AFM131 Lecture Notes - Lecture 2: Absolute Advantage, Comparative Advantage, General Agreement On Tariffs And Trade

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM131
• Professor: Bob Sproule

Document Summary

Canada is a large exporting nation as our population is . 05% of the world"s population. Global trade allows a nation to produce what it is most capable of producing, over and above local consumption; and buy what it needs from other nations which is mutually beneficial. Free trade: the movement of goods and services among nations without political or economic barriers **refer to pros and cons in figure 3. 2 on pg. Global market contains more than 7 billion potential customers. Productivity improves when country produces with comparative advantage. Global competition and less-costly imports keep prices down, so inflation doesn"t curtail economic growth. Free trade inspires innovation for new products and keeps firms competitively challenged. Uninterrupted flow of capital gives countries access to foreign investments, which helps keep interest rates low. Domestic workers can lose jobs; manufacturing jobs shift to low-wage markets. Moving operations oversees because of intense competitive pressure often means the loss of service jobs and white-collar jobs.