MGCR​ ​382​ ​Assignment​ ​#1

INTERNATIONAL​ ​BUSINESS
MGCR​ ​382,​ ​Winter​ ​2017

Assignment​ ​#1
REMARKS
● ​ ​This​ ​is​ ​a​ ​group​ ​assignment.​ ​You​ ​have​ ​been​ ​assigned​ ​to​ ​a​ ​group​ ​and​ ​the​ ​groups​ ​are​ ​binding.​ ​Any
group​ ​change​ ​requires​ ​explicit​ ​permission.
● ​ ​Answer​ ​all​ ​the​ ​problems​ ​in​ ​the​ ​space​ ​provided.​ ​Clearly​ ​show​ ​your​ ​work​ ​and​ ​reasoning,​ ​and
encircle​ ​your​ ​final​ ​answer.
● ​ ​No​ ​information​ ​can​ ​be​ ​exchanged​ ​between​ ​members​ ​of​ ​different​ ​groups.
● ​ ​The​ ​due​ ​date​ ​is​ ​February​ ​15,​ ​4PM​ ​at​ ​Darlene​ ​Fowler’s​ ​office​ ​in​ ​Bronfman​ ​454.
● ​ ​Assignment​ ​is​ ​to​ ​be​ ​submitted​ ​in​ ​print​ ​form.​ ​No​ ​electronic​ ​submissions​ ​accepted.
● ​ ​Late​ ​submissions​ ​will​ ​not​ ​be​ ​accepted.
● ​ ​Round​ ​answers​ ​to​ ​2​ ​decimal​ ​places.

Section:​ ​001​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​Group​ ​Number:​ ​26

Student​ ​1​ ​Name:​ ​Romy​ ​Gravel

Student​ ​Number:​ ​260618140

Student​ ​2​ ​Name:​ ​Selma​ ​Bouabdellah

Student​ ​Number:​ ​260743743

Student​ ​3​ ​Name:​ ​Melissa​ ​Papadantonakis

Student​ ​Number:​ ​260727223

Student​ ​4​ ​Name:​ ​Jenna​ ​McFeely

Student​ ​Number:​ ​260658567

Student​ ​5​ ​Name:​ ​Sean​ ​Mitro

Student​ ​Number:​​ ​260625474
 MGCR​ ​382​ ​Assignment​ ​#1
PROBLEM​ ​1​ ​(5​ ​POINTS)
Spain​ ​and​ ​Portugal​ ​are​ ​trading​ ​grapes​ ​and​ ​leather​ ​footwear.​ ​Their​ ​output​ ​per​ ​hour​ ​of​ ​labor​ ​for​ ​each
product​ ​is​ ​indicated​ ​below.

a)​ ​Graph​ ​the​ ​production​ ​possibilities​ ​for​ ​Spain​ ​and​ ​Portugal​ ​for​ ​their​ ​production​ ​of​ ​grapes​ ​and​ ​leather
footwear​ ​(2​ ​POINTS)

The​ ​line​ ​at​ ​the​ ​top​ ​represents​ ​Spain​ ​and​ ​the​ ​line​ ​at​ ​the​ ​bottom​ ​represents​ ​Portugal
 MGCR​ ​382​ ​Assignment​ ​#1

b)​ ​Which​ ​country​ ​has​ ​the​ ​comparative​ ​advantage​ ​in​ ​grapes?​ ​In​ ​leather​ ​footwear?​ ​(1​ ​POINTS)

​ ​Spain​ ​is​ ​17/11​ ​(1.54)​ ​ ​times​ ​better​ ​than​ ​Portugal​ ​in​ ​producing​ ​grapes​ ​but​ ​only​ ​5/4​ ​ ​(1.25)​ ​times
better​ ​in​ ​leather​ ​footwear​ ​production.​ ​Portugal​ ​is​ ​only​ ​11/17​ ​(0.65​ ​)​ ​times​ ​as​ ​good​ ​as​ ​Spain​ ​in
producing​ ​grapes​ ​and​ ​4/5​ ​ ​times​ ​(0.8)as​ ​good​ ​in​ ​leather​ ​footwear​ ​production.

