ASEAN (Association of Southeastern Asian Nations) – Founded in 1967, ASEAN now consists of 10 Southeast Asian nations with the shared goal of creating trade-friendly policies, promoting economic growth, and ensuring peace and stability between member states.The goal of the EU is to promote the “Four Freedoms”: the free movement of goods, services, people and money across borders within the member countries. EU (European Union) – This agreement consists of 27 European countries 19 of which share a common currency: the Euro.A new version with updated terms was signed by the United States in 2020. NAFTA (North American Free Trade Agreement)/USMCA (US-Mexico-Canada Agreement) – This agreement, which took effect in 1994, promotes trade between the United States, Mexico and Canada.Three important examples of trading blocs are: Trading blocs occur whenever two or more nations agree to liberalize trade across their borders via the removal of a combination of tariff and non-tariff. ![]() These rules are designed to limit trade barriers such as subsidies, tariffs, and quotas. Definition of Economic Bloc: A set of countries which engage in international trade together, and are usually related through a free trade agreement or. Trading blocs are simply groups of countries that establish rules for trade between all participating countries. When these agreements contain multiple countries, we refer to them as Trading Blocs. Interdependenceīecause trading blocs increase trade among participating countries, the countries become increasingly dependent on each other.Because there are many benefits to participating in trade, countries often make agreements with other countries to facilitate the free and fair flow of goods and services between them. ![]() For example, the European Union now not only deals not only with trade partnerships, but also with human rights, consumer protection and greenhouse gas emissions. Loss of SovereigntyĪ trading bloc is likely to lead to at least partial loss of sovereignty for its participants. The average cost of production is decreased because mass production is allowed. The larger markets created via trading blocs permit economies of scale. Increases economic leverage for the trading bloc as a whole. Open trade leads to faster transfer of technology across borders. The EU has trade agreements in place with these countries/regions, but both sides are now negotiating an update. It increases local investments since the trading bloc increases the overall size of markets for firms. Size of MarketĪn increase in foreign direct investment results from trade blocs and benefits the economies of participating nations. Thus, the member country may start importing from other member countries since the price becomes artificially cheaper than buying from the previous non-member country. When a trade bloc is formed, an external tariff maybe be applied to non-member countries, making some goods that were initially cheaper, now more expensive. The more efficient producer produces, leading to less wastage of scarce resources. Trade CreationĮliminations of trade barriers for member countries increase domestic production and consumption. ![]() – Union of South American Nations (Unasur/Unasul) 1. – North American Free Trade Agreement (NAFTA) Reducing or eliminating barriers (such as tariffs and non-tariffs) allows members within the agreement to trade amongst each other more easily and freely. For example, the European Union is an economic union. A trade bloc (or trading bloc) is a type of agreement between governments where barriers to international trade are eliminated or reduced between participating nations/regions. RTAs, defined in the WTO as reciprocal preferential trade agreements between two or more partners, have allowed countries to negotiate rules and commitments. Economic UnionĪn Economic Union has the same benefits as a common market but there is a common tax system and employs the same currency. For example, no permits are required to work in another member country. Common MarketĪ Common Market is like a customs union but there is a free flow of factors of productions between the countries. Customs UnionĪ Customs Union is like a free trade area except that member countries maintain a common tariff against non-member countries. For example, the North American Free Trade Agreement ( NAFTA) between the USA, Canada & Mexico created a free trade area. Two or more countries form a Free Trade Area in which trade barriers between the countries are abolished but each country maintains its own tariffs against non-member countries.
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