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1010 Exam Review
Final Exam Format ► While
some of the questions on the exam are fairly strait forward, in others you will be required to apply knowledge that you have acquired to specific cases. ► Read the cases. Read the additional readings I will suggest. ► I have set up a web site with an example of the type of question you might be asked. ► www.geocities.com/lafitte_ca
Some Tips ► There
will no consultation of textbooks, notes or dictionaries.
► Please
bring two pieces of identification with you:York University Validation Card and photo identification.
► Students
content.
are responsible for the entire course
Some Tips ►
Read the question carefully and answer only what is asked. If it is an essay answer, then it is expected that a thesis statement, supporting evidence and summary of evidence are provided. If it is an answer requiring the use of A General Model of Government Intervention, read the question carefully to determine how many interventions are required.
►
Be sure you understand the general model of government intervention detailed on page 302.
►
What aspect of the Model is required? Only the Dimensions of the Model or the entire Model. (ie. The Policy Evaluation Matrix)
Readings Cases: In Between Public and Private: Readings and Cases on Canada's Mixed Economy: 1. The Medical Centre on pp. 325 – 360. 2. Commercialization of the Liquor Control Board of Ontario on pp. 443 – 452 3. Solid Waste Management in Toronto on pp. 453 – 470 4. Privatization of Highway 407, pp. 437 – 442.
Additional Suggested Readings 5.
6. 7. 8.
The Book Publishing Industry Development Program: An Evaluation, pp. 361 – 378. The Canada – US Softwood Lumber Trade Dispute. pp. 482 – 514. The Case for the “Triple E Senate”, pp. 176-188. See my “helpful” articles on my web site, they will be of use.
The Policy Evaluation Matrix
Policy Evaluation Matrix ► Was
the policy intervention Direct or Indirect? ► Was the policy process of the government Strategic or Reactive? Reactive is often viewed as ‘knee jerk’) ► What is the policy intervention coercive or was it voluntary?
Quality Determinants. ► When
you evaluate public policy not only must you identify the type of intervention, direct/indirect, strategic/reactive and coercive/voluntary but it is also important to make a quality assessment. ► They are accuracy, precision, efficiency, time delay and the environmental effects on the private sector.
Quality Determinants. ► When
you evaluate public policy not only must you identify the type of intervention, direct/indirect, strategic/reactive and coercive/voluntary but it is also important to make a quality assessment. ► They are accuracy, precision, efficiency, time delay and the environmental effects on the private sector.
Accuracy ► The
accuracy of an intervention is simply the degree to which the intended or stated goals are satisfied when all the effects and interactions are substantially complete or have reached a new state of equilibrium.
Accuracy of an Intervention ► Direct
Coercive Intervention is more accurate.
►
The goal to eliminate traffic congestion is satisfied with causal relationships (for example, weather, road conditions, budgetary requirements, etc.)
Accuracy of an Intervention ► Indirect
Voluntary Intervention is less accurate.
► Commuters
will choose at which point they will decide to use public transportation
Precision ► PRECISION
is the degree to which the effect of the intervention is limited to only the intended goals. ► Does the action result in unintended consequences?
Precision of an Intervention ►
►
Direct coercive intervention is more precise. The goal to eliminate traffic congestion is satisfied with the banning of automobiles.
►
►
Indirect Voluntary intervention is less precise. There are requirements for the infrastructure of public transit and enticements to satisfy the goal of eliminating traffic congestion.
Efficiency of an Intervention ►
►
► ►
Direct Coercive intervention is more efficient. With the elimination of automobiles, the city’s spending on roads will be reduced. Revenues will be collected from fines. There will be less traffic and a healthier population.
►
►
►
Indirect Voluntary intervention is less efficient. There will be increased budgetary pressure for incentives to take public transit. Transfer and equalization payments will be required.
Time Delay ► Time
delay is the period of time between the implementation of an intervention and the accomplishment of the desired goals.
Time Delay of an Intervention ► Direct
Coercive intervention takes less time. ► It is immediate.
► Indirect
Voluntary intervention takes more time. ► Waiting for commuters to choose the ‘better way’ could take forever. ► Take the TTC as an example.
Environmental Effect on the Private Sector of an Intervention ► Accounts
for who or which sector has government targeted for change and what will be the response. ► Any change could be deleterious to the private sector.
Environmental Effect on the Private Sector of an Intervention ► Purely
Strategic intervention is less deleterious. ► Business thrives in an environment of predictable formal and informal relations with government.
► Purely
reactive intervention is more deleterious. ► The private sector is endeavoring to resolve the effects, impacts and influences of the consequences and ramifications that government did not consider.
Case: The Medical Centre ► Shouldice
Medical
Centre ► In 1940, hospital space and doctors were scarce, especially for this non-emergency surgery that normally took three weeks of hospitalization.
Case: The Medical Centre ►
Dr. Shouldice resolved to do what he could to alleviate the problem. Contributing his services at no fee, he performed an innovative method of surgery on seventy of these men, hastening their induction into the army.
Case: The Medical Centre ► These
delighted recruits soon made known their success stories and by the war's end, more than 200 civilians had contacted the doctor and were awaiting surgery. The scarcity of hospitals beds however, created a major problem. There was only one solution, Dr. Shouldice decided to open his own hospital.
The Medical Centre Interventions ► 1931 creation of the Private Hospitals Act Allowing for the Creation of Private Hospitals ► 1972 Act was amended to prevent new entrants. ► 3P Model (Public Private
Application of the Model: Cases 1.
The Privatization of Pearson International Airport.
