Have you ever questioned yourself why the cost of lettuce increases during a conflict in a distant nation? Well, war and international conflict in any country can have a devastating effect on Canada’s economy. This article will explore the different ways that international conflicts affect Canada’s domestic economy as well as how they are reflected on the statistics of Canada’s Gross Domestic Product (GDP).
Exports And Imports
Canada’s exports of goods reached a record-high of $546.7 billion in 2017, up 5.7 percent from the previous year. The global economy is linked in ways that make all countries interconnected. International conflicts, such as the U.S.-China trade war or Brexit, are also connected to Canada. Canada’s exports are a gauge of how much it sells to other nations.
The volume of imports indicates how much Canada buys from foreign nations. Cars are the most common import into Canada, followed closely by trucks, auto parts, and auto accessories. Apart from these, Canada imports crude oil, computers, gold, turbo-jets, and processed petroleum oil. Talking about the figures, Canada’s goods imports increased by 3.7% in December 2021.
Imports and exports are vital for a country. There are instances of countries that depend entirely on the basis of these. A fluctuation in the flow of goods can have a dreadful effect on a nation.
A trade war is a situation where countries take action against each other by imposing tariffs on goods and services. While the term ‘trade war’ implies that there are winners, it’s more accurate to think of a trade war as a mutually assured destruction. When one country raises tariffs, other countries retaliate with their own tariffs. The result of this type of escalation leads to higher prices for both consumers and producers. It can also cause job losses as companies have less access to international markets.
Here is an example of a trade war. A six-year trade dispute between the EU and the US culminated in the ‘banana wars’. The US protested that a programme from the EU violated free trade laws. Only 7% of the bananas consumed in Europe come from the Caribbean. Shockingly, the United States does not ship any bananas to Europe. Still, US multinational corporations control 75% of the EU market.
The EU allegedly provided privileged access to European markets for Caribbean banana exporters. When buying Latin American bananas from countries in Africa and the Caribbean across international borders in 1993, Europe imposed high import taxes. The Americans who cultivate and export bananas suffered a considerable loss as a result. The World Trade Organization received a complaint from the US about the EU. The EU was told to change its regulations after the US triumphed in 1997.
Cause Of Trade Wars
Trade wars are either deliberately planned or are the result of rash political choices. These wars are started with the following goals in mind:
Safeguard The Domestic Economy: Initiating a trade war is mostly done to assist domestic companies. Local businesses frequently struggle to compete with foreign competitors.
To Provide Job Opportunities: To lower unemployment and raise living standards, governments impose import restrictions.
To Protect a Country’s Intellectual Property: The government imposes import restrictions when intellectual property rights, trade secrets or other rights are violated.
Tourism Affected By International Conflicts
International conflict and its effect on tourism has been a very hot topic in recent years, especially with the rise of conflicting relationships between Russia and Ukraine.
The Russia-Ukraine conflict has had a negative effect on tourism in both countries. In Russia, tourist numbers have dropped sharply since the start of the conflict, with many people cancelling or postponing their trips. In Ukraine, the situation is even worse, with the country’s tourism industry effectively destroyed. This has had a devastating effect on the economy of both countries.
In 2020, Russia and Ukraine together accounted for 3% of all foreign travel expenditures worldwide. In 2022, a protracted conflict may result in a global loss of approximately 14 billion dollars in tourism revenue.
Risk Management Techniques
There are different ways to manage risks in today’s world. Some companies may use more than one technique depending on their business objectives.
Prioritizing risks and threats should always be the first step in developing a risk management plan. You can accomplish this by using a rating scale depending on the chance of each occurring danger.
Naturally, a danger that falls into the top category should take precedence over the others. There is a need of strategy to minimise, or at least mitigate, these risks. There is a catch, though. Priority should be given to a risk if it is on a lower rung but has the potential to cause greater financial harm.
· Buy Insurance
Determine the forms of insurance that your company might need by evaluating liabilities and regulatory requirements. The most common ones are life insurance, professional insurance, and disability insurance. When compared to the possible expense of uninsured risk, purchasing insurance offers you the peace of mind if something were to go downhill.
· Limit Liability
The legal concept of “limiting liability” prevents a business from being held accountable for amounts greater than the worth of its assets. This rule is founded on the notion that a corporation’s stockholders shouldn’t be held accountable for the obligations of the corporation.
There are several reasons why limiting liability is a good risk management technique for companies. First, it can help prevent lawsuits or other legal action against the company. Secondly, it can help protect the company’s assets and reputation. Lastly, it can help the company avoid financial losses. In a scenario of international conflict, limited liability helps reduce the brunt of the conflict on the company.
How RapidCents can help your Business During a Conflict?
RapidCents is a payment processor that has been helping merchants to operate their online businesses smoothly. There are different ways through which RapidCents can add stability to your business amid an international conflict. We help merchants by providing them with a stable way to continue payment processing without having to worry about the instability of the currency.
A good payment processor helps merchants during international conflict by allowing them to process payments in multiple currencies from different parts of the world. For example, if a merchant is selling goods or services to customers in the United States and Canada, they need to accept payments in both US and Canadian dollars.
If you have not yet become a RapidCents merchant, this is the right time to get in touch with RapidCents and elevate your business to the next level.
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