4.1.5 Trading blocs

Question 1

What are Trading blocs?

Answer 1

Trading blocs are when the governments of a group of countries agree to trade together freely i.e. normally with no trade barriers

Question 2

What do memebers of Trading Blocs usually do?

Answer 2

The members of a trading bloc make preferential economic, and sometimes political, arrangements to boost trade

Question 3

What are Preferential trade areas?

Answer 3

Members agree to either reduce or eliminate trade barriers for a select number of goods or services, resulting in partial trade liberalisation

Question 4

What are Free trade areas?

Answer 4

Members agree to either reduce or eliminate trade barriers for all goods and services, resulting in trade liberalisation

Question 5

What are Customs unions?

Answer 5

Members agree to the removal of trade barriers amongst themselves and a common approach to trade barriers when dealing with countries outside of the bloc

Question 6

What are some examples of trading blocs?

Answer 6

EU - (Includes Political, Legal, Financial and Trading)
ASEAN
USMCA
ASEAN + 3
MERCOSUR

Question 7

What are Common Markets?

Answer 7

Members agree to the removal of trade barriers as well as the freedom of movement of factors of production within the bloc

Question 8

What are economic Unions?

Answer 8

Comprises of the features of both a customs union and a common market, including common economic policies

Question 9

What are some advantages being in a Trading bloc?

Answer 9

• Creation of Trade
• Enables growth
• Stronger competitive force (Colective bargining)
• Access to new markets
• Freedom of movement (Avoid Skill shortages)
• source raw materials without customs checks (Alows J.I.T to function effectively)

Question 10

What are some disadvantages of being in a Trading bloc?

Answer 10

• Trade diversion
• Monopolies (Risk of large monopolies)
• Unemployment (Some people may lose their job if work moves out of the country)
• Cost (Expensive to be a member state)