4.1.5 - Trading Blocs

Question 1

What is a trading bloc?

Answer 1

Group of countries that form an agreement to reduce or eliminate protectionist measures between each other

Question 2

What do trading blocs enable for businesses?

Answer 2

• Increases trade liberalisation
• Enabled entry to new markets easily which can lead to increase in sales and revenue

Question 3

3 examples of trade blocs

Answer 3

• European Union
• ASEAN
• NAFTA

Question 4

What does ASEAN not allow but EU does?

Answer 4

Less integrated than EU as does not allow the free movement of people but does allow free flow of goods

Question 5

Limitations of businesses outside of the trading bloc

Answer 5

• Higher costs from protectionist measures
• Less competitive when selling goods to countries inside the bloc
• Decreases sales volume to countries within the bloc

Question 6

Advantages for businesses inside the trading bloc

Answer 6

• Access to more markets can sell to more customers due to free movement
• External tariff walls - Protect businesses within the trading bloc
• Businesses may gain additional support from the government to enable competitiveness against businesses in countries inside the bloc
• Free movement of labour allowing the source of workers to be larger

Question 7

Limitations for businesses inside the trading bloc

Answer 7

• Increased competition within the bloc
• New rules and regulations may be put into place that the businesses have to adhere to
• External tariffs may lead to retaliation from these countries outside the bloc
• Due to less competition outside the bloc this may lead to inefficiency