4.1.5 - trading blocs Flashcards
what is a trading bloc?
a group of countries that have made a formal agreement to trade with one another, often reducing or eliminating tariffs and other trade barriers.
true or false:
trading blocs can lead to increased trade among member countries.
true
fill in the blank:
an example of a trading bloc in Europe is the _____.
European Union (EU)
what is the primary purpose of a free trade area?
to allow member countries to trade with each other without tariffs on most goods.
which of the following is a characteristic of a customs union?
A) Common external tariffs
B) Individual trade policies
C) No trade barriers among members
A) Common external tariffs
what is the difference between a free trade area and a customs union?
a free trade area eliminates tariffs among member countries, while a customs union also includes a common external tariff on non-member countries.
name the benefits of participating in a trading bloc.
-increased market access for member countries.
- allows businesses to benefit from
comparative advantage - cheaper, better quality products. - makes it easier to source labour if free movement is permitted.
- aligns international legislation making markets more efficient.
true or false:
trading blocs can create trade diversion.
true
what does the term ‘trade diversion’ refer to?
the shift of trade from a more efficient producer to a less efficient one due to the formation of a trading bloc.
which trading bloc includes the United States, Canada, and Mexico?
United States-Mexico-Canada Agreement (USMCA)
how does a common market differ from a customs union?
a common market allows for the free movement of factors of production, such as labor and capital, in addition to goods.
fill in the blank:
the _____ is a trading bloc in South America that promotes economic integration.
Mercosur
what is the role of the World Trade Organization (WTO) in relation to trading blocs?
the WTO regulates international trade agreements and ensures that trading blocs do not violate global trade rules.
true or false:
all countries in a trading bloc must have the same economic policies.
false
name the potential disadvantages of trading blocs.
- can lead to trade barriers for non-member countries.
- infant industries are vulnerable to large international competitors.
- inefficient producers may be protected leading to poor quality and high prices.
Which of the following is NOT a type of trading bloc?
A) Free trade area
B) Customs union
C) Economic union
D) Trade embargo
D) Trade embargo
what is an economic union?
an economic union combines a common market with a customs union and harmonises economic policies among member countries.
(adoption of a common currency)
true or false:
trading blocs can enhance political ties between member countries, and potentially create tension with non-member countries.
true
what is the purpose of NAFTA (North American Free Trade Agreement)?
a free trade zone including trade, investment, labour, financial dealings and environmental legislation.
(negotiate separate dealings with outside members).
what is the purpose of the ASEAN (Association of Southeast Asian Nations)?
free trade agreement between politically, economically and culturally diverse countries.