Application of the Model: Cases 2. The Privatization of Highway 407
Privatization 1. 2. 3. 4. 5. 6. 7.
The reasons that government undertake privatizations are as follows. To improve efficiency To reduce public sector borrowing requirements. To reduce government involvement in decision making. To ease problems of pay determination. To widen share ownership. To gain political advantage.
Case: Privatization of Pearson
International Airport
► ► ► ►
Intent of the policy intervention: To build a new airport in Toronto with private money. Why? Future passenger growth, desire not to use public funds, job creation. 1,900 person years of employment during a period of recession in Canada. The contract was eventually awarded to the Pearson Development Corporation.
Case: Privatization of Pearson
International Airport
► Following
his election in 1993 new PM Jean Chrétien cancelled the contract at a cost of some $60m. No policy now existed. ► Later the management and operation of Pearson was turned over to a not for profit private public partnership, the GTAA. ► The GTAA is now developing a 4.4 billion dollar construction program at Pearson.
The Pearson Privatization To recap: The reasons that government undertake privatizations are as follows. 1. To improve efficiency (more capacity needed) 2. To reduce public sector borrowing requirements. (no cost, although, less revenue as well) 3. To reduce government involvement in decision making. (no longer responsible) 4. To ease problems of pay determination. 5. To widen share ownership. (public/private) 6. To gain political advantage. (Job Creation)
Case: The Privatization of Highway 407 Why was it done? Need to build a highway. 1. To build safe roads faster. (20 years ahead of schedule) 2. To reduce costs. (eventually sold for $3+ billion) 3. To protect the environment.
Case: The Privatization of Highway 407 4. To introduce new technologies and efficiencies. (innovative toll system). 5. Political. (to create jobs)
Quick Facts: From Highway 407 ETR 1.
407 ETR runs east and west just north of Toronto — Canada's largest city. From QEW (in the west) to Highway 7 just east of Brock Road (in the east) for a total of 108 kilometers.
2.
Connects with 6 interchanges on the 400 series highways: 401, 403, 410, 427, 400, and 404.
3.
First day of tolling was October 14, 1997.
4.
Over 710,000 transponders have been distributed as of February 2006.
5.
Over 12,922,268,218 total vehicle kilometers traveled since opening 407 ETR in October 1997, as of January 30, 2006.
6.
108.081 kilometers is the total length of 407 ETR.
Case: Solid Waste Management in
Toronto
► Problem
identified is that Toronto is overflowing with garbage and does not know what to do with it. The system is at capacity. ► Landfills were the disposal method of choice in Toronto, however, in 2002 the Keel Valley Landfill closed, resulting in the vast majority of Toronto's trash being sent to Michigan. ► Cost at Keele were $12 per tonne. Michigan is very costly at $52 per tonne.
How Might Toronto deal with this Stinky Problem? ► Open
the Adams Mine project thus creating a new landfill for Toronto. ► Running a publicity campaign encouraging households to use backyard composters. ► Bag limits. ► Setting up an incinerator. ► How would we characterize these interventions?
How Did Toronto deal with this Stinky Problem? ► Purchased
a new landfill in London ► City council voted 26 to 12 in favor of purchasing the Green Lane landfill, a 130hectare privately owned facility southwest of London.
Case: LCBO Privatization To recap: The reasons that government undertake privatizations are as follows. 1. To improve efficiency (more stores needed) 2. To reduce public sector borrowing requirements. (no cost, although, less revenue as well) 3. To reduce government involvement in decision making. (no longer responsible for liquor) 4. To ease problems of pay determination. (union jobs) 5. To widen share ownership. (public/private) 6. To gain political advantage. (possible job creation)
Case: The Commercialization of the
LCBO
Why was it done? Need to make LCBO more efficient. 1. To serve the public better. 2. More and bigger stores needed. 3. To make additional revenue. 4. To introduce new technologies and efficiencies. (Warehousing and POS). 5. Political. (to give it a chance to perform)
LCBO in 1929-1987 ► The
intent was to promote temperance. ► Stop the sin of alcohol. ► Not set up as a traditional retail system. ► Review of the system began as sales began to slip. A new Board led by private sector members like Steve Stavro envisioned a new LCBO. ► No money to deliver on that vision.
LCBO in 1987-2004. ► LCBO
began to be led by Andrew S. Brandt in 1991 and a team of private sector retailers. ► Notably, Larry Gee from Dominion and Bob Peter the former President of the Bay. ► Initially change was slow because if the lack of resources available. ► In 1997 that changed with the introduction of a seamless 5 year capital budget. ► Since that time profits have grown from $596 million to 1.04 billion.
Case: The Book Publishing Industry ► The
Canadian Book publishing industry has both a cultural dimension and an industrial dimension. ► These two elements are reflected in the way government approached the industry from a policy perspective. ► Since the 1950’s Canada's industry has moved from a cultural wasteland to a literary world leader.
Why has this Occurred? ►
►
► ►
Federal and Provincial Programs such as the Writers in Residence and the Writers in Schools program have introduced Children to the idea of literature from an early age. The Public Lending Rights Commission pays writers for the use of their books in public libraries. This increases availability and provides money to the authors. Financial support is provided by the Book Publishing Industry Development Program (BPIDP). What kind in interventions are these? Are they both the same type?
2430 Class 10 & 11 The Changing Nature of the International Business Environment
The Interconnected World ► ►
► ► ► ►
The world had gone international Money has become an internationally traded commodity. Physical trade has become international Service trade is international. The power of international markets drives all of these. The barriers that separated international markets have been torn down by policy or technology.
