Trade blocs Flashcards
State two things that would encourage a company to trade within their geographical region.
Cultural ties and knowledge of nearby markets.
Shorter distances mean lower transports costs
Define trading bloc
A group of countries situated in the same region that join together enjoy trade free of tariffs, quotas and other forms of trade barriers.
Members of a trade bloc are allowed to trade with each other free of trade barriers. What does this mean. 2 things
This means that a business in one state can sell any amount of goods and services to customers in all other countries belonging to the bloc.
And also, the price of these goods and service of the business will be protected from any governmental interference.
Describe common external tariff
Where members of a trade bloc impose the exact same tariffs or quotas on goods and services that are imported from countries outside the bloc.
In trading blocs there is free movement of labor, capital and goods- elaborate on this
Free movement of labor- A person who lives in one country should be able to work or live in any other country within the trade bloc.
Free movement of capital- There is no limit on the amount of money that individuals and businesses can transfer between banks of the different member nations .
Free movement of goods- There’s no formal checks conducted when goods are being transported between the borders of the different member nations
How would trade blocs benefit member countries in terms of being free of trade barriers?
Goods will be cheaper, there will be more consumer choice and faster economic growth.
Firms will be able to exploit economies of scale by having access to larger markets.
The extra competition may lead to the innovation and improvement of quality goods.
Why are trading blocs looked down upon by people who support global free trade.
Despite there being no real agreement on whether trade blocs result in less free trade or encourage globalization, some believe that trade blocs encourage regional free trade rather than global free trade
What are the two possible ways consumers can be exploited within a trade bloc-
Firms within a trade bloc can merge and become too powerful which can result in consumers within the trade bloc being exploited.
Inefficient producers may be protected from competition outside the bloc. Consumers within a trade bloc may pay more for goods and services in some industries.
How can trade blocs be a burden to the government and the tax payer?
There is a financial cost to the government and therefore the taxpayers of the member countries as the governments have to make contributions to support the trade blocs programs and initiatives.
How can regional free trade make the stakes high for member countries-(2 points)
They tend to become to reliant trade within the bloc and would make them more vulnerable to changes in price and demand patterns.
They may miss out on opportunity in the global market.
How may trade blocs upset nationalist people?
Members of a trade bloc may standardize laws, customs and trading practices, people who are happy with the traditional ways of their country may disapprove of these changes. Changes made to custom and laws may threaten a nations culture.
Why do some argue that trade blocs may attract more FDI for member countries?
Foreign firms may be encouraged to situate their business in these member countries in order to get access to a larger and barrier free market.
Why do some argue that trade blocs may encourage cooperation between the member countries.
They may share resources, help each other out, introduce common standards laws and customs.
How can trading blocs improve cross border peace
Trade blocs reduce cross border conflict, promote peace and achieve social and economic gains.
Describe how capital flows can be improved through trading blocs and as a result how their market for goods and services can be increase-
The members in a trade bloc can reduce barriers to cross border investment, they can harmonize regulations and can set up common financial institutions. This can provide the business with capital from investors. invest in their operations, expand their production, or innovate new products and services.
