This article explores the potential effects of Donald Trump’s economic policies on Canada’s economy.
Appropriate Subject Area(s):
Politics, economics, business studies, environmental studies.
Key Questions to Explore:
- What are the similarities and differences between the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP)?
- Why is Mr. Trump opposed to trade deals like the NAFTA and the TPP?
- How will Mr. Trump’s protectionist policies affect Canada?
- What are the arguments for and against the Keystone XL project?
Protectionism, Congressional approval.
Introduction to lesson and task:
Mr. Trump is vehemently against the North American Free Trade Agreement, which he calls a disaster. He promises to terminate the agreement if elected President of the United States of America. Mr. Trump’s contention with NAFTA stems from his belief that the deal has cost America thousands of jobs in the manufacturing sector and has wiped out America’s middle class. If elected, Mr. Trump will have to give six months’ notice before withdrawing from the deal, and he would need Congressional approval before imposing higher tariffs on Mexico and China.
If America decides to impose tariffs on Canadian goods and services, they will become less attractive to American consumers due to an increase in price. This will be bad news for the Canadian economy as over 75% of Canada’s exports are to the United States.
Mr. Trump is willing to approve the Keystone XL project, which President Obama previously rejected. This is positive news for TransCanada Corp, a Canadian Oil Company, and possibly the Canadian economy as a whole because the approval will provide an avenue for Canada to export oil to the United States. However, a large number of Canadians and American are opposed to the construction of a pipeline from Alberta to Nebraska, due to environmental concerns.
Students can benefit from weighting the costs and benefits of Mr. Trump’s policy to approve the Keystone XL project, and examining whether the construction of the Keystone pipeline will be beneficial to the Canadian economy in the long run.
Free Trade, protectionism, comparative advantage, absolute advantage
Some useful definitions:
- Free trade: This refers to a policy followed by some international markets in which a nation’s government does not restrict imports from, or exports to, other countries. This policy enables the free flow of goods and services between countries, without tariffs, quotas or subsidies.
- Protectionism: This term refers to government actions and policies that restrict or restrain international trade. Protectionist policies are usually enacted to protect local businesses and jobs from foreign competition. Examples of protectionist policies include: tariffs and quotas on imports, subsidies or tax cuts for local businesses and currency manipulation.
- Comparative Advantage: This is an economic law referring to the ability of any economic actor to produce goods and services at a lower opportunity cost (best alternative forgone) than other economic actors.
- Absolute Advantage: This is the ability of a country to produce a good or service at a lower cost per unit than the cost at which any other entity produces that same good or service.
Action (lesson plan and task):
Give students a copy of the article to read.
Then ask students to explore the pros and cons of free trade policies and protectionist policies. This article provides an opportunity for students to demonstrate or increase their awareness of economic concepts like comparative and absolute advantage.
Ask students to lists some of the costs and benefits of building the Keystone Pipeline. Ask them to determine if the benefits of the pipeline outweigh the costs, or vice-versa.
- Ask students if they know why Donald Trump is against the North American Free Trade Agreement.
- Determine if they can explain how the North American Free Trade Agreement differs from the Trans-Pacific Partnership.
- See if they know why Donald Trump is against the Trans-Pacific Partnership.
- Have them discuss how Canada will be affected if Mr. Trump is able to implement his policy proposals.
- Ask students to list some of the benefits of free trade agreements like NAFTA? (Hint: free flow of goods which enables specialization in areas where nations have comparative advantage.)
- Then have them identify some of the costs of free trade agreements.
- Make a list of some measures that can be taken to prevent jobs loss or wage cuts due to free trade agreements. (Subsidies, currency manipulation, protectionist policies, etc.)
- Discuss whether these are viable alternatives.
- Move on now to discuss whether the construction of the Keystone pipeline will be beneficial to the Canadian economy.
- Also ask students how the construction of the Keystone Pipeline could hurt the Canadian economy in the long run. (Hint: climate change.)
- If elected, Mr. Trump will need congressional approval before implementing his policies. Discuss why congressional approval is an important process in a democratic system. (It creates checks and balances which often lead to better decision making.)
- After completing this lesson plan, students should have a better understanding of the benefits of free trade, the costs associated with free trade and steps that can be taken to mitigate the costs of free trade.
- Ask students if they believe Mr. Trump’s policy will be good or bad for the Canadian economy.