Financial Services ► ►
►
Exchange Rates are determined principally by market forces As a result of these freedoms, the financial services industry has created vast array of products enabling borrowers and savers to take advantage of financial conditions around the world. Thus firms have achieved greater mobility.
Re-Thinking of the Global Economy ►
►
The global economy has changed everything we do. Costs have gone down and connectivity had increased. Distance, time and borders have eroded because they leave no country or community untouched.
International air travel International communication. Information and media use.
Impact of Technology ►
►
►
►
People have been tied together by the impact of the global telecommunications revolution. People now work and communicate over vast distances. Trade can be executed much more seamlessly than in previous generations. Information is much more available.
The Mobile Economy Capital sweeps across countries at electronic speed. ► Manufacturing and the generation of services move flexibly among countries and are networked across borders. ► Markets are supplied from a continually shifting set of sources. ► Ideas, insights, and techniques are communicated with increasing ease. ►
The Mobile Economy ► ► ► ►
Access to technology continues to grow. Borders are eroded as markets are integrated. As barriers fall, private capital seeks new markets. Government anxious to reduce deficits and shift spending to social needs, increasingly welcomes this investment.
The New Markets ► ►
►
►
The integration of financial markets is significant. Privatization marked the first true global offerings of equity The distinctions among national markets have become lost. World trade is growing.
World Trade ►
►
►
As world trade grows, trading in currency is growing at a steeper rate There is a greater risk of these markets causing instability because they are so large and so much money is moving around in them. This can be destabilizing. Many Asian states have suffered from currency swings.
How Have Companies Positions in a Changing World? • There is a presence of wider opportunities and tougher competition. • Boundaries are coming down. • Computers, alliances and outsourcing are permeating the walls of companies. • Financial operations are more transparent and subject to more aggressive scrutiny and demands by outside investors.
How Have Companies Positions in a Changing World? ► ►
► ►
► ►
Much wider and more diverse range of opportunities. More bracing competition and more risk along with the pressure generated by capital markets and customers who have a broader range of choices. Companies have to be prepared to meet these challenges. Fostering a culture that encourages alertness, responsiveness and flexibility and speeding up the cycle time of processes and decisions. Emphasizes the importance of employee knowledge. Information technology is driving the process.
What is the Role of Business? ►
►
► ►
Companies have had to adapt to become more nimble to meet the challenges of the rapidly changing markets. (e.g.. Eastman Kodak) Entrepreneurial values and attitudes emphasize initiative and rapid response. There is a need for creators and builders. Companies have to engage with the community's interest, environmental concerns and social values.
The Characteristic of Globalization: Economics over Politics The erosion of borders does not mean the end of national politics, national identity and economic nationalism. ► A country's history, culture and definition of national objectives still shape politics within each country. ►
What is the Role of Government? ► To ► To
reduce intervention. retool and refocus intervention to preserve the public trust. ► To buy into the idea of fundamental global change. ► To translate that change into policies consistent with national culture, history and temperament. ► To create and maintain the parameters within which the market operates. ► To move from an enforcer role to that of a referee.
Section 2: The Principles that influence International Trade. ► “The
benefits of international trade result in a more efficient employment of the productive resources of the world.” John Stuart Mill
International Trade ►The
exchange of goods and services between or among countries ►Enables a country to specialize in those goods it can produce most cheaply and efficiently ►Enlarges the potential market for goods of an economy ►Major force of economic relations among countries ►Is an extension of governmental policy
Reasons for Trade ► Resources
are not completely distributed across the globe. ► The climate and terrain of a state. ► The skills of its labor force. ► The advantages of specialization
Adam Smith ► To
specialize in production leads to increased output. ► To trade internationally specializing in producing only those goods in which a country has absolute advantage
David Ricardo on the Theory of Competitive Advantage ►
►
A country gains from trading certain goods even though its trading partners can produce those goods more cheaply. Goods and services which a country should produce and trade with other countries is the goods and services that it produces more efficiently than other countries.
Economic Benefits of the Theory of Comparative Advantage ►
► ► ►
International trade leads to more efficient and increased world production It results in the expansion of markets It leads to growth in domestic employment It stimulates the modernization and innovation of domestic companies
The Importance of International Trade • Some countries export only to expand their domestic market or to aid economically depressed sectors within the domestic economy. • Other countries depend on trade for a large part of their national income and to supply goods for domestic consumption.
Performance Criteria of a Mixed and Market Economy? ►
1.
2.
What model should governments choose. What emphasis? The emphasis is on achieving maximum output per person or per person employed. Freedom of choice is available to both producers and consumers.
Section 3: Multilateral Trading Agreements ► ►
► ►
INTERNATIONAL TRADE Attempts to improve balance of payments between countries. Use of differential tariffs. Trade policy has become the source of many international disputes.
General Agreement on Tariffs and Trade - GATT (1947) ► ► ►
►
Goal was to minimize new existing trade barriers Reduce import tariffs and quotas To abolish preferential trade agreements between member countries Tariff concessions were negotiated on the principle of reciprocity. (you scratch my back I’ll scratch yours).
Uruguay Round of GATT • The goal was the eventual reduction of tariffs by 33% • Tried to reduce or eliminate many non-tariff impediments. • Strengthen protection for intellectual property. • Open trade in investments and services • Establish the World Trade Organization (W.T.O.)
WORLD TRADE ORGANIZATION - W.T.O. ► ► ►
Operates a dispute settlement process Possesses stronger power to enforce agreements Has the authority to issue trade sanctions against a country that refuses to revoke an offending law or practice.
