Assume a Canadian company owns a manufacturing facility in an Asian country and

Question

Assume a Canadian company owns a manufacturing facility in an Asian country and that the Asian country is considering membership in a ten-member free-trade area within Asian. What could be an impact on the firm of the Asian country’s membership in the free-trade area?

a. There will be pressure to use workers from the other member of the free trade area especially when labor costs are lower

b. There may be justification to reduce exports from Canada to its facility in Asia and increase purchasing from countries within the free-trade area

c. There may be justification to reduce exports from Canada given the higher tariff that will result on products imported into the Asian country.

Explanation / Answer

Correct option: C. There may be justification to reduce exports from Canada given the higher tarrif that will result in products imported into the Asian country.

Explanation: when a country is a member of free trade area, it could have signed ''import quota'( limit on the quantity of a good that can be imported into a country in a given period of time)
This agreement will pressurise canadian company to limit imports from Canada.

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