Therefore:
Comparative​ ​advantage​ ​in​ ​grapes:​​ ​Spain
Comparative​ ​advantage​ ​in​ ​leather​ ​footwear:​ P
​ ortugal

c)​ ​What​ ​is​ ​the​ ​range​ ​of​ ​possible​ ​exchange​ ​rates?​ ​Provide​ ​the​ ​ranges​ ​in​ ​both​ ​grapes/footwear​ ​and
footwear/grapes.​ ​(2​ ​POINTS)

Spain​ ​ratio​ ​:​ ​17/5

Portugal​ ​ration​ ​:​ ​11/4

Grapes/footwear​ ​range​ ​is​ ​ ​ ​11/4​ ​ ​ ​≤​ ​ ​x​ ​≤​ ​ ​17/5

Footwear/grapes​ ​range​ ​is​ ​ ​ ​ ​ ​5/17​ ​≤​ ​ ​x​ ​≤​ ​ ​ ​4/11

**​ ​X​ ​means​ ​ ​the​ ​exchange​ ​rate

 MGCR​ ​382​ ​Assignment​ ​#1

PROBLEM​ ​2​ ​(5​ ​POINTS)

Assume​ ​that​ ​the​ ​exchange​ ​is​ ​0.15​ ​SEK/1​ ​CND.

a)​ ​A​ ​forecast​ ​predicts​ ​a​ ​5%​ ​CND​ ​depreciation.​ ​What​ ​is​ ​the​ ​value​ ​of​ ​the​ ​exchange​ ​rate​ ​that​ ​this
individual​ ​is​ ​predicting?​ ​(2​ ​POINTS)
-​ ​0.05​ ​=​ ​(​ ​X​ ​-​ ​0.15)​ ​/​ ​0.15

Solve​ ​for​ ​X

X​ ​=​ ​0.1425​ ​SEK​ ​/​ ​CDN

Rounded​ ​answer​ ​:​ ​0.14​ ​SEK​ ​/​ ​CDN

b)​ ​Another​ ​forecast​ ​is​ ​predicting​ ​a​ ​12%​ ​SEK​ ​appreciation.​ ​What​ ​is​ ​the​ ​value​ ​of​ ​the​ ​exchange​ ​rate​ ​that​ ​this
individual​ ​is​ ​predicting?​ ​(2​ ​POINTS)

0.12​ ​= (​ ​(1/X​ ​-​ ​1/0.15)​ ​ ​÷​ ​ ​1/0.15​​ ​)

Solve​ ​for​ ​X

X​ ​=​ ​0.1339​ ​SEK​ ​/​ ​CAD​ ​or​ ​7.47​ ​CAD/SEK

 MGCR​ ​382​ ​Assignment​ ​#1

c)​ ​Do​ ​the​ ​forecasters​ ​in​ ​a)​ ​and​ ​b)​ ​agree​ ​or​ ​disagree​ ​with​ ​each​ ​other?​ ​Explain.​ ​(1​ ​POINTS)

The​ ​forecasts​ ​in​ ​a)​ ​and​ ​b)​ ​disagree​ ​on​ ​the​ ​amount​ ​change​ ​in​ ​the​ ​exchange​ ​rate.​ ​However,​ ​they
agree​ ​with​ ​each​ ​other​ ​on​ ​the​ ​direction​ ​of​ ​the​ ​forecast​ ​because​ ​a​ ​depreciation​ ​in​ ​the​ ​CAD​ ​in
comparison​ ​to​ ​the​ ​SEK​ ​means​ ​that​ ​for​ ​each​ ​canadian​ ​dollar,​ ​you​ ​will​ ​get​ ​less​ ​swedish​ ​krona.
This​ ​is​ ​equivalent​ ​to​ ​an​ ​appreciation​ ​in​ ​the​ ​SEK,​ ​which​ ​means​ ​that​ ​you​ ​will​ ​be​ ​able​ ​to​ ​purchase
1CAD​ ​for​ ​less​ ​swedish​ ​krona.
 MGCR​ ​382​ ​Assignment​ ​#1

QUESTION​ ​3​ ​(10​ ​POINTS)

Assume​ ​that​ ​the​ ​British​ ​Pound​ ​is​ ​currently​ ​traded​ ​at​ ​1.17​ ​£/1​ ​€.​ ​The​ ​Brazilian​ ​Real​ ​is​ ​trading​ ​at​ ​3.36
BRL/1​ ​€.

a)​ ​Determine​ ​the​ ​implied​ ​BRL/1​ ​£​ ​cross​ ​rate.​ ​(4​ ​POINTS)

