(PAPER 1) 4.1.5 trading blocks

Question 1

trading blocks definition

Answer 1

a group of countries that sign up to free trade between them, protected by a tariff wall against imports from the outside

Question 2

European union definition

Answer 2

a single market made out of European countries with free movement of people, goods and services

Question 3

north American free trade association

Answer 3

a free trade zone made up of Canada, Mexico and the USA

Question 4

association of south east Asian nations definition

Answer 4

a free trade agreement between ten south-east asian nations

Question 5

why businesses prefer to trade within their geographical region

Answer 5

cheaper to transport goods shorter distances—> costs will generally be lower. Moreover, cultural ties and familiarity with nearby markets reinforce regional
trading and preferences.

Question 6

benefits for businesses of trading blocs

Answer 6

+ Free movement of goods between members–> gives the potential to create a large single market, providing significant opportunities for businesses to grow.

+ As the volume of trade increases, producers are able to benefit from economies of scale; leading to lower unit costs and, usually, lower prices for consumers.

+ Access to more skilled workers, which can improve the efficiency and quality of
production.

Question 7

drawbacks for businesses of trading blocs

Answer 7

• To create a single market, new rules and regulations may be agreed, including minimum wage rates.
• Can become more expensive to import products from countries not in the bloc. This may mean a business’s costs increase.
• Competition increases because of freer trade, so those businesses with a monopoly may find they are competed away.

Question 8

trading blocs. IN & OUT

Answer 8

IN:
- big home market provides scale economies of scale
- free trade boosts competition and efficiency
OUT:
- rules to govern the market may be bureaucratic
- may take focus from faster growing markets elsewhere