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Free Trade

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by

David Remes

on 28 January 2014

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Transcript of Free Trade

Free Trade?
Comparative Advantage

The ability of a firm or individual to produce goods and/or services at a lower opportunity cost than other firms or individuals. (In our case a firm will be a country)
Monopoly Problems
Three problems often associated with a market controlled totally by a single firm are: (1) inefficiency, (2) inequity, (3) political abuse.
World Trade Organization
Trans-Pacific Partnership
Ideas and Thoughts
Why do they exist?

NAFTA & it's role in Evansville
Lower production costs = lower prices. Evansville Whirlpool factory’s workers lose, while consumers all over the US and importers win.
Free Trade Agreements
NAFTA & Mexican agriculture
Boundary Curve (PPC)
A graphical representation of the possible outputs using two or more inputs assuming that all inputs are used efficiently.
The Comprehensive Economic and Trade Agreement (CETA)
Discussion
Perfect competition
low prices, economic efficiency
Imperfect competition
Oligopoly
Abusive prices
Monopoly
COMPETITION
Potential negative consequences for the environment in both Canada and EU.

This new trade deal could negatively impact Canadians' constitutional right to use their own public bank (Bank of Canada).

Do you agree with the views of the poverty and inequality video?

What are your views on NAFTA?

Is there a way to ensure the Governments involved in Free Trade Agreements will share the benefits with their population?
World trade; is there something that needs to be changed?
Objectives of TPP:

Abolish tariffs (Completely and no exceptions).
Take away the boarder to let products enter and leave countries without strict regulations
Unify Imports/exports rules
What countries want for their economies:
Efficiency/Lowest production costs possible
To compete in the global market at a level of Comparative Advantage and Economies of Scale
What people want:

High Standards of Living at the lowest cost possible.
=
“Secure” good paying jobs + array of good quality products at affordable(relatively low) prices.

Problem:
No one country is able to supply all goods and services its population desires.
They all dream of becoming an Autarky. However reality is that all of them either lack necessary technology, or specific natural resources, or production capacity(factors of production to be trade independent.
No Trade
Controlled Trade
Free Trade
What is a Free trade Agreement?
Is an agreement between two or more States to simultaneously lower barriers to entry of mostly goods into their domestic market.
Selective Immigration

Class type
Investors

The investor class applicant must have a personal net worth of at least CDN $1,600,000. They are required to make an investment of CDN $800,000, paid to the Receiver General of Canada. The investment is subsequently allocated to participating provinces and territories in Canada.
These governments use the funds for job creation and economic development. The full amount of the investment (without interest) is repaid to the investor after five years.

MICROECONOMIC CONCEPT REVIEW
To put into perspective:
Average Hourly wage
Mexico $ 5.38
U.S. $ 33.53
Summary: American subsidies for agricultural goods result in Mexican import dependency due to competition.

This causes higher manipulation of prices by monopolies.

NAFTA
CANADA, MEXICO, USA
In effect since 1994
Increases level of trade and investment within countries
On average lowers price of goods
Increases quality of goods through competition
Pros:
Promotes free trade
Raises world output levels
Establishes a standard rule
Cons:
Unequal benefits awarded to developed countries
Unfair political leverage to larger economies via hegemony
Voting power
Summary: Whirlpool factory moving to Mexico
Full transcript