This presentation looks at protectionism and its' impact on the Global GDP

1. GLOBAL PROTECTIONISM
AND THE WORLD ECONOMY
PAUL YOUNG
DECEMBER 26, 2018

2. PAUL YOUNG - BIO
• CPA, CGA
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Financial Solutions
• Former Lecturer – CGA Ontario – Public
Finance, Advance Accounting, Finance and
Advance Information Systems
Contact information:
Paul_Young_CGA@Hotmail.com

3. OVERVIEW
This presentation looks protectionism policies
when it comes to merchandise trade.
I said back in 2017 that world was headed to
more protectionism policies and trade wars. The
trade wars has escalated as USA has moved
forward with a string of tariffs on imports like
steel and aluminum.
USA has also raised concern with theft of IP that
is also leading increase trade tensions between
USA and China

4. AGENDA
• What is protectionism
• Issues with protectionism
• Top exporting countries
• IP Theft (Most Protective vs Less Protective
• China and USA Trade
• Canada and Trade Deficits
• Blog – Protectionism
• Blog – Canada and Trade
• Trump and USA Trade
• Solutions

5. WHAT IS
PROTECTIONISM
Protectionism refers to government actions and policies that restrict
or restrain international trade, often done with the intent of
protecting local businesses and jobs from foreign competition.
Typical methods of protectionism are tariffs and quotas on imports
and subsidies or tax cuts granted to local businesses. The primary
objective of protectionism is to make local businesses or industries
more competitive by increasing the price or restricting the quantity
of imports entering the country.
Source - http://www.investopedia.com/terms/p/protectionism.asp

6. ISSUES WITH
PROTECTIONISM
Many countries are receiving pressure at
home to create jobs. The problem is that
government cannot create jobs directly
as that is up to private sector.
Government has a role and that is to do
with policies, like taxation or regulations
or trade/investment agreements with
various countries around the world.
Some countries artificially keep their
currency low as part of trying secure
foreign direct investment. Many
countries feel these countries that are
using labor and/or currency rates to keep
their costs down are not acting fairly as
such will look at counter measure
through the form of tariffs/duties.
Some countries artificially control
investment by putting restriction on
ownership. Foreign ownership restriction
along with business subsidies can lead to
companies within those countries having
an unfair advantage over companies in
other countries.
Consumers can pay higher prices due to
import taxes

7. GLOBAL PROTECTIONISM
Source - http://www.cnbc.com/2017/04/18/imf-raises-global-growth-forecasts-warns-against-protectionism.html
"With persistent structural problems—such as low productivity growth and high
income inequality—pressures for inward-looking policies are increasing in advanced
economies. These threaten global economic integration and the cooperative global
economic order that has served the world economy, especially emerging market and
developing economies, well," the International Monetary Fund said in its latest World
Economic Report.
IMF – CNBC – April 18, 2017

8. GLOBAL TRADE PROTECTIONISM
Source - https://www.washingtonpost.com/news/theworldpost/wp/2018/11/12/wto-2/?utm_term=.c7058dcb14cf
Washington Post – November 12, 2018

9. PROTECTIONISM – GLOBAL CONSUMER
• Source - http://www.jsonline.com/story/opinion/contributors/2017/04/13/roth-donald-trumps-
protectionist-trade-inclinations-hurt-wisconsin/100413028/
In contrast, hiking taxes on imports — as Trump has signaled — is regressive and
serves to hurt consumers, particularly the working class, by forcing American
consumers to pay higher prices. Whether it is a tariff or the BAT tax, consumers
ought to know that the end result will be higher prices on cars, clothes and
Coronas.
Milwaukee Journal-Sentinel – April 13, 2017

10. IP THEFT
Source - http://www.theglobalipcenter.com/wp-
content/uploads/2017/02/GIPC_IP_Index_2017_Report.pdf
Best Worse

11. TOP EXPORTING COUNTRIES
Source - http://www.worldatlas.com/articles/exports-by-country-20-largest-
exporting-countries.html
FORECASTED GDP GROWTH
Source - https://www.oecd.org/.../Growth-has-peaked-amidst-
escalating-risks-economic-outloo...

12. USA VS CHINA
TRADE 2016
Exports $116B
Imports $463B
Deficit ($347)B
New Trade 2017
• $43B Alaska LNG
• $37B Aerospace
• $170 Other

13. USA AND CHINA TRADE WAR
Source - https://www.industryweek.com/economy/trump-xi-agree-temporary-truce-bid-contain-trade-war?NL=IW-07&Issue=IW-07_20181203_IW-
07_943&sfvc4enews=42&cl=article_1_b&utm_rid=CPG03000001519274&utm_campaign=31183&utm_medium=email&elq2=c02fc733fbff47a2a5d7c5e7ac45d037
Industrial Week – December 3, 2018

14. CANADA TRADE DEFICIT
Source - Stats Canada
Issues:
• More taxes (Carbon Taxes)
• Tax hikes (Payroll Taxes, Income Taxes, Small Business Taxes)
• High hydro costs
• Pipelines approved, but not built
• Lack of capacity to expand exports (Ports, pipelines, roads, bridges)
• No new trade deals (Emerging Markets)
• Pushing social agenda (Agenda 2030)

