Trade blocs Flashcards
What is a trading bloc?
A trading bloc is a group of countries situated in the same region that join together to form a free trade area which means that trade between all the members will be completely unrestricted - free from tariffs, quotas and other trade barriers.
What are the different types of trading blocs?
Preferential Trading Areas (PTAs)
Free Trade Areas (FTAs)
Customs Unions
Common Markets
Economic Unions.
What is the difference between a PTA and an FTA?
PTAs remove trade barriers on a range of goods and services, but not all goods and services are covered and some trade restrictions still exist.
FTAs are completely free of trade barriers between members, but members are allowed to impose trade restrictions on non-members.
What is the advantage of being a member of a trading bloc?
- cheaper goods and increased consumer choice
- faster economic growth
- attraction of foreign direct investment
- closer cooperation between member countries
- reduced cross-border conflict.
What is the disadvantage of being a member of a trading bloc?
- financial cost to government and taxpayers
- possibility of regional monopolies and unequal benefits among countries
- protection of inefficient producers
- encouragement of regional trade over global trade
- dependence on trade within the bloc.
What is the impact of trading blocs on non-member states?
Countries not belonging to trade blocs will face common trade barriers when selling goods & services to any members inside the bloc and they will be disadvantaged - they may be forced to find new markets although, it’s still not clear whether non-members will suffer in the long term.
