3.1.3 Trading Blocs (INCOMPLETE)

Question 1

What is a trade bloc?

Answer 1

Groups of countries where trade barriers are reduced or eliminated between member states.

Question 2

What is trade creation?

Answer 2

When there is an increase in the total amount of goods and services traded because of reduced trade restrictions within a trading bloc

Question 3

What is trade diversion?

Answer 3

This is when a trading bloc reduces imports from non member states, enabling businesses within member states to increase sales inside the trading bloc.

Question 4

What is a free market?

Answer 4

• Where there is free movement of people and capital
• Individuals in all member countries can work in any other member country
• Businesses based within a common market can invest in any member country.

Question 5

How many member states does the EU have?

Answer 5

27 Member states

Question 6

What are the benefits of trading within a trading bloc?

Answer 6

• Access to member states without trade restrictions
• No tariffs on imports from member states leading to lower prices benefitting businesses and customers
• Economies of scale
• Creates a larger market and attracts FDI
• Spreading of risk

Question 7

What are the constraints of trading in a trade bloc?

Answer 7

• No protection for domestic industries competing with other trading bloc members
• Higher competition for domestic producers
• Can take a long time to join trading bloc and make new rules

Question 8

What impact can firms operating in a trading bloc face?

Answer 8

• It will benefit businesses that can increase exports within a trading block
• Businesses competing with other firms in the trading bloc will face more competition
• Some businesses might resist regulations that aim to improve working conditions.

Question 9

What might happen if adverse events happen in a trade bloc that a country operates in?

Answer 9

The businesses in that country and the government are likely to be affected