The GATT Debate SUPPORTERS ► GATT would improve the overall business environment. ► Would create jobs ► Would stimulate trade and investment. ► Would allow countries to lever their natural competitive advantages.
OPPONENTS ► GATT would result in massive losses of manufacturing jobs ► Would result in lower pay for workers in developed countries. ► Opportunities would threaten the sovereignty of countries. ► The powerful W.T.O.
Trading Communities ►
►
To promote trade among countries that have common economic and political interest or are located in a particular region. They favor member counties over nonmember countries. The Commonwealth of Nations The North American Free Trade Agreement European Union
International Trade ► In
1990, International trade was approximately $8.76 trillion (US), double that of 1980. ► Driven by inflation and higher prices for commodities, the value of international trade in the United States increased nearly tenfold between 1958 and
The Growth of International Trade ►
►
►
►
Floating currency exchange rates were adopted in 1973. In the 1970s and 1980s, price competition between trading partners was augmented by the resulting fluctuations in exchange rates. The depreciation of a country's currency making exports appear cheaper and causing imports to appear more expensive. This affects a country's balance of trade.
Section 4: Restrictions on International Trade ► ►
►
►
Canada’s Dependence on Natural Resources How should Canada determine the price of its natural resources? Weighing increased current income and consumption against the possibility of lower real income and consumption in the future If costs increase. Opposition to export sales of natural resources.
Indirect Restrictions on Exports ► ►
►
►
Policies of diversification on industrial production To reduce dependence on income from exports if there is fluctuations in export sales of commodities. To maintain a basic self sufficiency in essential commodities to avoid dependence on other countries. National security concerns.
Specialization ► Requires
the mobility of labour at high economic and social cost. ► Emphasizes the broader range of costs and the distribution of potential benefits and costs.
Restrictions on Imports ► ► ► ► ► ► ►
A tariff or import duty is a tax. An ad valorem tariff is a tax as a percentage of the price of a good. A license fee is required to import specific a good. Quotas are limitations on the quantity of a good which can be imported. Combined with an import license so that the importer is paying a fee to import a specific amount. More stringent restrictions Embargo, Sanction, Boycott.
Why Tariffs Exist ►
►
Raising the price of imports maintains domestic industries at a less efficient level of production than would occur under free trade and encourages tariff retaliation from other countries. This compounds the loss of real income and output that would be realized by specialization and comparative advantage.
CANADA AND INTERNATIONAL TRADE ►
A HISTORICAL PERSPECTIVE ON TRADE
►
From the 16th to the 18th Century, Canada's leading exports was fish and fur. During the 19th century, there was the exploitation of forests and timber as they became the staple export. In the 20th Century, agriculture, forestry, mining and manufacturing was developed.
►
►
CANADIAN EXPORT GROWTH Year 1950 1960 1970
1980 1996 2000
Billions of $ $3.16 $5.39 $16.82 $64.3 $275.82 $412.18
The Purpose of NAFTA ►
►
►
To gradually remove tariffs and other trade barriers on most goods produced and sold in North America. It was built on the Canada The United States Free Trade Agreement (1989) To eliminate or reduce many tariffs between the two countries.
The Goals of NAFTA ► The
Governments of Canada, the United States and Mexico resolved to strengthen the special bonds of friendship and cooperation amongst their nations. ► To contribute to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation; ► To create an expanded and secure market for goods and services produced in their territories; ► To reduce distortions to trade;
The Goals of NAFTA ► ► ►
► ►
To establish clear and mutually advantageous rules governing their trade; To ensure a predictable commercial framework for business planning and investment; To build on their respective rights and obligations under the G.A.T.T. and other multilateral and bilateral instruments of cooperation; To enhance the competitiveness of their firms in global markets; To foster creativity and innovation and promote trade in goods and services that are the subject of intellectual property rights;
The Goals of NAFTA ►
► ► ► ► ►
To create new employment opportunities and improve working conditions and the living standards in their respective territories; To undertake each of preceding in a manner consistent with environmental protection and conservation; To preserve their flexibility to safeguard the public welfare; To promote sustainable development; To strengthen the development and enforcement of environmental laws and regulations; To protect, enhance and enforce basic workers rights.
National Treatment ► Refers
to establishing for Canada the United States and Mexico with respect to a state or province, treatment no less favorable than the most favorable treatment accorded by such state or province to any like, directly competitive or substitutable goods.
National Treatment ► This
means that Canadian federal, provincial and territorial governments cannot treat goods from the United States and Mexico any differently from the way that they treat domestic goods with respect to taxation and regulations for sale, transportation, distribution or production. ► The United States and Mexico cannot discriminate against Canadian goods.
Dispute Resolution Panels ► Anti
dumping refers to goods that are sold at prices lower than in their domestic market. ► Countervailing refers to a practice of a government to decide that manufacturers of imports have been unfairly subsidized in some way by their domestic government.
NAFTA Commission ► The
avoidance or settlement of all disputes regarding the Interpretation or application of this Agreement or whenever a Party considers that an actual or proposed measure of the other Party is or would be inconsistent with the obligations of this Agreement." ► Panels are organized on the basis of industry sectors.
Tariff and Non-Tariff Barriers ► The crux is the reduction of tariffs. ► There would be no exception from eventual
elimination of quotas and tariffs. ► Tariff negotiations would start from actual or much lower tariff rates. ► Goods placed into four categories based on their sensitivity to increased imports, reflecting both how great an impact liberalization of trade would have and how political powerful its producers were.
The Effects of NAFTA • Created the world's
second largest free trade zone • Brings together an estimated number of 365 million consumers • Has a combined annual trade and investment flow of over $500 billion US
Good Luck on your Exam!
