''TRADE IS A WEAPON OFPEACE''

by Jack the Economics Guy

On September 11. 200 I, ten·orists attacked the l't>nple of Aniericu. The Twin Towers and the Pentagon were destroyed; using hijacked commerc.;ial airplanes with innocent citi1.ens to lly imo buildings. American flights were cancelled. and the tlighls in progress were in tructed to land nt unm.lian airports. America, Canada and the rest of the world have been greatly affected by this delihenite altack on II democrntic nc1tion. This c,;urrenlcrisis has had effects in world politics. economies and trade.

Rapid cha111iing environment of global business.

I. Globalization coultl be reduced because of political pressures. /\ number of new safety measures have been implemented resulting m increased exporting cost, which could reduce competitive atlvantttge.

2. More hinational companies an: formed to work close together in thest: exceptional times. An example of this is British Airways PLC and KLM Royal Dutch Airlines who were talking about c.;onsolidating the Duropean airline industry. British Airways also wanted lo hook up with AmericHn Airlines. which also would help reduce the fear of tht: term Fortress Europe.

J. Somi.: international companies might show a reduced expecred income because the uncontrollahle enviro11mc'ntalforces.

4. There will be a reduced amounr of t:'oreign Direct lnvesln1ent into America bec;1u:;eit is seen as more risky 1hunbefore 1he attack. The a11<1ckalso had a negative effect 011 buyer's bd1avior thot reduces prof• its, which 1·educ.;esnew PDI.

Trude Investment Challr!nges.

I. There will h1.: increase<l prcferenti,11 arrnngemcnts, l'ikc Canada anti Singapore who plan to launch free-trade talks to bid for an increase i11modest trade levels and set up a stepping stone 10 l"uture trade deals in Southern Asia.

2. The APEC leaders (trnue ministers from the 142 memhers) expresses strong support for the laund1 of a new round of global trade talks under the World Tr-ndeOrgHnization.

3. Consumer spending is the main engine thnt fuels economic,;growth, accounting for two thirds of gross domestic product, in the United States.

4. The consumer inl.lex will rise if the U.S. military campaign is able to mot out Osama bin Ladin and his Al Qactla network, and take away the threat of anthrax attack. If they fail, con umer confid1.:ncewould sink even further.

5. Greenspan said, "Before the recovery process gets under way, stability will need to be restored to the American economy and other economies around the World."

6. Trade is reduced because of the attack on September 11, 200 I. The economy was practically shut down for a few days, as consumers stayed away from shopping. The attack also hindered production because manufactures ran out of supplies. This is because air and shipping travel shut down.

7. Exports and imports have and will continue to fall in the month~ to come. Canada exports during the month of August were about $34.1 billion. down 14% from July. anti the lowest level since April 2000.

8. Portfolio investment has decreased lowering the prices substantially. Even with the Interest rate is at the lowest since 40 years ago. ii still has not parked an increase in stock prices. which is a normal occurrence.

Application of economic theories monetary policies.

International Monetary System Effects

I. Many countries are making fiscal and nl(lnetary changes because they all rely on the demand from the U.S.nulrket.

2. Many countries. like Canndn would be better of counting on lower interes1 rates from their cen1ral banks to s1i111ulatethe economy. The interest rate for Canada is mcnt :;hould mail available surplus tn citi1ens. but some economist are not sure if consumers nre in lhc mootl to spend their extra n1()neythese tlays.

5. Government might wunt to en1.:ourage consumers In spend more through n~cal pulicy, becnuse it wit I have more effect on bolstering confidence- and rc~u1ningdernand than mnm:tary policy.

6. Job cuts in the US hit a ten-yeJr high at 4.9~ nnJ b belii:ved ll) be hc.iucu tn 6'7c. Thi~ will llavc a grcal effect 111i lrtlde. I r al I th\lse people drni"l have jobs. don't ~rend. \\ hicll reduce. ptoduc.;ti\ln,whit:h will increu~esunemployment. This cycle will con1inuc. until the citizen's confidence increases. untl sturt buying more products.

