Canada's Benefits From International Trade

Canada benefits from international trade in a number of ways. Admittedly, Canada’s soil and weather conditions are not suitable to produce goods such as banana, tea, coffee or spices that its citizens commonly consume. But, it does not mean that Canada should import only those goods that cannot be produced within the country. There are many other strong arguments going beyond the banana or tea examples for active participation in world trade. When two countries join together to trade, each can specialise in production of those goods that it can produce at lower cost than the other using less resources and export the surplus to the other country. Since resources are limited, they can together produce more goods and services in this process and

They also have access to a wider variety of goods. Opening up of the country to imports increases sources of supply of goods and services and reduces monopoly power. Similarly, success in exports means that Canada has to produce goods and services at competitive prices by raising productivity which in turn allows firms to pay higher wages to the workers.It is noted that employment in Canada could be directly or indirectly depend on international trades, directly by employment in producing the goods and services meant for exports, and indirectly through employment in supporting activities such as transport, trade and banking services needed for

The Canadian economy is very much integrated with regional and global trade. The share of imports and exports of Canada in its GDP for second quarter of 2014 has grown to above 60% in recent years(Canada, 2014). Canada has signed the North American Free Trade Agreement (NAFTA) with United States and Mexico who are its two most important trading partners. NAFTA played a significant role in integrating North American economies through expansion of international trade. Abundant natural resources of oil and natural gas in Canada thus explain why it exports them to the US(Representative, 2013). Canada’s energy products such as crude oil, petroleum products and natural gas contribute towards 23.67% (113,425.8 / 479,363.8) of the total exports of goods from Canada(Canada, Exports of goods on a balance-of-payments basis, by product, 2014). NAFTA has been quite beneficial to Canada as it has become US’s largest supplier in oil.A good percentage of cars used in Canada are imported from other parts of North America. Apart from comparative cost and factor availability, the gravity model of international trade could provide additional explanation for Canada’s large volume of trade with the US and Mexico due to the geographical proximity and large size of the