Final Exam Format ► While
some of the questions on the exam are fairly strait forward, in others you will be required to apply knowledge that you have acquired to specific cases. ► Read the cases. Read the additional readings I will suggest. ► I have set up a web site with an example of the type of question you might be asked. ► www.geocities.com/lafitte_ca
Some Tips ► There
will no consultation of textbooks, notes or dictionaries.
► Please
bring two pieces of identification with you:York University Validation Card and photo identification.
► Students
content.
are responsible for the entire course
Some Tips ►
Read the question carefully and answer only what is asked. If it is an essay answer, then it is expected that a thesis statement, supporting evidence and summary of evidence are provided. If it is an answer requiring the use of A General Model of Government Intervention, read the question carefully to determine how many interventions are required.
►
Be sure you understand the general model of government intervention detailed on page 302.
►
What aspect of the Model is required? Only the Dimensions of the Model or the entire Model. (ie. The Policy Evaluation Matrix)
Readings Cases: In Between Public and Private: Readings and Cases on Canada's Mixed Economy: 1. The Medical Centre on pp. 325 – 360. 2. Commercialization of the Liquor Control Board of Ontario on pp. 443 – 452 3. Solid Waste Management in Toronto on pp. 453 – 470 4. Privatization of Highway 407, pp. 437 – 442.
Additional Suggested Readings 5.
6. 7. 8.
The Book Publishing Industry Development Program: An Evaluation, pp. 361 – 378. The Canada – US Softwood Lumber Trade Dispute. pp. 482 – 514. The Case for the “Triple E Senate”, pp. 176-188. See my “helpful” articles on my web site, they will be of use.
The Policy Evaluation Matrix
Policy Evaluation Matrix ► Was
the policy intervention Direct or Indirect? ► Was the policy process of the government Strategic or Reactive? Reactive is often viewed as ‘knee jerk’) ► What is the policy intervention coercive or was it voluntary?
Quality Determinants. ► When
you evaluate public policy not only must you identify the type of intervention, direct/indirect, strategic/reactive and coercive/voluntary but it is also important to make a quality assessment. ► They are accuracy, precision, efficiency, time delay and the environmental effects on the private sector.
Quality Determinants. ► When
you evaluate public policy not only must you identify the type of intervention, direct/indirect, strategic/reactive and coercive/voluntary but it is also important to make a quality assessment. ► They are accuracy, precision, efficiency, time delay and the environmental effects on the private sector.
Accuracy ► The
accuracy of an intervention is simply the degree to which the intended or stated goals are satisfied when all the effects and interactions are substantially complete or have reached a new state of equilibrium.
Accuracy of an Intervention ► Direct
Coercive Intervention is more accurate.
►
The goal to eliminate traffic congestion is satisfied with causal relationships (for example, weather, road conditions, budgetary requirements, etc.)
Accuracy of an Intervention ► Indirect
Voluntary Intervention is less accurate.
► Commuters
will choose at which point they will decide to use public transportation
Precision ► PRECISION
is the degree to which the effect of the intervention is limited to only the intended goals. ► Does the action result in unintended consequences?
Precision of an Intervention ►
►
Direct coercive intervention is more precise. The goal to eliminate traffic congestion is satisfied with the banning of automobiles.
►
►
Indirect Voluntary intervention is less precise. There are requirements for the infrastructure of public transit and enticements to satisfy the goal of eliminating traffic congestion.
Efficiency of an Intervention ►
►
► ►
Direct Coercive intervention is more efficient. With the elimination of automobiles, the city’s spending on roads will be reduced. Revenues will be collected from fines. There will be less traffic and a healthier population.
►
►
►
Indirect Voluntary intervention is less efficient. There will be increased budgetary pressure for incentives to take public transit. Transfer and equalization payments will be required.
Time Delay ► Time
delay is the period of time between the implementation of an intervention and the accomplishment of the desired goals.
Time Delay of an Intervention ► Direct
Coercive intervention takes less time. ► It is immediate.
► Indirect
Voluntary intervention takes more time. ► Waiting for commuters to choose the ‘better way’ could take forever. ► Take the TTC as an example.
Environmental Effect on the Private Sector of an Intervention ► Accounts
for who or which sector has government targeted for change and what will be the response. ► Any change could be deleterious to the private sector.
Environmental Effect on the Private Sector of an Intervention ► Purely
Strategic intervention is less deleterious. ► Business thrives in an environment of predictable formal and informal relations with government.
► Purely
reactive intervention is more deleterious. ► The private sector is endeavoring to resolve the effects, impacts and influences of the consequences and ramifications that government did not consider.
Case: The Medical Centre ► Shouldice
Medical
Centre ► In 1940, hospital space and doctors were scarce, especially for this non-emergency surgery that normally took three weeks of hospitalization.
Case: The Medical Centre ►
Dr. Shouldice resolved to do what he could to alleviate the problem. Contributing his services at no fee, he performed an innovative method of surgery on seventy of these men, hastening their induction into the army.
Case: The Medical Centre ► These
delighted recruits soon made known their success stories and by the war's end, more than 200 civilians had contacted the doctor and were awaiting surgery. The scarcity of hospitals beds however, created a major problem. There was only one solution, Dr. Shouldice decided to open his own hospital.
The Medical Centre Interventions ► 1931 creation of the Private Hospitals Act Allowing for the Creation of Private Hospitals ► 1972 Act was amended to prevent new entrants. ► 3P Model (Public Private
Application of the Model: Cases 1.
The Privatization of Pearson International Airport.