£​/​ ​1​ ​BRL​ ​=​ ​1.17​ ​ ​£/1​ ​€​ ​ ​÷​ ​3.36​ ​BRL/1​ ​€​ ​=​ ​0.348​ ​£/​ ​BRL

￡BRL/1​ ​£​ ​=​ ​ ​1​ ​/​ ​0.348​ ​=​ ​2.87​ ​BRL/1​ ​£

b)​ ​Suppose​ ​that​ ​the​ ​Real​ ​to​ ​pound​ ​exchange​ ​rate​ ​were​ ​3.19​ ​BRL/1​ ​£.​ ​Is​ ​there​ ​any​ ​arbitrage​ ​opportunity?
Explain.​ ​(2​ ​POINTS)

Yes,​ ​since​ ​the​ ​currency​ ​rates​ ​do​ ​not​ ​match.​ ​A​ ​dealer​ ​is​ ​offering​ ​a​ 2 ​ .87​ ​BRL/1​ ​£​ ​ ​as​ ​opposed​ ​to​ ​the
rate​ ​of​ ​3.19​ ​BRL/1​ ​£​ ​ ​which​ ​is​ ​superior.​ ​ ​Someone​ ​holding​ ​Real​ ​currency​ ​can​ ​exchange​ ​their​ ​money​ ​into
euros,​ ​and​ ​then​ ​exchange​ ​their​ ​euros​ ​into​ ​pounds​ ​to​ ​then​ ​change​ ​it​ ​back​ ​to​ ​BRL​ ​at​ ​a​ ​higher​ ​exchange
rate​ ​which​ ​would​ ​result​ ​in​ ​a​ ​profit.

c)​ ​Assume​ ​you​ ​have​ ​1000​ ​BRL.​ ​What​ ​is​ ​your​ ​profit​ ​in​ ​BRL?​ ​(4​ ​POINTS)

Exchange​ ​1000​ ​BRL​ ​for​ ​297.62​ ​1​ ​€​ ​at​ ​a​ ​rate​ ​of​ ​3.36BRL/1​ ​€
Exchange​ ​297.62​ ​€​ ​into​ ​348.22​ ​£​ ​at​ ​a​ ​rate​ ​of​ ​1.17£/1​ ​€
Exchange​ ​348.22​ ​£​ ​ ​for​ ​1110.82​ ​BRL​ ​at​ ​a​ ​rate​ ​of​ ​3.19BRL/£

Profit=​ ​1110.82-1000=​ ​110.82BRL

 MGCR​ ​382​ ​Assignment​ ​#1

QUESTION​ ​4​ ​(10​ ​POINTS)

The​ ​Bank​ ​of​ ​McGill​ ​offers​ ​you​ ​the​ ​following​ ​quotes:

a)​ ​ ​How​ ​many​ ​Australian​ ​Dollars​ ​will​ ​you​ ​need​ ​to​ ​buy​ ​100​ ​USD?​ ​(2​ ​POINTS)
133​ ​AUD​ ​ ​(1.33​ ​AUD/USD​ ​*100​ ​USD)

b)​ ​ ​How​ ​many​ ​Euros​ ​will​ ​you​ ​need​ ​to​ ​sell​ ​to​ ​get​ ​200​ ​Australian​ ​Dollars?​ ​(2​ ​POINTS)
200​ ​AUD/​ ​(1.41​ ​AUD/EUR)​ ​=​ ​141.84​ ​EUR

c)​ ​ ​How​ ​many​ ​USD​ ​will​ ​you​ ​receive​ ​if​ ​you​ ​sell​ ​50​ ​Australian​ ​Dollars?​ ​(2​ ​POINTS)
50​ ​AUD/(1.3​ ​AUD/USD)​ ​=​ ​38.46​ ​USD

d)​ ​ ​How​ ​many​ ​Australian​ ​Dollars​ ​will​ ​you​ ​need​ ​to​ ​buy​ ​1000​ ​Euros?​ ​(2​ ​POINTS)
(1.43​ ​AUD/EUR​ ​*​ ​1000​ ​EUR)=​ ​1430​ ​AUD

e)​ ​ ​How​ ​many​ ​USD​ ​will​ ​you​ ​need​ ​to​ ​buy​ ​75​ ​Australian​ ​Dollars?​ ​(2​ ​POINTS)
75​ ​AUD​ ​/​ ​(1.33​ ​AUD/USD)=​ ​56.39​ ​USD
 MGCR​ ​382​ ​Assignment​ ​#1

PROBLEM​ ​5​ ​(10​ ​POINTS)

Assume​ ​that​ ​you​ ​have​ ​the​ ​following​ ​information:

Is​ ​covered​ ​interest​ ​arbitrage​ ​worthwhile?​ ​If​ ​so,​ ​calculate​ ​the​ ​profit​ ​after​ ​one​ ​year​ ​assuming​ ​that​ ​you
have​ ​500,000​ ​Yuan.

