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The Importance of International Trade in Canada Economics 11 Stewart COPY BLACK FONT! Why do we trade with International Countries? We cannot afford to be totally self sufficient Productivity and standard of living are higher when you specialize in what you do best and buy the rest from others Specialization allows for greater economic efficiency Globalization The creation of a world economy caused by increased international trade, investment flows, and the spread of multinational corporations Advantages to Trade Absolute advantage – The ability for one economy to produce a good or service with fewer resources than another Example: Your neighbour is a highly skilled mechanic, you are a highly skilled computer technician. Should you do your own tune-up? You can accomplish more by sticking with your specialization! Advantages to trade Comparative advantage- The ability of one economy to produce a good or service with comparatively fewer resources than another (ex. Have a lower opportunity cost) Even if one nation has absolute advantage in every field of production, chances are that it will have a greater advantage in some fields over others.