4.1.5 Trade blocs Flashcards
trade bloc
groups of countries from different regions
come together to form agreement = flow of free trade
protected from imports by non member countries
-usually groups of countries in specific regions that manage and promote trade activities
4 reasons why have trade blocs?
1-reduce barriers e.g tariff
2-control/regulate trade e.g. prevent over-dominance
3-ethical trade (prevent exploitation)
4-free trade = lower price, increase export potential, higher growth and EOS
5 positives of trade blocs
positives : 1-beneficial pressures of competition 2-degree of protection from tough world, 3-specialisation = benefits of EOS 4-smaller countries greater say global trade agreements 5-good relationships
types of trade blocs
- free trade area e.g ASEAN, NAFTA
- customs union
- single market e.g. EU
single market
example of free trade area
no tariffs, common external tariffs, freedom of movement of goods/people, common rules/regulations
maintain of expansion through movement of labour = mass produce and skilled workers
- EU = level playing field- demanded by employers unifying rules/regulation
e. g. health/safety/environment goals
free trade area
no tariffs between members or external tariffs (checks origin country) negotiate own trade deals
agree eliminate/minimal trade barriers
participating nations = rules for area to operate, decide if tariffs in places/or other rules e.g. how to resolve trade disputes
e.g. NAFTA , EU African continental free trade area
pros and cons of free trade areas
pros:
1-less gov spending = eco growth, less on tariffs
2-dynamic & competitive = innovation- local business less reliant on gov subsidies
3-FDI & investors = boost domestic businesses
cons:
1-increase job outsourcing - less tariffs= MNCs produce cheaper countries = poor working conditions
2-degradation of natural resources
3-reduced tax revenue smaller countries struggle to replace revenue lost from import tariffs and fees
customs union (& adv and dis)
no tariffs& no border checks, common external tariff, trade deal for whole customs union
type of free trade agreement,
e.g.EU, Caribbean community, Eurasian customs union
adv: trade increase in members, reduce trade deflection
dis: trade decrease with non members, some in union = not receive fair share of tariff revenues, complexity of setting tariff rate= time & cost
EU:
group of countries that have formed a regional bloc based on a treaty of political and social and economic issues
aims: peace, prosperity, freedom
UK joined 1973, voted to leave June 2016
- 27/28 countries, Austria, Belgium, France, single market trade bloc, worlds largest trading bloc, world 2nd largest economy behind USA, 2014: EU output = $18.5trillion
- 5 largest economies: Germany, France, uk, Italy, Spain = account for around 70% of 28- trading bloc(before uk left)
impact of EU in businesses & positives and negatives
- free trade & movement of labour
- regulations for businesses: laws affect employee/consumer rights
positives:
1-security = economic stability and growth
2-business opportunity/no tariffs/free trade in Union
negatives:
1-no common language, difficult withdraw process
2-reduces power/responsibility of nations, members restrictive regulations
NAFTA & impact of NAFTA on business
North American free trade agreement, America, Mexico, Canada
-free trade area not force all member tariffs or other trade barriers to be same
- bigger markets = no extra taxes = lose to competitors
- national firms merge to form TNCs
- protection from foreign competitors & political stability
- dependant on foreign markets
features/benefits/drawbacks of NAFTA
features/benefits;
- tariffs eliminated = reduced import/export costs
- good for GDP (NAFTA boosted Mexican farm exports)
- creates jobs
drawbacks:
- led to job losses (682,900 in US)
- job migration suppressed wages
- Mexican farmers out of business = US companies degraded Mexican environment
- Mexican trucks access to US, Mexican trucks aren’t same safety standard as US trucks
ASEAN
association of south East Asian nations
- create common front against spread of communism
- promote political, economic and social stability from rising tensions in asian pacific region
FTA: lower intra regional tariffs = common effective preferential tariff scheme (CEPT) for AFTA
-criteria : agree to subscribe to all agreements began with 5 original member now expanded to 10
key features of ASEAN
positives and negatives
key features: characterised by great internal diversity, generally high economic growth, free flowing trade routes (easy access to each country’s workforces/ consumer bases)
positives:
- free flow of capital, goods/services, investment
- increase connectivity countries decrease isolation of poorer areas
negatives:
- reduce power of nations have a say and decrease responsibility
- members restricted by regulations (e.g. chosen trade partners, external tariffs)
- no common language spoken
impact of ASEAN on businesses
- increase foreign competition in domestic
- flows of investment, capital, skilled labour (capitalise on this as barriers to trade minimise)
- regional standards competition policy, consumer protection business
- fully fledged economic community = exchange easily
- small/medium firms= help/access to high tech areas
- 600 million inhabitant in ASEAN = large workforce
