4.1.5 - Trading Blocks

Question 1

What is a trading bloc

Answer 1

• A trading bloc is a type of intergovernmental agreement to reduce regional trade barriers
• Depending on how closely the members wish to integrate their economies they may form different types of trading blocs such as free trade areas, customs unions, common markets and full economic & monetary union

Question 2

What is the impact of Brexit on the UK

Answer 2

• Brexit means we leave the EU trading Bloc
• Without an agreement on trade, the UK would have to operate under World Trade Organisation
  (WTO) rules, which could mean customs checks and tariffs on goods as well as longer border check for travellers

Question 3

What is a hard brexit

Answer 3

• A hard Brexit would likely see the UK give up full access to the single market and full access of the customs union along with the EU
• The arrangement would prioritise giving Britain full control over its borders and making new trade deals
• A hard Brexit, however, could see British goods and services subject to tariffs, adding 10% to the cost of exported cars
• While sectors such as agriculture could lose protections against cheap imports from abroad

Question 4

What is a soft Brexit

Answer 4

• A soft Brexit would mean that the UK would have full access to the single market on a tariff free basis
• British firms could also do business in any part of the EU, and the goods from the UK would not be subject to border checks
• However this means the UK would have to make payments into the EU budget – which they don’t want to do and they have to accept the free movement of people which does not achieve the immigration targets of the government

Question 5

What is ASEAN

Answer 5

• ASEAN was started in 1967 by Thailand, Malaysia, Philippines, and Singapore to promote economic and social growth in the region
• Since then it has expanded several times with five more countries joining the trade bloc
• It has negotiated a free trade agreement among member states and with other countries such as China, as well as eased travel in the region for citizens of member countries.

Question 6

What is NAFTA

Answer 6

• NAFTA was created in 1992 with the simple idea of giving the customers in the USA, Canada and Mexico cheaper goods.
• Without import tariffs between the countries the goods are less expensive which is a bonus for the consumer, but not always popular with business

Question 7

What is trade bloc expansion

Answer 7

• Expansion of a trading bloc; the process of more countries joining an existing trading bloc, thereby making it expand
• These benefits might be; access to larger markets, economies of scale by producing more and selling more, enhanced competition and migration with a good supply of able bodied labour

Question 8

What are the opportunities of free trade

Answer 8

1 Freedom to trade; For example UK businesses can sell goods and services freely across the whole of the European Union

#2 Enlarged market; For example the size of the market for British goods is now 499 million people, can mean EOS
#3 Protection from international competition outside of the BLOC; For example UK businesses are protected from competition from China
#4 Freedom of movement of people; For example UK firms can employ talented people from across Europe.

Question 9

What are the drawbacks of free trade

Answer 9

• Free trade agreements (such as trading blocs) can also create problems for business
• Dominance of developed countries in global trading
• It can kill off domestic business in developing nations
• It can reduce national sovereignty or identity as countries become standardised, westernised