Free Trade Agreement: What is a Free Trade Agreement?
“To understand what a free trade agreement is let’s look at what we have around on this table. The tablecloth is from India, the cups are from France, the roses from Ecuador and the pineapples in this drink are from Costa Rica” pointed out Grandma.
The children were amazed to learn about how far the things on the table had travelled. They had never thought about it. As Mira sipped on her pineapple drink, she thought about the journey the pineapple juice and the roses had made.
Grandma Tara continued, “So, when something comes from a different county, you say it is “imported”, and when we send things to another country, you say they are “exported”. Everything on this table is “imported”.” With a bit of a laugh she said, “You could even say that I am “imported” because I was born in a different country”.
“Now, in the old days, when we imported goods from another country, the government added an extra charge to them. This charge or extra fee is called a tariff or a duty. These tariffs or duties made things more expensive and of course when one country added a tariff, the other country added tariffs on their goods .If Canada put duties on roses from Ecuador, for example, then Ecuador would put duties on Canadian maple syrup in return This happened repeatedly with every country
She pointed to the flowers and said, “I paid fifteen dollars for these flowers today. If there were additional tariffs on them, they would cost a lot more.”
“One day, a very clever Englishman named Richard Cobden sat down with a Frenchman named Michel Chevalier and created the very first free trade agreement. With the removal of tariffs, the English could buy French cheese quite cheaply and the French could buy English jams at reasonable prices so each country sold more cheese and jam. Soon, more and more countries decided to remove tariffs and now there are free trade agreements all over the world.”
“So, it’s a good thing?” asked Mira
“Well, that depends. If you want to buy roses from Ecuador then it’s a good thing because you don’t have to pay an additional fee , but if you grow roses in Ontario, then you want people buying your roses and not cheaper roses from Ecuador.”
“Oh wow! That’s tricky!” said Teyus who was really enjoying eating his creamy egg and fruit dessert called “Espumillas”.
“So, what do countries do about that?” asked Mira, “and what exactly is NAFTA?” She had been hearing her parents talk a lot about this at home recently.