500​ ​000​ ​Yuan​ ​invested​ ​at​ ​one-year​ ​interest​ ​rate​ ​of​ ​2.58%​ ​which​ ​will​ ​give​ ​me​ ​ ​512,900​ ​Yuan​ ​(500​ ​000​ ​*
1.0258)

Convert​ ​500,​ ​000​ ​Yuan​ ​at​ ​spot​ ​rate​ ​into​ ​8​ ​264​ ​600​ ​Yen.​ ​After​ ​that,​ ​invest​ ​at​ ​the​ ​one​ ​year​ ​yen​ ​rate​ ​of
2.85%​ ​which​ ​will​ ​give​ ​me​ ​ ​8​ ​500​ ​141.1​ ​Yen​ ​after​ ​one​ ​year​ ​(​ ​8​ ​264​ ​600​ ​*​ ​1.0285)

Exchange​ ​8​ ​500​ ​141.1​ ​Yen​ ​into​ ​Yuan​ ​using​ ​the​ ​one-year​ ​forward​ ​exchange​ ​rate.​ ​This​ ​will​ ​result​ ​in​ ​561
369.26​ ​Yuan.

Arbitrage​ ​profit=​ ​561​ ​369.26​ ​-​ ​512,​ ​900​ ​=​ ​48,​ ​469.26​ ​Yuan

The​ ​interest​ ​arbitrage​ ​is​ ​worthwhile​ ​because​ ​it​ ​generates​ ​a​ ​risk-free​ ​profit,​ ​since​ ​the​ ​exchange​ ​rate​ ​will
not​ ​fluctuate​ ​thanks​ ​to​ ​the​ ​forward​ ​exchange​ ​rate.
 MGCR​ ​382​ ​Assignment​ ​#1

PROBLEM​ ​6​ ​(20​ ​POINTS)​ ​<Max​ ​2​ ​Pages>

Canada​ ​and​ ​the​ ​EU​ ​are​ ​currently​ ​negotiating​ ​a​ ​trade​ ​deal​ ​which​ ​would​ ​reduce​ ​tariffs​ ​significantly.
What​ ​are​ ​the​ ​implications​ ​for​ ​Canadian​ ​companies?​ ​What​ ​are​ ​the​ ​implications​ ​for​ ​Canadian
consumers?​ ​Why​ ​would​ ​regions​ ​have​ ​potentially​ ​wanted​ ​to​ ​block​ ​the​ ​deal?​ ​How​ ​could​ ​this​ ​deal​ ​affect
Belgium?​ ​Italy?​ ​(Please​ ​include​ ​your​ ​sources)

The​ ​trade​ ​deal​ ​currently​ ​being​ ​negotiated​ ​between​ ​Canada​ ​and​ ​the​ ​EU​ ​is​ ​the​ ​Comprehensive
Economic​ ​and​ ​Trade​ ​Agreement​ ​(CETA),​ ​which​ ​aims​ ​to​ ​“open​ ​new​ ​markets​ ​in​ ​the​ ​EU​ ​for​ ​our​ ​exporters
and​ ​generate​ ​significant​ ​benefits​ ​for​ ​all​ ​Canadians”​ ​(Justin​ ​Trudeau,​ ​2016)​ ​.​ ​According​ ​to​ ​the
government​ ​of​ ​Canada,​ ​once​ ​CETA​ ​is​ ​fully​ ​implemented​ ​“​98​ ​percent​ ​of​ ​EU​ ​tariff​ ​lines​ ​will​ ​be​ ​duty-free
for​ ​Canadian​ ​goods,​ ​and​ ​an​ ​additional​ ​one​ ​percent​ ​will​ ​be​ ​eliminated​ ​over​ ​a​ ​seven-year​ ​phase​ ​out
period.​ ​Tariff​ ​elimination​ ​will​ ​provide​ ​enhanced​ ​export​ ​opportunities​ ​into​ ​the​ ​EU​ ​market​ ​for​ ​Canadian
producers,​ ​processors,​ ​and​ ​manufacturers,​ ​as​ ​well​ ​as​ ​for​ ​agricultural​ ​and​ ​agri-food​ ​products,​ ​fish​ ​and
seafood,​ ​forestry​ ​goods,​ ​and​ ​the​ ​full​ ​range​ ​of​ ​industrial​ ​goods​ ​”​ ​(​ ​Government​ ​of​ ​Canada,​ ​2016).
Therefore,​ ​Canadian​ ​companies​ ​will​ ​be​ ​able​ ​to​ ​reach​ ​a​ ​ ​larger​ ​customer​ ​base​ ​in​ ​order​ ​to​ ​sell​ ​their
products.

