BUSI 1800 Chapter Notes - Chapter 3: Joint Venture, Tungsten, World Trade Organization
2 May 2018
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BUSI 1800
Chapter 3: Competing in Global Markets
The Dynamic Global Market:
• Caada’s market is 35.7 million people
• There are over 7 billion potential customers in 194 independent countries
• Global trends have hit the US and Canadian auto industries, forcing the closing of plants,
the loss of jobs and the restructuring of many companies
• Progressive companies are continuously looking for opportunities in the global markets,
at the same time as they are also looking for threats
• Exporting: selling goods and services to another country
• Canada is generally an exporting country
• Importing: buying goods and services from another country
• Free Trade: the movement of goods and services among nations without political or
economic barriers
Why Trade With Other Nations?
• No one country can produce all the products that its people want and need
• Nations who cannot produce what they want and need will want to trade with countries
who can and have a surplus
• Some countries have an abundance of natural resources but lack the technological
know-how to retrieve them
• Other countries have the technology but lack the natural resources
Pros and Cons of Free Trade:
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The Theories of Comparative and Absolute Advantage:
• Comparative Advantage Theory: a country should sell to other countries those products
that it produces most effectively and efficiently, and buy from other countries those
products it cannot produce as effectively or efficiently
o For example, Canada has a comparative advantage in some forestry, agricultural
and mineral products and lacks a comparative advantage in growing coffee, thus
we import most of the coffee we consume
• Absolute Advantage Theory: exists when a country has a monopoly on producing a
specific product or is able to produce it more efficiently than all other countries
o An absolute advantage in natural resources may not last forever, e.g., diamond
production in South Africa
o Global competition has caused some absolute advantages to decrease
Getting Involved in Global Trade:
• In Canada, small business contributes between 25-41% to Caada’s gross doesti
product, accounts for 69.7% of the private sector labour force, and comprises of about
90% of all exporters
• Government agencies such as Foreign Affairs and International Trade Canada and Export
Development Canada assist companies in getting more involved in international trade
Importing Goods and Services:
• The Canada Border Services Agency ensures that goods and services entering Canada
are compliant with our regulations both federally and provincially
Exporting Goods and Services:
• Canadian exports represent 2.4 percent (US$458 billion) of world merchandise trade
and 1.7 percent (US$78 billion) of world services trade
• Trade with other countries provides jobs for Canadians (about 1 in 3 Canadian jobs)
Measuring Global Trade:
• Balance of Trade: a countr’s ratio of eports to iports
• Trade Surplus: a favorable balance of trade; occurs when the value of the outr’s
exports exceeds that of its imports
• Trade Deficit: an unfavorable alae of trade; ours he the alue of the outr’s
imports exceeds that of its exports
• Balance of Payments: the difference between money coming into the country (from
exports) and money leaving the country (from imports) plus money flows from other
factors such as tourism, foreign aid, military expenditures and foreign investment
• Emerging economies are experiencing high growth rates, improved living standards and
more global prominence
• Technological advances allow most regions in the world to be included in global trade
• The federal government has developed a Global Markets Action Plan, which identifies
three important opportunities for Canadian trade
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