Analysis of Canadian Trade Agreements

1126 words (5 pages) Essay in International Business

23/09/19 International Business Reference this

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 GLOBAL BUSINESS ENVIRONMENT

 

Canada based company:

 I represent a business which produces uranium, a mineral fuel extracted from Mc Arthur river and cigar lake mines. As Canada is the largest producer of uranium, I was doing research and analysis on Canadian Trade Agreements to go global.

Canadian Trade Agreements:

 There are two types of International trade agreements that Canada mainly relies upon. They are Free Trade Agreements and Foreign Investment Promotion and Protection Agreements. These trade agreements remove barriers for any company to invest and spread globalization.

Canadian Free Trade Agreements:

 The main goal of a Free Trade Agreements is to facilitate trade and eliminate trade barriers. They open markets to Canadian businesses by reducing the barriers such as tariffs, quotas. They create fair conditions for business operating abroad.

  1. Canada-Chile Free Trade Agreement: The Canada-Chile free trade agreement (CCFTA) was signed on Dec 5,1996 that mainly covers trade in goods, services and investments. It was Canada’s first free trade agreements with a South American country. The main objectives of this agreement is to eliminate barriers for trade and facilitate movement of goods and services and promote conditions for fair competition.
  2. North America Free Trade Agreement: The North America Free Trade Agreement (NAFTA) came in to force for creating the world’s largest free trade zones and created strong economic growth for Canada, US and Mexico. Since NAFTA came into effect, trade and investments in these countries have increased proving a rapid growth of economy in North Americaand better access to technologies and investment across the country. (NAFTANOW, 2012)

Reasons To Choose CCFTA :

 As both the trade agreements were studied, I would prefer to establish my uranium business in Chile. The main reasons are

  • Chile provides an ideal environment for doing business abroad for Canadians. This agreement between Canada and Chile avoids double taxation and foster good business environment. (government of canada, 2017)
  • Agreement On Labour Cooperation: CCALC main objectives was to improve labour cooperation such as improving working conditions and living standards. It is enclosed with the promotion of labour principles to protect rights of workers protection of migrant workers and equity in wages. (Canada-Chile Agreement on Labour Cooperation, 2015)
  • There are no quantitative restrictions on uranium as Chile is open on quantity of imports. So the scope for business in Chile is maximized and profitable. (government of canada, 2016)

Controversial Issues With CCFTA:

  • Environmental and Social Responsibility: When pursuing free trade agreements there are some issues like labour standards and environmental protection. The standards set by a country may not be acceptable by another country which are created beyond their borders. This results higher and more expensive standards for production to sustain in the market. (CEIBS, 2017)
  • As multinational companies are becoming increasingly powerful there are some issues based on these free trade agreements such as shift in power to these companies and the governments may not be in position to set boundaries because of these agreements.
  • There will be an additional competition in the market for the local producers by emerging the international markets with the high standards of products.

Potential Benefits:

  • From more than a decade the economic relation between Canada and Chile was enhanced. A recent studies states that the trade between these countries has increased more than 300 percent and the trade of goods increased from 7.8 million in 1996 to 2.7 billion dollars in 2010. There is a major increase in investments to Chile which was benefitted from this agreement as Canada has been the largest source of investment in Chile which constitutes about 13.3 billion dollars in 2010. (Wikipedia, 2018)
  • Chile stands in the top importers of uranium for Canada and the Canadian is potentially benefited by enforcing Chile trade agreement from FIPA to FTA.
  • Access to international markets benefits the countries economy by increase in the trade and investments.
  • The trade between these countries let to the strong growth in creating jobs and the price of the products lowered due to the reduce in tariffs.

Potential Harm’s:

  • In recent times, there is an increased outsourcing of jobs to other countries. These FTA’s facilitate the employers to work in other countries resulting in the increased rate of unemployment for the local employers.
  • Since Canada and Chile are good trading partners, Canada might not want to trade with another country since they could get it in Chile. So, there will be a loss in trade to other countries.
  • As for countries who buy imported goods, there is a possibility of losing its culture by the mass arrival of goods from exporting countries.

 

Conclusion: The relevance of free trade agreements remains to be a divisive issue between opposing views. There is a vast increase in trade and investments between two countries over the decade. Chile is one of the major destination for Canada for importing goods and Canada is one of the top destination for importing uranium and the free trade agreement between these countries facilitate the business by removing the trade barriers.

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