The​ ​implications​ ​of​ ​reducing​ ​tariffs​ ​significantly​ ​between​ ​the​ ​EU​ ​and​ ​Canada​ ​for​ ​Canadian
companies​ ​is​ ​highly​ ​dependent​ ​on​ ​the​ ​industry,​ ​as​ ​well​ ​as​ ​consumer​ ​demand​ ​for​ ​that​ ​particular​ ​good​ ​in
both​ ​Europe​ ​and​ ​Canada.​ ​If​ ​Canadian​ ​demand​ ​for​ ​European​ ​goods​ ​is​ ​high,​ ​Canada​ ​would​ ​import​ ​more
European​ ​goods,​ ​thus​ ​threatening​ ​Canadian​ ​companies​ ​which​ ​will​ ​now​ ​face​ ​competition​ ​from​ ​European
companies.​ ​The​ ​increase​ ​of​ ​competition​ ​due​ ​to​ ​the​ ​increase​ ​of​ ​imports​ ​in​ ​Canada​ ​could​ ​be​ ​detrimental
to​ ​Canadian​ ​companies,​ ​as​ ​they​ ​would​ ​have​ ​to​ ​lower​ ​their​ ​prices​ ​or​ ​change​ ​their​ ​competitive​ ​positioning
in​ ​order​ ​to​ ​be​ ​able​ ​to​ ​compete.​ ​Conversely,​ ​Canadian​ ​companies​ ​would​ ​benefit​ ​from​ ​this​ ​negotiation​ ​if
demand​ ​for​ ​Canadian​ ​products​ ​in​ ​Europe​ ​is​ ​high,​ ​as​ ​Canadian​ ​companies​ ​would​ ​then​ ​export​ ​more​ ​and
see​ ​an​ ​increase​ ​in​ ​revenues.​ ​In​ ​other​ ​words,​ ​many​ ​trading​ ​opportunities​ ​could​ ​arise.​ ​For​ ​example,​ ​Italy
does​ ​not​ ​produce​ ​(important​ ​quantities​ ​of)​ ​petroleum,​ ​but​ ​Canada​ ​does.​ ​Therefore,​ ​Italy​ ​could​ ​be​ ​highly
interested​ ​in​ ​importing​ ​its​ ​oil​ ​from​ ​Canada,​ ​especially​ ​if​ ​tariffs​ ​are​ ​significantly​ ​reduced​ ​by​ ​the
agreement.

