With all the news on trade negotiations and globalization, many of us are confused about how this whole thing works. Here’s a simple view that should help.
Big three
A nation’s economy can be broken into three parts: local, national, and international. Local economies include what goes on near your home (within your city or province), national means business activities within your country, and international involves selling to the world—which brings about currency concern and the balance of trade. Examples are as follows:
- Local – dry cleaners, dentists, donut shops
- National – telephone carriers and grocery stores
- International – natural resources and automobiles
Of course, there is always a mix. Developed nations typically have numbers like this: 40% local, 30% national, and 30% international. And when it comes to international, there are usually two types: companies that export, and organizations like Walmart and McDonald’s who operate within another country’s economy sending profit and head office jobs back home.
Global
Doing business internationally has always had requirements. Political stability, property rights, and the rule of law are essential. That’s why the third world can’t compete. But once African countries finish their internal fighting and attain some fertile environment for capitalism, this planet will be running on all cylinders. (You think we got smog now!)
International competitiveness is about more than just ports, natural resources, and infrastructure. It involves business, politics, and culture intertwining together. For example, when it comes to women in the workforce, Canada operates on a different plane than most Asian nations.
- Canada – 90% of mothers work full-time, 1 year paid maternity leave, subsidized daycare
- Asia – 50% mothers work full-time, no maternity leave, no daycare (they use grandparents instead)
Because Canada is at a different place along the culture curve, it’s more expensive to operate here. That’s why globalization gives away all the cheap stuff. And there are differences between us and the States.
- Canada – government hospital care, 1 year paid maternity leave
- USA – private hospital care, no paid maternity leave
The US competes more closely with the developing world, especially in the South. But as the world continues to advance, everyone will eventually see things our way.
Manufacturing
You also hear lots about manufacturing and again there are two types: durable goods and inexpensive items that are easy to make. Durable goods are things like washing machines and other products made from metal. Stuff easily made includes all the crap you find at the dollar store. Initially, countries like China and Mexico only made cheap goods but as time went by, they turned their skills toward the better paying jobs that come with durable goods. That’s when we moved the cheap stuff to Bangladesh.
And every nation has protected industries. Ones excluded from facing international competition. Farming is popular since it aligns with national pride but some choices are much more practical. For example, auto factories can be converted into making tanks for times of war. Same goes for steel. You can’t be buying from the enemy.
Summary
Everything is always a balancing act. Because Canada has government healthcare, sometimes companies like Toyota prefer to operate here. It’s not just the hassle of managing American plans but what if you have to lay somebody off? Do you really want the stress of wondering whether they’re still covered?
Recent NAFTA renegotiations had lots to do with maintaining well-paying jobs here in Canada (like, making auto parts). Not everyone can work in tech and we’re serious about our middle class. On the other hand, super woke Liberal governments have put a stake in the ground with respect to oil production. They’ve pretty much capped us at 4 million barrels a day. As a result, international investors have moved elsewhere.
Hopefully, when it comes to trade, our progressive values haven’t put us too far ahead of the pack. In case they have, you can always work at the dry cleaner.