Microeconomics,, 16th Canadian Edition

(Sean Pound) #1

Conducting business in a foreign country is not always easy. Differences
in language, in local laws and customs, and in currency complicate
transactions. Our concern in this chapter, however, is not with these
complications but with government policy toward international trade,
which is called trade policy. At one extreme is a policy of free trade—that
is, an absence of any form of government interference with the free flow
of international trade. Any departure from free trade designed to protect
domestic industries from foreign competition is called protectionism.


In the decades following the end of the Second World War, most
countries gradually moved away from protectionist policies and toward
freer trade. This shift led to large increases in the flows of international
trade and contributed to rising prosperity in those countries. In recent
years, however, a backlash against freer trade has emerged in many
countries, motivated in part by the economic disruptions that accompany
freer international trade. In particular, U.S. President Donald Trump has
argued that the United States no longer benefits from existing free-trade
agreements and has sought to repeal or renegotiate several of them. This
policy stance, from a country that for decades was a strong promoter of
global free trade, has created concern among many of America’s trading
partners, including Canada. The tensions surrounding global trade and
trade policy are likely to be of great importance for the next several years.


6. discuss the main features of the North American Free Trade
Agreement.
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