Financial F(lrces al work

I. The American dollM did nnt lose hut gained to 1he Canadian Dnllar because ii is still considered be the safe haven.

2. Many companies will still use the American <lullar lls a vehicle currency.

3. The EURO i!- likdy to gain ground on the American tlnllar.

1. Countries, who practice mercnntilism, might consider free trade in order 10 arouse their own economy.

2. Countries such as America c,;oultl also beco,rn: more protective of products that involve the upki:ep of the U.S. military.

3. This effect could hinder the growth of newly industrialized countries (NlC's) such as the 4 Asian tigers, Mexico. etc.

4. Les.sdcvelcipetl countries rely heavily on their export, anti with the slowdown of imports to devclopcd countries. the less Jeveloped ctiuntrics could get into Bnlnnc.;e or Payments trouble.

5. Tariffs, dutic!'i. and non-tariff barrit>rs (NTBs) will be reduced in order lo stimulate the suffering world ccono111y.An example of this is that EU has given Pnki~tan an eco• nomic boost with giving the "free trm.lc."

6. The EU might give sorne or its member subsidies to c;xport to other non EU cottnlrics.

International orgnnizations invDlvetl

I. 'file United Nations, not involved in the r,hysical battle against terrorisl. ,night have to get rnore involved as the baule goes l)rl. This might help strengthen the rela1iom,hip between North America arid Europe.

2. World Bank, and the IMF migh1 have to help out less developed countries. becau e they might default un thcif' deht repayment.

3. OPEC (Organization nf Petroleum Exporting Countries) met on Oct 29 with non-OPEC oil producers. like Russia and Mexico. They wam these countrie tu cooperate and cut production. to increase the price of oil back 10 $22-$28 a barrel. OPEC members will then meet on Nov 14, to discuss ways to raise prices. Oil prices dropped lo $18·$22 a barrel after the September attack.

4. More agreement like EFTA (European Free Trade Agreement), ASC:AN (Association of SouthEast nations) and the NAFTA (North American Free Trude agreement) will be created 10 help stir the sluggish economy.

5. The IMF might use their film surveillance to guide eoun1ries 10 make good fiscal and

2.75%, and for A111ericais 2.50% the lowest it has been fur 40 years. A It hough low interest rate is un cffoc,;tiveway 10 stimulate the economy. the lower rates usually take six months to a year to huve a stimulating effec,;t.

3. Corporate tux cuts 1101such an effccl way to stir the economy because many corpora• tion are not making much prMit these day. and tax cuts on protit~ will not help them.

4. Some economil,t believe that the govan•

4. The NEW YORK EXCHANGE clo~cd for 6 days. which shook the entire world. creating u11cerrninly n11da f'alling stock.

5. Need to be c.;orcfulthat soverl!ign debl is not misused. Efficiency and corruption does Uf'ise. so rhal n lot uf 111u11eydocs not benefit the country or its people.

6. Countrie might inc.;rcasctheir Balance of Payment problem. und to reduce this they could give export inc,;cntives.

BRITISH COLUMBIA LEGISLATIVE INTERNSHIP PROGRAM 2003 Program PURPOSE

To provide British Columbia university graduates an opportunity to supplement their academic training with exposure to public policy-making and the legislative process within the province's parliamentary system.

Who Is Eligible

Individuals who have received a Bachelor's Degree from a B.C. university or a 8.C. university-college within two years of January 2003.

LOCATION TERM

Parliament Buildings, Victoria, British Columbia

APPLICATION DEADLINE

January 31, 2002 • 4 p.m.

January 6, 2003 • June 30, 2003

STIPEND

$16,210 for 6 months

How To Apply

Program Applications are available from Political Science Departments at all universities in British Columbia, You can also request an application by contacting the Public Education & Outreach Office in Room 144, Parliament Buildings, Victoria B.C., V8V 1 X4. Telephone: (250) 387-8669 Email: BCUP@leg.bc.ca. Or print an application from the website: www.legis.gov.bc.ca.

ACADEMIC ADVISOR$

Dr. Paul Tennant, University of British Columbia

Dr. Patrick Smith, Simon Fraser University

Dr. Norman Ruff, University of Victoria

Dr. Tracy Summerville, University of Northern British Columbia _,.-v•~,