Understanding Trade Handout

Trade Barriers - Protectionism
Protectionism is a political and economic term describing ________________ measures that

limit ____________ into a country with the intent of protecting commerce within that
country against foreign __________________. By adopting protectionist policies, the policy
makers seek to protect domestic jobs and help domestic businesses stay profitable.
Protectionism can prove to be counterproductive by harming a country’s economy more than

it helps. It often creates a reaction whereby other _____________ engage in their own
protection policies, and end up creating a protectionism “arms race” among the
countries. Critics of protectionism also argue that it may create short-term gains, but at the
cost of more substantial long-term gains. These critics advocate a system of free _________
where businesses are allowed to compete internationally.
Tariffs or ___________ on imported goods, make goods from other countries __________
expensive than locally made goods. The other advantage of tariffs for domestic governments
is an increase in revenue as the government ____________ the money that it taxes. Tariff
winners are domestic governments, ___________producers, and the ___________
employees. Tariff losers are foreign producers, foreign employees, and the _____________.
____________ are a barrier in which the government gives ________ to certain industries so
that those businesses can charge lower prices and be more competitive on the world market.
Governments also can set import __________. These set a limit on the amount of a specific
_______ that may be imported into the country in a certain period of time. This protects
domestic producers of the ________ good by limiting imports and foreign competition. A
quota causes the prices of the good to _________.
When a government imposes a _________ ___________ it is banning trade on a

__________ product or country. These are declared to pressure foreign governments to
change their ___________ or to protest human rights violations. A trade embargo declared by
Canada affects Canadians by increasing the need for domestic products and may cause the
price of a product to increase because the supply has _________________. When another
country imposes a trade embargo on Canadian products, there is a surplus domestic supply.
Businesses may lose money if they do not find an alternate ______________ to sell to. In
2003, the ‘Mad Cow’ disease - 30 countries issued a trade embargo on Canadian beef…the
cattle industry lost billions.
___________ are an economic action taken by a country to coerce another to conform to an

international agreement or norms of conduct.
___________ _______________ _______________: Many countries have invested in

Canada. You can see this when you walk down the street – Starbucks, McDonalds, Ford
trucks, Apple Store. This provides new ___________, technology, and _____________ for
Canadians. There are laws, however, that influence foreign investment. These laws limit the
amount of foreign ownership allowed in a certain sector or industry so that foreign investors
cannot get full __________ of areas of the Canadian economy.
What is Free Trade?
Free trade, is trade that is conducted without ____________ of any kind. Governments
lower barriers in order to _____________ international trade. Free trade has been
promoted by many Western countries since the end of World War II. But while the aim
of most free trade supporters is to have completely free trade among all countries, in
practice nearly all countries still have ___________ barriers to trade.
In principal, nearly all economists agree that free trade is a good thing because it
encourages trade. They maintain that increased trade has the potential to make everyone
___________ off. But many also argue that countries may need to develop certain
industries in order to be successful on the world market. In order to develop these
industries, governments may need protectionist policies for a period of __________. For
instance, a country, because of location or available resources, may have a comparative
advantage in producing computers. But if the country does not have a well-established
industry for producing computers, it may struggle to compete with other producers
internationally. If the government can protect this industry until it is strong enough to
_____________, the benefits from trade can be more fairly distributed. Many
_____________ countries support this argument because their industries are less
developed and may be less able to compete internationally.
Among policy-makers, one major point of contention is over which types of policies
inhibit free trade. For example, many labour advocates in industrialized countries have
accused poorer countries of unfair competition because they have industries that use
________ labour or do not follow certain environmental or worker __________
standards. In response, poor countries have argued that it is not reasonable to expect them
to provide the same standards as rich countries. They claim that rich countries promote
these standards as a way of protecting their ________ businesses.
Similarly, many of these labour advocates have complained that free trade is inherently
unfair because labour is so much cheaper in poor countries. Businesses will often
_________ their operations to places where they can pay people less (______________),
and workers in rich countries often ________ jobs as a result. Some economists counter
that less expensive labour is an advantage of poor countries while rich countries have
other advantages such as advanced ____________ and infrastructure.
Moving towards specialized Trade
If a company that originally made a variety of products decides to change its strategy or
policy and focus on just producing one specific item OR makes structural changes to
produce all their products more efficiently, it is called “___________________”. It is a
reorganization of a company in order to increase its efficiency. This reorganization may
lead to an expansion or reduction in company size.

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Trade Barriers - Protectionism

Protectionism is a political and economic term describing ________________ measures that

Protectionism can prove to be counterproductive by harming a country’s economy more than

When a government imposes a _ ___ it is banning trade on a

___________ are an economic action taken by a country to coerce another to conform to an

___ _ _________: Many countries have invested in

Moving towards specialized Trade

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