Application of the Model: Cases 2. The Privatization of Highway 407
Privatization 1. 2. 3. 4. 5. 6. 7.
The reasons that government undertake privatizations are as follows. To improve efficiency To reduce public sector borrowing requirements. To reduce government involvement in decision making. To ease problems of pay determination. To widen share ownership. To gain political advantage.
Case: Privatization of Pearson
International Airport
► ► ► ►
Intent of the policy intervention: To build a new airport in Toronto with private money. Why? Future passenger growth, desire not to use public funds, job creation. 1,900 person years of employment during a period of recession in Canada. The contract was eventually awarded to the Pearson Development Corporation.
Case: Privatization of Pearson
International Airport
► Following
his election in 1993 new PM Jean Chrétien cancelled the contract at a cost of some $60m. No policy now existed. ► Later the management and operation of Pearson was turned over to a not for profit private public partnership, the GTAA. ► The GTAA is now developing a 4.4 billion dollar construction program at Pearson.
The Pearson Privatization To recap: The reasons that government undertake privatizations are as follows. 1. To improve efficiency (more capacity needed) 2. To reduce public sector borrowing requirements. (no cost, although, less revenue as well) 3. To reduce government involvement in decision making. (no longer responsible) 4. To ease problems of pay determination. 5. To widen share ownership. (public/private) 6. To gain political advantage. (Job Creation)
Case: The Privatization of Highway 407 Why was it done? Need to build a highway. 1. To build safe roads faster. (20 years ahead of schedule) 2. To reduce costs. (eventually sold for $3+ billion) 3. To protect the environment.
Case: The Privatization of Highway 407 4. To introduce new technologies and efficiencies. (innovative toll system). 5. Political. (to create jobs)
Quick Facts: From Highway 407 ETR 1.
407 ETR runs east and west just north of Toronto — Canada's largest city. From QEW (in the west) to Highway 7 just east of Brock Road (in the east) for a total of 108 kilometers.
2.
Connects with 6 interchanges on the 400 series highways: 401, 403, 410, 427, 400, and 404.
3.
First day of tolling was October 14, 1997.
4.
Over 710,000 transponders have been distributed as of February 2006.
5.
Over 12,922,268,218 total vehicle kilometers traveled since opening 407 ETR in October 1997, as of January 30, 2006.
6.
108.081 kilometers is the total length of 407 ETR.
Case: Solid Waste Management in
Toronto
► Problem
identified is that Toronto is overflowing with garbage and does not know what to do with it. The system is at capacity. ► Landfills were the disposal method of choice in Toronto, however, in 2002 the Keel Valley Landfill closed, resulting in the vast majority of Toronto's trash being sent to Michigan. ► Cost at Keele were $12 per tonne. Michigan is very costly at $52 per tonne.
How Might Toronto deal with this Stinky Problem? ► Open
the Adams Mine project thus creating a new landfill for Toronto. ► Running a publicity campaign encouraging households to use backyard composters. ► Bag limits. ► Setting up an incinerator. ► How would we characterize these interventions?
How Did Toronto deal with this Stinky Problem? ► Purchased
a new landfill in London ► City council voted 26 to 12 in favor of purchasing the Green Lane landfill, a 130hectare privately owned facility southwest of London.
Case: LCBO Privatization To recap: The reasons that government undertake privatizations are as follows. 1. To improve efficiency (more stores needed) 2. To reduce public sector borrowing requirements. (no cost, although, less revenue as well) 3. To reduce government involvement in decision making. (no longer responsible for liquor) 4. To ease problems of pay determination. (union jobs) 5. To widen share ownership. (public/private) 6. To gain political advantage. (possible job creation)
Case: The Commercialization of the
LCBO
Why was it done? Need to make LCBO more efficient. 1. To serve the public better. 2. More and bigger stores needed. 3. To make additional revenue. 4. To introduce new technologies and efficiencies. (Warehousing and POS). 5. Political. (to give it a chance to perform)
LCBO in 1929-1987 ► The
intent was to promote temperance. ► Stop the sin of alcohol. ► Not set up as a traditional retail system. ► Review of the system began as sales began to slip. A new Board led by private sector members like Steve Stavro envisioned a new LCBO. ► No money to deliver on that vision.
LCBO in 1987-2004. ► LCBO
began to be led by Andrew S. Brandt in 1991 and a team of private sector retailers. ► Notably, Larry Gee from Dominion and Bob Peter the former President of the Bay. ► Initially change was slow because if the lack of resources available. ► In 1997 that changed with the introduction of a seamless 5 year capital budget. ► Since that time profits have grown from $596 million to 1.04 billion.
Case: The Book Publishing Industry ► The
Canadian Book publishing industry has both a cultural dimension and an industrial dimension. ► These two elements are reflected in the way government approached the industry from a policy perspective. ► Since the 1950’s Canada's industry has moved from a cultural wasteland to a literary world leader.
Why has this Occurred? ►
►
► ►
Federal and Provincial Programs such as the Writers in Residence and the Writers in Schools program have introduced Children to the idea of literature from an early age. The Public Lending Rights Commission pays writers for the use of their books in public libraries. This increases availability and provides money to the authors. Financial support is provided by the Book Publishing Industry Development Program (BPIDP). What kind in interventions are these? Are they both the same type?
2430 Class 10 & 11 The Changing Nature of the International Business Environment
The Interconnected World ► ►
► ► ► ►
The world had gone international Money has become an internationally traded commodity. Physical trade has become international Service trade is international. The power of international markets drives all of these. The barriers that separated international markets have been torn down by policy or technology.
