Canadians Assess Impact of Global Trade

By Oshins, Alice H. | Risk Management, April 1990 | Go to article overview

Canadians Assess Impact of Global Trade


Oshins, Alice H., Risk Management


by Alice H. Oshins As Canada's sole French-speaking province, Quebec has always taken a keen interest in international issues. And today, in light of the U.SCanada Free Trade Agreement and Europe's emerging common market, global trade issues are popular topics among Quebec's business community. Such was the theme of the RIMS Montreal chapter's annual I-Day last March, Europe 1992, Free Trade and Challenges to Risk Management. "1992 is not a final date. It is a process," said Roger Paquette, assistant deputy minister of Quebec's International Affairs Ministry. He said that Quebec industry should expect a more competitive and independent Europe in 1992 and counter these changes with innovation and technology. "The changing world economies will impact and alter the structure of the economy of Quebec, which, with only 6 million people, is a relatively small but open economy," he said. While Mr. Paquette said Quebec manufacturers want to develop trade ties within Europe, 75 percent of Quebec's exports currently end up in the United States. Francois Bourassa, an attorney for the National Bank of Canada, said that the creation of major trading blocks within Europe and North America "will lead to super-trading blocks and ultimately to true globalization."

Awareness

When dealing internationally, Mr. Bourassa said, Canadian companies should be aware of the potential for political, economic and trade risks. Political risks include the potential for war or revolution in a country, economic risks involve exchange rates and inflation and trade risks could be a buyer's inability to pay.

Yet, Mr. Bourassa added, one risk companies do not usually consider when entering into a trade agreement with a foreign firm involves contracts. He recommends that a company requests a contract clause outlining the law and the jurisdiction to govern in the event of a dispute.

"If there is no jurisdiction specified in your contract," Mr. Bourassa said, "then you have a problem, because you haven't identified and managed the risk from the start."

He said that in such an agreement, companies can opt for arbitration instead of taking the case before the courts. Arbitration," he said, "is confidential-there is no published result for the record. It is also much faster."

Free Trade As for the free trade agreement between the United States and Canada, Mr. Bourassa said that issues to watch for are countervailing duties, which are established to offset government grants or subsidies, and control mechanisms such as anti-dumping measures.

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