Trade Blocs Flashcards
What is a trade bloc
A group of countries that come together to trade
What is a trade agreement
Formal agreements that remove barriers between them
What are the two types of trade
Visible trade - goods that can be seen and weighed
Invisible trade - trade that can’t be seen, e.g tourism
What are the global benefits of trade
World peace
Less conflict
Increased global standard of living
What are the regional benefits of trade
Developing economies have more representation in world affairs
Agreeing on one currency
What are the advantages of being in a trade bloc
Eliminates trade barriers
-> gives members more opportunities to increase production and trade
Employment
-> allows migration
Exchange rates
-> simplifies transactions
What are the disadvantages of trade blocs
Member countries are forced to trade within the group
Dependence
-> countries rely on each other
-> without certain countries others will experience economic decline
Employment
-> more competition can decrease wages and cause unemployment
What are the four types of trading blocs
Free trade area
Common market
Custom union
Economic monetary union
What is a free trade area
trade barriers between countries are eliminated
each member country maintains its own tariffs
What is a common market
Member countries impose a common external tariff
there is an additional agreement to allow the free flow of goods, capital and eventually labour
4 freedoms
What is a custom union
Member countries impose a common external tariff
What is an economic monetary union
Members will operate at a common market, with a common tax system
same currency