Financial Services ► ►
►
Exchange Rates are determined principally by market forces As a result of these freedoms, the financial services industry has created vast array of products enabling borrowers and savers to take advantage of financial conditions around the world. Thus firms have achieved greater mobility.
Re-Thinking of the Global Economy ►
►
The global economy has changed everything we do. Costs have gone down and connectivity had increased. Distance, time and borders have eroded because they leave no country or community untouched.
International air travel International communication. Information and media use.
Impact of Technology ►
►
►
►
People have been tied together by the impact of the global telecommunications revolution. People now work and communicate over vast distances. Trade can be executed much more seamlessly than in previous generations. Information is much more available.
The Mobile Economy Capital sweeps across countries at electronic speed. ► Manufacturing and the generation of services move flexibly among countries and are networked across borders. ► Markets are supplied from a continually shifting set of sources. ► Ideas, insights, and techniques are communicated with increasing ease. ►
The Mobile Economy ► ► ► ►
Access to technology continues to grow. Borders are eroded as markets are integrated. As barriers fall, private capital seeks new markets. Government anxious to reduce deficits and shift spending to social needs, increasingly welcomes this investment.
The New Markets ► ►
►
►
The integration of financial markets is significant. Privatization marked the first true global offerings of equity The distinctions among national markets have become lost. World trade is growing.
World Trade ►
►
►
As world trade grows, trading in currency is growing at a steeper rate There is a greater risk of these markets causing instability because they are so large and so much money is moving around in them. This can be destabilizing. Many Asian states have suffered from currency swings.
How Have Companies Positions in a Changing World? • There is a presence of wider opportunities and tougher competition. • Boundaries are coming down. • Computers, alliances and outsourcing are permeating the walls of companies. • Financial operations are more transparent and subject to more aggressive scrutiny and demands by outside investors.
How Have Companies Positions in a Changing World? ► ►
► ►
► ►
Much wider and more diverse range of opportunities. More bracing competition and more risk along with the pressure generated by capital markets and customers who have a broader range of choices. Companies have to be prepared to meet these challenges. Fostering a culture that encourages alertness, responsiveness and flexibility and speeding up the cycle time of processes and decisions. Emphasizes the importance of employee knowledge. Information technology is driving the process.
What is the Role of Business? ►
►
► ►
Companies have had to adapt to become more nimble to meet the challenges of the rapidly changing markets. (e.g.. Eastman Kodak) Entrepreneurial values and attitudes emphasize initiative and rapid response. There is a need for creators and builders. Companies have to engage with the community's interest, environmental concerns and social values.
The Characteristic of Globalization: Economics over Politics The erosion of borders does not mean the end of national politics, national identity and economic nationalism. ► A country's history, culture and definition of national objectives still shape politics within each country. ►
What is the Role of Government? ► To ► To
reduce intervention. retool and refocus intervention to preserve the public trust. ► To buy into the idea of fundamental global change. ► To translate that change into policies consistent with national culture, history and temperament. ► To create and maintain the parameters within which the market operates. ► To move from an enforcer role to that of a referee.
Section 2: The Principles that influence International Trade. ► “The
benefits of international trade result in a more efficient employment of the productive resources of the world.” John Stuart Mill
International Trade ►The
exchange of goods and services between or among countries ►Enables a country to specialize in those goods it can produce most cheaply and efficiently ►Enlarges the potential market for goods of an economy ►Major force of economic relations among countries ►Is an extension of governmental policy
Reasons for Trade ► Resources
are not completely distributed across the globe. ► The climate and terrain of a state. ► The skills of its labor force. ► The advantages of specialization
Adam Smith ► To
specialize in production leads to increased output. ► To trade internationally specializing in producing only those goods in which a country has absolute advantage
David Ricardo on the Theory of Competitive Advantage ►
►
A country gains from trading certain goods even though its trading partners can produce those goods more cheaply. Goods and services which a country should produce and trade with other countries is the goods and services that it produces more efficiently than other countries.
Economic Benefits of the Theory of Comparative Advantage ►
► ► ►
International trade leads to more efficient and increased world production It results in the expansion of markets It leads to growth in domestic employment It stimulates the modernization and innovation of domestic companies
The Importance of International Trade • Some countries export only to expand their domestic market or to aid economically depressed sectors within the domestic economy. • Other countries depend on trade for a large part of their national income and to supply goods for domestic consumption.
Performance Criteria of a Mixed and Market Economy? ►
1.
2.
What model should governments choose. What emphasis? The emphasis is on achieving maximum output per person or per person employed. Freedom of choice is available to both producers and consumers.
Section 3: Multilateral Trading Agreements ► ►
► ►
INTERNATIONAL TRADE Attempts to improve balance of payments between countries. Use of differential tariffs. Trade policy has become the source of many international disputes.
General Agreement on Tariffs and Trade - GATT (1947) ► ► ►
►
Goal was to minimize new existing trade barriers Reduce import tariffs and quotas To abolish preferential trade agreements between member countries Tariff concessions were negotiated on the principle of reciprocity. (you scratch my back I’ll scratch yours).
Uruguay Round of GATT • The goal was the eventual reduction of tariffs by 33% • Tried to reduce or eliminate many non-tariff impediments. • Strengthen protection for intellectual property. • Open trade in investments and services • Establish the World Trade Organization (W.T.O.)
WORLD TRADE ORGANIZATION - W.T.O. ► ► ►
Operates a dispute settlement process Possesses stronger power to enforce agreements Has the authority to issue trade sanctions against a country that refuses to revoke an offending law or practice.
The GATT Debate SUPPORTERS ► GATT would improve the overall business environment. ► Would create jobs ► Would stimulate trade and investment. ► Would allow countries to lever their natural competitive advantages.
