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Rotman Commerce (1,030)
RSM100Y1 (287)
John Oesch (141)

Lecture 5

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University of Toronto St. George
Rotman Commerce
John Oesch

RSM100Y1 Two weeks from now there will be a mockexam in classWealth Creation TradeInternationalizationDuring the Depression it was learned that trade restriction made all countries worse offIndustrialized countries tried to set up institutions to reduce barriers to trade and increase trade and flows of capitaThe World Trade Organization WTO formerly the GATT tries to reduce trade barriers through major negotiating rounds and to mediate trade disputesMany earlier trade rounds were successful but there has been little progress in last 10 yearsGroups of countries have also reduced trade barriers among themselves by setting up customs unions or common marketsThe biggest such movement has been the establishment in the late 1950s of the European Economic Community EECnow referred to as the European UnionIt has expanded to include most of western and central EuropeThe European Union EU not only has free trade among the member countries but also permits with some exceptions the free movement of labour as wellIn the late 1990s most EU members also adopted a common currency the Euro to make trade among themselves even easierIn 1989 Canada and the US began a free trade agreement that was expanded in 1991 to include Mexico the North American Free Trade AgreementNAFTANAFTA does NOT have free movement of labour or a common currencyOther partial free trade groups have been founded in Asia and in Latin AmericaThere is little doubt that freer trade has made an important contribution to economic growth among the industrialized countries since WW2Trade restriction tax or dutiesEmbargo extreme form of trade sanctionTaxes usually slow down trade No two countries are tied in free tradefree trade is still a goal Foreign exchange can slow down trade if its costly timemoneyEU Suggestion for a common Currencythere are some EU countries that dont use the EUROPolitics of Identity stops people from UK from adoption of the EuroEuro is issued by European Central BankFloatsome dont flow currency that sets all the timeChina sets its currency against the USANAFTA duty is to keep tariffs down reduce barriers to tradeMexico Manufacturing moved to Mexico once NAFTA was signed Save Money Mache DoraLobbyist in US questions our Lumber Industriesaccused us of Cheating and subsiding the Lumber Industrythey imposed import duty for lumberRefer to LumberOranges Diagram in previous lecture While Canada Lumber Cost increase to a point where it is larger than US Cost therefore people will start buying US LumberCanada can also proposed duty on orangesthus hurting the US industry and Canadians can purchase from Mexico Not sustainable in long run in people keep proposing tax or barriersNAFTA dont have a common currency US dollar is a WORLD WIDE currency especially in the industry of oil Canada and Mexico are paranoid about US parallelism
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