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B. People and Environments: Canada's Interactions with the Global Community · Canada's Interactions with the Global Community

Trade Agreements and How Canada's Choices Affect Other Regions

B3.6 B3.2 B3About 45 minutes
Learning goals
  • I can explain what a trade agreement and a tariff are.
  • I can name some trade agreements and organizations Canada belongs to.
  • I can describe how Canada's political, social and economic interactions affect people in other regions.
  • I can explain how choices like buying fair trade products connect me to workers in other countries.

Words to know

trade agreement
A deal between countries that sets the rules for buying and selling between them.
tariff
A tax a country charges on goods coming in from another country.
free trade
Trade with few or no tariffs or other barriers.
fair trade
A system where farmers and workers in other countries are paid a fair price and work in safe conditions. Fair trade products carry a special label.
multinational company
A company that does business in many countries.
consumer
A person who buys and uses goods and services.

Who makes the rules?

In a game of road hockey, everyone agrees on the rules first: where the nets go, what counts as a goal. Then the game is fair and runs smoothly.

Countries that trade need rules too. They write them down in trade agreements.

Tariffs and trade agreements

A tariff is a tax on imports. If a country puts a tariff on Canadian lumber, the lumber costs more to buy there, so people may buy less of it.

Countries use tariffs to protect their own businesses, or sometimes when they disagree with another country. Tariffs usually make things cost more for consumers.

A trade agreement is a deal where countries agree to lower or remove tariffs and follow shared rules. It also includes ways to settle disagreements.

Large stacks of cut lumber in a sawmill yard beside an evergreen forest.
Lumber is one of Canada's big exports. If another country puts a tariff on it, this wood costs more for people there to buy. AI-generated image
How a tariff works (example numbers)Canadian lumberworth $100bordertariff+ $20price for buyersin the othercountry: $120Higher price, sopeople may buy less.
A tariff is a tax on imports. In this made-up example, a $20 tariff makes $100 of lumber cost $120 in the other country, so people there may buy less.
Agreement or organizationWho is in itIn effect since
CUSMA (Canada–United States–Mexico Agreement). It replaced NAFTA, which started in 1994.Canada, the United States, Mexico2020
CETA (Comprehensive Economic and Trade Agreement)Canada and the European Union2017
CPTPP (a trade agreement among countries around the Pacific Ocean)Canada and other countries in Asia, Oceania and the Americas2018
WTO (World Trade Organization)Most countries of the world; Canada is a founding member1995
Some of the trade agreements and organizations Canada belongs to. Canada has many more trade agreements with individual countries.
When Canada's big trade agreements started1994NAFTAbegins1995WTOfounded2017CETA(with the EU)2018CPTPP(Pacific)2020CUSMAreplaces NAFTAnot to scale: the dots are evenly spaced
The agreements from the table in order. CUSMA replaced NAFTA in 2020, so NAFTA and CUSMA are really one long story.

Canada's interactions affect other regions

When Canada interacts with other countries, it changes things there, not just here. Here are three kinds of interactions:

  • Economic (money and business): Canadian mining companies work in many countries in Africa, Asia and Latin America. They can bring jobs, roads and money to a region. But some projects have also raised serious concerns about pollution and about whether local and Indigenous communities were properly asked and respected. In 2019 Canada created an office, the Canadian Ombudsperson for Responsible Enterprise, where people can raise concerns about how certain Canadian companies behave abroad.
  • Social (people and how they live): when Canadians buy fair trade coffee or chocolate, farmers in places like Ethiopia, Peru or Ghana may earn a fairer price, which can help pay for things like their children's schooling. Canadian aid can help build schools and clinics.
  • Political (governments and decisions): Canada and other countries may agree to sanctions, which means limiting trade with a government that is seriously abusing human rights, to pressure it to change. Canada also supports fair elections in some countries by sending observers.

The same interaction can have good and bad effects, and different people may see it differently.