The​ ​potential​ ​increase​ ​in​ ​net​ ​exports​ ​would​ ​result​ ​in​ ​increased​ ​expenditure​ ​on​ ​Canadian​ ​goods,
causing​ ​the​ ​aggregate​ ​expenditure​ ​function​ ​to​ ​shift​ ​upwards.​ ​This​ ​would​ ​result​ ​in​ ​an​ ​increase​ ​in​ ​the
equilibrium​ ​level​ ​of​ ​Canada’s​ ​ ​GDP.​ ​According​ ​to​ ​Conference​ ​Board​ ​of​ ​Canada​ ​research,​ ​with​ ​the
agreement​ ​in​ ​place​ ​it​ ​is​ ​estimated​ ​that​ ​by​ ​2023​ ​the​ ​elimination​ ​of​ ​tariffs​ ​will​ ​cause​ ​a​ ​rise​ ​in​ ​exports​ ​of
$1.4​ ​billion,​ ​as​ ​indicated​ ​by​ ​the​ ​chart​ ​in​ ​the​ ​appendix​ ​(Goldfarb,​ ​2016).​ ​Also,​ ​if​ ​Europeans​ ​were​ ​to
consume​ ​more​ ​Canadian​ ​goods,​ ​that​ ​could​ ​affect​ ​the​ ​exchange​ ​rate​ ​since​ ​the​ ​ ​Canadian​ ​dollar’s​ ​value
would​ ​increase,​ ​holding​ ​all​ ​other​ ​factors​ ​constant
 For​ ​Canadian​ ​consumers,​ ​CETA​ ​would​ ​likely​ ​provide​ ​higher​ ​quality​ ​goods,​ ​lower​ ​prices,​ ​and​ ​a
greater​ ​variety​ ​of​ ​goods​ ​available.​ ​Commonly​ ​imported​ ​European​ ​goods​ ​such​ ​as​ ​wine,​ ​cheese,​ ​and​ ​cars
will​ ​become​ ​more​ ​affordable​ ​to​ ​Canadians​ ​with​ ​the​ ​presence​ ​of​ ​CETA.​ ​Additionally,​ ​a​ ​joint​ ​Canada-EU
study​ ​indicates​ ​that​ ​CETA​ ​would​ ​not​ ​only​ ​increase​ ​bilateral​ ​trade​ ​and​ ​Canada’s​ ​income​ ​by​ ​a​ ​projected
$12​ ​billion​ ​annually,​ ​but​ ​provide​ ​economic​ ​growth​ ​equivalent​ ​to​ ​creating​ ​almost​ ​80,000​ ​new​ ​jobs​ ​(CTV
news,​ ​2016​ ​).

Some​ ​regions​ ​have​ ​wanted​ ​to​ ​potentially​ ​block​ ​the​ ​deal​ ​in​ ​order​ ​to​ ​protect​ ​their​ ​local​ ​businesses
in​ ​fear​ ​that​ ​the​ ​reduction​ ​of​ ​tariffs​ ​will​ ​reduce​ ​barriers​ ​to​ ​entries,​ ​therefore​ ​allowing​ ​foreign​ ​companies
to​ ​expand​ ​to​ ​their​ ​region​ ​and​ ​overrun​ ​their​ ​local/​ ​“infant”​ ​industries.​ ​ ​“​ ​Some​ ​regions​ ​in​ ​Belgium​ ​have
expressed​ ​concern​ ​that​ ​CETA​ ​will​ ​weaken​ ​environmental,​ ​consumer,​ ​as​ ​well​ ​as​ ​labor​ ​regulations”​ ​(The
Globe​ ​and​ ​Mail,​ ​2016)​ ​ ​.​ ​Additionally,​ ​Belgian​ ​farmers​ ​fear​ ​competition​ ​from​ ​Canadian​ ​dairy​ ​products
that​ ​would​ ​arise​ ​from​ ​the​ ​agreement.​ ​Italy​ ​exports​ ​many​ ​of​ ​their​ ​local​ ​goods​ ​to​ ​Canada,​ ​with​ ​13,147
Italian​ ​companies​ ​exporting​ ​to​ ​Canada​ ​(European​ ​Commission,​ ​2016).​ ​Italy​ ​will​ ​benefit​ ​from​ ​the
agreement​ ​as​ ​they​ ​will​ ​be​ ​able​ ​to​ ​more​ ​easily​ ​export​ ​local​ ​goods​ ​such​ ​as​ ​textiles,​ ​produce,​ ​and​ ​and
furniture.

To​ ​summarize,​ ​this​ ​agreement​ ​has​ ​potential​ ​pros​ ​and​ ​cons​ ​for​ ​both​ ​parties.​ ​However,​ ​there​ ​are
many​ ​other​ ​factors​ ​to​ ​consider​ ​such​ ​as​ ​transportation​ ​costs​ ​(Canada​ ​and​ ​Europe​ ​are​ ​geographically​ ​far
apart,​ ​so​ ​even​ ​after​ ​considering​ ​the​ ​reduction​ ​of​ ​tariffs​ ​provided​ ​by​ ​this​ ​agreement,​ ​Canadian​ ​or​ ​EU
companies​ ​might​ ​still​ ​be​ ​reluctant​ ​to​ ​trade​ ​due​ ​to​ ​higher​ ​transportation​ ​costs​ ​than​ ​if​ ​they​ ​were​ ​to​ ​trade
with​ ​countries​ ​geographically​ ​closer​ ​to​ ​them)​ ​and​ ​exchange​ ​rates​ ​(once​ ​again,​ ​even​ ​after​ ​considering​ ​the
reduction​ ​of​ ​tariffs​ ​implied​ ​by​ ​this​ ​agreement,​ ​some​ ​Canadian​ ​or​ ​EU​ ​ ​companies​ ​might​ ​be​ ​more​ ​tempted
trade​ ​with​ ​other​ ​countries​ ​that​ ​would​ ​offer​ ​them​ ​a​ ​more​ ​profitable​ ​exchange​ ​rate).
Appendix
 Work​ ​Cited