15. BLOG - PROTECTIONISM
• What is Protectionism?
• Protectionism refers to government actions and policies that restrict or restrain international trade, often done with the intent of
protecting local businesses and jobs from foreign competition. Typical methods of protectionism are tariffs and quotas on imports
and subsidies or tax cuts granted to local businesses. The primary objective of protectionism is to make local businesses or industries
more competitive by increasing the price or restricting the quantity of imports entering the country.
• Source - http://www.investopedia.com/terms/p/protectionism.asp
•
• What causes protectionism?
• Many countries are receiving pressure at home to create jobs. The problem is that government cannot create jobs directly as that is up to
private sector. Government has a role and that is to do with policies, like taxation or regulations or trade/investment agreements with
various countries around the world.
• Some countries artificially keep their currency low as part of trying secure foreign direct investment. Many countries feel these countries
that are using labor and/or currency rates to keep their costs down are not acting fairly as such will look at counter measure through the
form of tariffs/duties.
• Some countries artificially control investment by putting restriction on ownership. Foreign ownership restriction along with business
subsidies can lead to companies within those countries having an unfair advantage over companies in other countries.
•
• Why is the world heading to more protectionism?
• Slow growth globally which is impacting both exports and the domestic markets for various countries.
• New government leadership like Trump in the United States ran on platform to create jobs. New government can lead to change in
policies, like reducing taxation or reducing red tape or tariffs/duties on imports.

16. BLOG - TRADE
• http://www.canadianmanufacturing.com/exporting-and-importing/canada-u-s-trade-not-broken-no-need-trump-fix-freeland-says-
181024/?custnum=11196356799&title=&utm_source=CMO&utm_medium=email&utm_campaign=161222B
•
• Key Quote “I think the reality is the trading relationship with Canada is the farthest possible thing from being broken. It is very balanced and
mutually beneficial”
•
• Fact:
• Mexico has leapfrog Canada in terms on trade with the United States - http://www.huffingtonpost.ca/2016/12/07/mexico-us-trade-
canada_n_13487730.html . “According to data from the U.S. Commerce Department, trade in goods between the U.S. and Mexico amounted to
US$245.3 billion this year through October, while U.S.-Canada trade totaled $230.4 billion”
• Canada is imposing carbon taxation and United States is not - http://www.cme-mec.ca/download.php?file=58ju7z2st.pdf – Canada needs to be
competitive in terms of taxation as well as regulations. Business investment by companies will go to various jurisdictions that maximize return on
investment (ROI)
• http://www.huffingtonpost.ca/2016/11/18/alberta-texas_n_13075844.html “Texas is right now in much better fiscal condition than Alberta.”
• Softwood Lumber - http://www.forestbusinessnetwork.com/66288/softwood-goes-deeper-than-just-lumber/ “The fact remains that Canadian
lumber companies continue to enjoy a supply of logs from government sources, while US counterparts that are in areas with a high density of
federally owned timberland continue to die off. This has far-reaching consequences for the US Forest Service and other land managers that no
longer have markets to sell their logs. That brings me to a question, why can’t mills positioned near the Canadian border compete for logs that
are in Canada? Now that the Canadian system is more market-based, shouldn’t logs be free to cross the border like lumber?”
• Canada has dropped out of the top 10 for FDI - https://www.slideshare.net/paulyoungcga/fdi-foreign-direct-investment-the-importance-of-
capital-inflow
• Ontario has fallen in terms of mining investment - http://www.mining.com/canadas-saskatchewan-manitoba-worlds-new-top-mining-
destinations/

17. USA TRADE AND
TRUMP
Source -
http://www.ttnews.com/articles/us-
trade-gap-narrows-seven-month-low-
record-exports or
http://www.startribune.com/ap-fact-
check-trump-ignores-strong-points-in-
us-trade/485093841/

18. PROTECTIONISM POLICIES AND WTO
The Trump administration’s economic policy is rapidly breaking down the World Trade Organisation (WTO) system
and shattering the rules-based international order. On top of imposing tariffs, the United States is blocking the
appointment of new judges to the body that interprets and enforces WTO rules, decisions and agreements.
If this continues, the WTO will virtually cease to function by the end of 2019.
This will cause a gradual breakdown of the multilateral trading system and lead to a new international economic
order that is no longer anchored in liberal democratic values, nor fully constrained by the rule of law.
Source - https://theconversation.com/australia-has-to-prepare-for-life-after-the-world-trade-organisation-100522

19. STOCK MARKET / GLOBAL INVESTMENT
Source – OECD and BMO Economics

20. SOLUTIONS / TRADE
Source - https://piie.com/blogs/trade-investment-policy-watch/three-ways-reduce-trade-deficit
1. Consume less and save more. If US households or the government reduce consumption (businesses save
more than they spend), imports will drop and less borrowing from abroad will be needed to pay for
consumption. This means that consumption taxes—like those that nearly all other countries in the world
have—could help reduce the deficit, by discouraging consumption, increasing saving, and reducing the
government deficit. In contrast, an unfunded tax cut, such as the one proposed by the administration, will
expand the deficit because the government will be consuming more relative to its earnings
2. Depreciate the exchange rate. Trade deficit reversals are typically driven by a significant real exchange
rate depreciation. A weaker dollar makes imports more expensive and exports cheaper and improves the
trade balance. Given the dollar is the world's reserve currency, and still regarded as the safest for investors,
it tends to run stronger than other currencies. But when foreign governments actively push the dollar up to
maintain their surpluses, the United States could counteract interventionby selling dollars and buying foreign
currencies. The administration could also encourage the adoption of other major currencies, such as the
euro, yen, or renminbi, as alternative reserve currencies. A weaker dollar would be good for the US
economy, but relinquishing the role as the dominant currency would reduce the power of the United States in
global markets and the seigniorage (profit) earned
3. Tax capital inflows. One of the reasons that the United States runs a trade deficit is because borrowing
from abroad is cheap and easy. If it were more expensive, US citizens and the government would borrow
less. A tax on (non–foreign direct investment) capital inflows that rises with the size of the inflow could
reduce excessive borrowing for consumption and help close the government imbalance. While some worry
that capital controls could distort asset prices and reduce investment, they could also curb excessive
speculative investment, such as happened before the financial crisis.