Fair trade labels

Look for a fair trade label on coffee, tea, chocolate, bananas or sugar. It means an independent group checked that farmers were paid a fair minimum price and that rules against child labour were followed. Fair trade products often cost a little more. Deciding whether to buy them is a choice each family makes.

Worked example

Let's trace an interaction both ways

A Canadian company opens a gold mine in another country. List possible effects in that region and in Canada.

  1. Effects in the other region (positive): jobs for local workers, new roads or power lines, tax money for that country's government to spend on schools or hospitals.
  2. Effects in the other region (possible concerns): pollution of rivers or soil if not done carefully; people may have to move; Indigenous and local communities may disagree with the project if they were not properly consulted.
  3. Effects in Canada: profits for the company and its owners (which can include Canadians' pension savings); jobs for Canadian engineers and managers.
  4. Big picture: The effects depend on how the mine is run: whether it follows strong environmental rules, treats workers fairly and listens to local communities.

The mine can bring both benefits (jobs, money, roads) and costs (pollution, community conflict). Its impact depends on how responsibly it is run and whether local people have a real say.

Just for fun

Why did nobody invite the tariff to the class party?

Because it made everything cost more! 💸

Hands-on activity

Fair trade detective

With a grown-up, look in your kitchen or at the store for coffee, tea, chocolate, bananas or sugar.

  1. Check each package for a fair trade label. Write down which products have one and which country they came from.
  2. If you are at a store, compare the price of a fair trade product with a similar one without the label. Which costs more? About how much?
  3. Write two or three sentences: Would your family choose the fair trade product? What would you consider? (There is no single right answer. Think about price, the farmers, and what matters to your family.)

Your turn

1

What is a tariff?

2

What usually happens to the price of an imported good when a tariff is added?

3

What is a trade agreement?

4

Which three countries are in CUSMA?

5

What does a fair trade label tell you?

6

Give one way Canada's economic interactions can affect people in another region.

More practice: warm-up

1

What does CETA connect Canada with?

2

What agreement did CUSMA replace?

3

What does WTO stand for?

4

Name two products you might find with a fair trade label.

5

What is a consumer?

More practice: on your own

1

Why might a country put a tariff on imported goods? Give one reason.

2

Who pays more when a country puts tariffs on imports, and why?

3

Sort each interaction as economic, social or political: (a) Canada sends observers to watch an election. (b) A Canadian bank opens branches in the Caribbean. (c) Canadian volunteers help build a school.

4

How can a Canadian family's shopping choices affect a cocoa farmer in Ghana?

5

What are sanctions, and why does Canada sometimes use them?

Challenge

1

Explain why the impact of a Canadian mine in another country can be seen differently by a mine worker, a farmer downstream and a company owner.

2

Free trade agreements remove tariffs. Give one benefit and one challenge for Canadians.

3

Canada created the Canadian Ombudsperson for Responsible Enterprise in 2019. Why might a country want an office like this?

Check your understanding

Quiz

1.

A tariff is...

2.

Which countries are part of CUSMA?

3.

What is the main purpose of a trade agreement?

4.

Which is an example of a social interaction between Canada and another region?

5.

Buying fair trade chocolate can help...

6.

A Canadian mine in another country...

For parents and teachers

Big idea: Trade agreements set the rules for trade; tariffs are taxes on imports. Canada's economic, social and political interactions affect people in other regions, sometimes in helpful ways and sometimes in harmful ways.

How to help at home:

  • Look for fair trade labels together and talk about what they mean. Avoid shaming any shopping choice: price matters to every family.
  • If tariffs or trade disputes are in the news, explain them simply: a tariff is a tax on imports, and it usually makes things cost more. Keep the talk about how trade works, not about who is right.

Common difficulties:

  • Thinking a tariff is paid by the other country. It is collected when goods come in, and the cost is often passed on to buyers.
  • Seeing companies or countries as all good or all bad. Encourage your child to list benefits and costs, and to ask who is affected and how.