Service,​ ​W.​ ​(2016,​ ​October​ ​19).​ ​Belgium's​ ​Wallonia​ ​region​ ​rejects​ ​deadline​ ​to​ ​sign​ ​EU-Canada​ ​deal.
Retrieved​ ​February​ ​14,​ ​2017,​ ​from
http://www.theglobeandmail.com/report-on-business/international-business/european-business/belgi
ums-wallonia-region-rejects-deadline-to-sign-eu-canada-deal/article32438167/

Canada-European​ ​Union​ ​Comprehensive​ ​Economic​ ​and​ ​Trade​ ​Agreement​ ​(CETA).​ ​(2017,​ ​February
07).​ ​Retrieved​ ​February​ ​14,​ ​2017,​ ​from
http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cet
a-aecg/index.aspx?lang=eng

CETA:​ ​A​ ​progressive​ ​trade​ ​agreement​ ​for​ ​a​ ​strong​ ​middle​ ​class.​ ​(2017,​ ​February​ ​10).​ ​Retrieved​ ​February
14,​ ​2017,​ ​from
http://www.international.gc.ca/gac-amc/campaign-campagne/ceta-aecg/index.aspx?lang=eng

Danielle​ ​Goldfarb,​ ​Special​ ​to​ ​Financial​ ​Post.​ ​(n.d.).​ ​Behind​ ​CETA's​ ​headlines:​ ​What​ ​Canadians​ ​need
to​ ​know​ ​about​ ​the​ ​deal​ ​and​ ​what's​ ​at​ ​stake.​ ​Retrieved​ ​February​ ​14,​ ​2017,​ ​from
http://business.financialpost.com/fp-comment/behind-cetas-headlines-what-canadians-need-to-know
-about-the-deal-and-whats-at-stake

Italy​ ​:​ ​CETA​ ​in​ ​your​ ​town.​ ​(n.d.).​ ​Retrieved​ ​February​ ​14,​ ​2017,​ ​from
http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-in-your-town/italy_en.htm

Press,​ ​T.​ ​C.​ ​(n.d.).​ ​Belgian​ ​region​ ​rejects​ ​deadline​ ​to​ ​sign​ ​EU-Canada​ ​deal.​ ​Retrieved​ ​February​ ​14,
2017,​ ​from
http://business.financialpost.com/news/economy/belgian-region-rejects-deadline-to-sign-eu-canada-
deal

How​ ​the​ ​trade​ ​agreement​ ​with​ ​the​ ​EU​ ​could​ ​benefit​ ​Canada.​ ​(n.d.).​ ​Retrieved​ ​February​ ​14,​ ​2017,
from
http://www.ctvnews.ca/business/how-the-trade-agreement-with-the-eu-could-benefit-canada-1.3134
117

Behind​ ​CETA's​ ​headlines:​ ​What​ ​Canadians​ ​need​ ​to​ ​know​ ​about​ ​the​ ​deal​ ​and​ ​what's​ ​at​ ​stake.​ ​(n.d.).
Retrieved​ ​February​ ​11,​ ​2017,​ ​from
http://www.conferenceboard.ca/press/speech_oped/16-10-21/behind_ceta_s_headlines_what_cana
dians_need_to_know_about_the_deal_and_what_s_at_stake.as​px

Canada​ ​and​ ​EU​ ​sign​ ​historic​ ​trade​ ​agreement​ ​during​ ​EU-Canada​ ​Summit.​ ​(2016,​ ​October​ ​30).
Retrieved​ ​February​ ​14,​ ​2017,​ ​from
http://pm.gc.ca/eng/news/2016/10/30/canada-and-eu-sign-historic-trade-agreement-during-eu-canad
a-summit