Trade Blocs 4.1.5

Question 1

What is a trade bloc?

Answer 1

A trading bloc is a group of countries that work together to provide special deals for trading. This promotes trade between specific countries within the bloc.

Question 2

What are the types of trading blocs?

Answer 2

• EU
• NAFTA
• ASEAN

Question 3

What is a common market?

Answer 3

Trade between member countries should be as easy as trade within a country.

Question 4

EU

Answer 4

The worlds largest trading bloc (27 countries). The EU is the world’s largest trader of manufactured goods and services. All of the countries within the EU can trade freely with each other, which means that no tariffs are put in place. This makes goods and services cheaper, which is good for both businesses that export and businesses that import within the EU.

Question 5

ASEAN

Answer 5

ASEAN is a trade bloc of 10 nations with an aggregate economic size (as measured by the total GDP of the member countries) of $2.3 trillion.
The aim is to establish a fully-fledged economic community (AEC). ASEAN is a middle-income region but with big differences in per capita incomes of the member countries. Association of Southeast Asian Nations (Brunei Darussalam, Cambodia, Indonesia, Lao P.D.R., Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam).

Aims to accelerate economic growth, social progress, and cultural development in the region, and promote regional peace and stability.

Question 6

NAFTA

Answer 6

Stands for North American Free Trade Association. Aims to eliminate barriers between USA, Canada and Mexico. Production was moved from USA to Mexico - builds tension on US workers. Free trade zone including trade, investment and environmental legislation.

Question 7

What are the disadvantages of trading blocs?

Answer 7

• Retaliation eg: other blocs may be created as a result of a trading bloc.
• Protectionist: having a trade BLOC may not help trade liberalisation, the WTO want a reduction in barriers to trade between all countries.
• Shutting down the domestic industry. Increased competition creates winners and losers.
• Countries can often only be part of one trading bloc, which means they cannot enter others.
• Trade wars/ price wars

Question 8

What are the advantages of trading blocs?

Answer 8

• Freedom to trade eg: UK businesses can sell goods and services freely across the whole of the European Union.
• Enlarged market which can lead to EOS.
• Protection from International competition outside of the BLOC.
• Freedom of movement of people.