OPPONENTS ► GATT would result in massive losses of manufacturing jobs ► Would result in lower pay for workers in developed countries. ► Opportunities would threaten the sovereignty of countries. ► The powerful W.T.O.
Trading Communities ►
►
To promote trade among countries that have common economic and political interest or are located in a particular region. They favor member counties over nonmember countries. The Commonwealth of Nations The North American Free Trade Agreement European Union
International Trade ► In
1990, International trade was approximately $8.76 trillion (US), double that of 1980. ► Driven by inflation and higher prices for commodities, the value of international trade in the United States increased nearly tenfold between 1958 and
The Growth of International Trade ►
►
►
►
Floating currency exchange rates were adopted in 1973. In the 1970s and 1980s, price competition between trading partners was augmented by the resulting fluctuations in exchange rates. The depreciation of a country's currency making exports appear cheaper and causing imports to appear more expensive. This affects a country's balance of trade.
Section 4: Restrictions on International Trade ► ►
►
►
Canada’s Dependence on Natural Resources How should Canada determine the price of its natural resources? Weighing increased current income and consumption against the possibility of lower real income and consumption in the future If costs increase. Opposition to export sales of natural resources.
Indirect Restrictions on Exports ► ►
►
►
Policies of diversification on industrial production To reduce dependence on income from exports if there is fluctuations in export sales of commodities. To maintain a basic self sufficiency in essential commodities to avoid dependence on other countries. National security concerns.
Specialization ► Requires
the mobility of labour at high economic and social cost. ► Emphasizes the broader range of costs and the distribution of potential benefits and costs.
Restrictions on Imports ► ► ► ► ► ► ►
A tariff or import duty is a tax. An ad valorem tariff is a tax as a percentage of the price of a good. A license fee is required to import specific a good. Quotas are limitations on the quantity of a good which can be imported. Combined with an import license so that the importer is paying a fee to import a specific amount. More stringent restrictions Embargo, Sanction, Boycott.
Why Tariffs Exist ►
►
Raising the price of imports maintains domestic industries at a less efficient level of production than would occur under free trade and encourages tariff retaliation from other countries. This compounds the loss of real income and output that would be realized by specialization and comparative advantage.
CANADA AND INTERNATIONAL TRADE ►
A HISTORICAL PERSPECTIVE ON TRADE
►
From the 16th to the 18th Century, Canada's leading exports was fish and fur. During the 19th century, there was the exploitation of forests and timber as they became the staple export. In the 20th Century, agriculture, forestry, mining and manufacturing was developed.
►
►
CANADIAN EXPORT GROWTH Year 1950 1960 1970
1980 1996 2000
Billions of $ $3.16 $5.39 $16.82 $64.3 $275.82 $412.18
The Purpose of NAFTA ►
►
►
To gradually remove tariffs and other trade barriers on most goods produced and sold in North America. It was built on the Canada The United States Free Trade Agreement (1989) To eliminate or reduce many tariffs between the two countries.
The Goals of NAFTA ► The
Governments of Canada, the United States and Mexico resolved to strengthen the special bonds of friendship and cooperation amongst their nations. ► To contribute to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation; ► To create an expanded and secure market for goods and services produced in their territories; ► To reduce distortions to trade;
The Goals of NAFTA ► ► ►
► ►
To establish clear and mutually advantageous rules governing their trade; To ensure a predictable commercial framework for business planning and investment; To build on their respective rights and obligations under the G.A.T.T. and other multilateral and bilateral instruments of cooperation; To enhance the competitiveness of their firms in global markets; To foster creativity and innovation and promote trade in goods and services that are the subject of intellectual property rights;
The Goals of NAFTA ►
► ► ► ► ►
To create new employment opportunities and improve working conditions and the living standards in their respective territories; To undertake each of preceding in a manner consistent with environmental protection and conservation; To preserve their flexibility to safeguard the public welfare; To promote sustainable development; To strengthen the development and enforcement of environmental laws and regulations; To protect, enhance and enforce basic workers rights.
National Treatment ► Refers
to establishing for Canada the United States and Mexico with respect to a state or province, treatment no less favorable than the most favorable treatment accorded by such state or province to any like, directly competitive or substitutable goods.
National Treatment ► This
means that Canadian federal, provincial and territorial governments cannot treat goods from the United States and Mexico any differently from the way that they treat domestic goods with respect to taxation and regulations for sale, transportation, distribution or production. ► The United States and Mexico cannot discriminate against Canadian goods.
Dispute Resolution Panels ► Anti
dumping refers to goods that are sold at prices lower than in their domestic market. ► Countervailing refers to a practice of a government to decide that manufacturers of imports have been unfairly subsidized in some way by their domestic government.
NAFTA Commission ► The
avoidance or settlement of all disputes regarding the Interpretation or application of this Agreement or whenever a Party considers that an actual or proposed measure of the other Party is or would be inconsistent with the obligations of this Agreement." ► Panels are organized on the basis of industry sectors.
Tariff and Non-Tariff Barriers ► The crux is the reduction of tariffs. ► There would be no exception from eventual
elimination of quotas and tariffs. ► Tariff negotiations would start from actual or much lower tariff rates. ► Goods placed into four categories based on their sensitivity to increased imports, reflecting both how great an impact liberalization of trade would have and how political powerful its producers were.
The Effects of NAFTA • Created the world's
second largest free trade zone • Brings together an estimated number of 365 million consumers • Has a combined annual trade and investment flow of over $500 billion US
Good Luck on your Exam!
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