canada’s place in today’s dynamic global economy. The Canadian government is undertaking a seemingly contrarian strategy of seeking trade agreements with other nations, in a world which increasingly views free trade and globalization in a negative light. This lesson plan seeks to clarify the rationale behind the Canadian government’s policies towards international trade and examines the risks and benefits inherent in those policies.
Appropriate Subject Area(s):
Key Questions to Explore:
- Why is Canada open to free trade, even though most nations are adopting protectionist policies?
- Why is Canada seeking trade deals with China, given the clear differences in form of government?
- Why is free trade unpopular in many developed nations?
- What factors will Canada take into account before signing a free trade deal? Are other factors beyond economics taken into account (e.g. form of government, civil liberties, civil rights, etc.)?
- How could today’s anti-globalization climate negatively or positively affect the Canadian economy?
- What steps is the Canadian government taking to offset the risk of other nations protectionist policies?
Free trade, authoritarian government, dumping, CETA, TPP, NAFTA
- Free Trade agreement: Trade agreements generally facilitate the flow of goods, services and investments between parties involved. Examples include:
- North American Free Trade Agreement (NAFTA): NAFTA is a free trade agreement between Canada, the United States of America and Mexico, which encouraged the flow of goods and labour among North-American nations. This agreement became effective on January 1, 1994.
- Trans Pacific Partnership (TPP): TPP was a proposed trade agreement among 12 nations, including the U.S., Canada, and Mexico. The partnership aimed to foster trade growth by reducing existing barriers to trade among these nations.
- Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA): CETA is a progressive free trade agreement which eliminates tariffs and/or reduces barriers in virtually all sectors and aspects of Canada-EU trade.
- Dumping: Dumping occurs when manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production. The purpose of this act is usually to increase market share in a foreign market or to drive out competition.
- Comparative advantage: Comparative advantage is an economic law referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than others.
- Authoritarian government: An authoritarian government is characterized by strong central power and limited political freedoms.
Copies of the article plus links to these associated articles:
Introduction to lesson and task:
In recent times we have seen a push back against globalization in the United States and much of the rest of the developed world.
In 2016 a number of events occurred which gave credence to the view that globalization has become widely unpopular. These events include the following: Britain voted to leave the European Union (Brexit); nationalist parties in Europe gained widespread support; and Mr. Trump improbably rose to power after championing protectionist policies. This anti-globalization movement puts global trade at risk.
Interestingly, the Canadian government appears to be going against the grain. As the rest of the world seemingly embraces protectionism, Canada continues to actively seek trade deals.
This policy has yielded some early successes, namely: Canada is currently in the latter stages of securing the Comprehensive Economic Trade Agreement (CETA) with the European Union. Canada is also weeks away from commencing negotiation of a free-trade agreement with China. And Prime Minister Trudeau had a relatively successful meeting with Mr. Trump, who declared that prospective changes to NAFTA will benefit both the United States and Canada.
Indeed, there are many ways NAFTA could be rewritten to favour both countries. For example, a new trade deal could include new environmental and labour provisions, protection of intellectual property of both countries, improved access to government contracts, and increased foreign ownership of telecommunication companies in both countries.
Given the fact that the U.S. buys 75% of Canada’s exports, the U.S. will be in a better position to dictate the in a revised agreement, making it more likely that the new terms will limit Canada’s access to U.S. markets, not expand it. Against this backdrop, the Canadian government’s strategy of seeking trade deals with China and the European Union is highly reasonable.
As Canada seeks to enter new trade agreements, it must adapt to the idiosyncrasies of its new trading partners and deal with the negative effects of free trade. For example, in the case of new trade deals with China, the Canadian government must be ready to deal with the potential public fallout from securing a trade deal with an authoritarian government. It must also contend with the fact that China controls its currency and isn’t very welcoming to foreign businesses. In the case of CETA, the Canadian government must take active steps to curtail the potential effects of job losses and lower wages in certain sectors, due to the efficiencies a larger economic market will derive from such a deal.
This lesson plan seeks to explore the rationale behind the anti-globalization sentiment in the rest of the world and the Canadian government’s pursuit of favourable trade deals for Canada.
Action (lesson plan and task):
- Ask your students to state some reasons many working class people view globalization unfavourably.
- Ask your students to explain why the Canadian government is actively pursuing new trade agreements, given the negative effects of globalization (i.e. job losses and lower wages).
- Ask your students to state some ways in which governments could assuage these concerns.
- Ask your students to indicate by a show of hands if they support or oppose trade integration with a country whose authoritarian government continues to play an outsize role in directing its economy. Ask your students to explain their rationale.
- Ask your students to state the benefits and costs of agreeing to a free trade deal with China.
- Ask your students to state the sectors in which Canada will have a comparative advantage in a trade deal with China.
- Ask your students to state some alternative trade agreements that could govern Canada’s trading relationship with the US if NAFTA is cancelled.
- Ask your students to state Mr. Trump’s rationale for seeking a revised trade agreement.
- Ask your students to state some new provisions the Canadian government will be advocating for if NAFTA negotiations are reopened.
- Ask your students to explain why it might be difficult for the Canadian government to secure a favourable deal if NAFTA is revised.
Consolidation of learning:
- Ask your students to research the Comprehensive Economic and Trade Agreement (CETA).
- Ask them to present a broad description of CETA to the class and explain how it will benefit the Canadian economy. If they also come across factors that might have a negative impact on the Canadian economy, encourage them to share them with the rest of the class.
- At the end of this lesson plan, students should have a better understanding of the current global economic climate, and they should be able to articulate the strategy the Canadian government has decided to undertake to navigate this new economic landscape.
- Ask students to state the pros and cons of seeking new trade partners besides the United States.