Trade Blocs Flashcards
Define ‘trading blocs’
Freely flowing goods, money and workers over national boundaries, this requires an amendment of national laws and can include countries of different development levels
Define ‘protectionalism’
The method of protecting a country’s domestic industries from foreign competition
Define ‘political-economic alliances’
Countries that cooperate together to gain economic and political benefit e.g. GB and the Commonwealth
Name the six types of trade blocs
- preferential trade area
- free trade area
- customs union
- common market
- economic union
- full integration
What is a preferential trade area?
Lower but not eliminated trade barriers between members
What is a free trade area?
Eliminated internal barriers but maintenance of independent external barriers e.g. NAFTA
What is a customs union
Eliminated internal barriers and agreed common external barriers e.g. EU
What is a common market?
Eliminated internal barriers and adopted common external barriers to allow a free movement of resources amongst its members e.g. Mercosur
What is an economic union?
Eliminated internal barriers and adopted common barriers to allow free movement of resources and a uniform set of economic policies e.g. EU
Describe full integration
USA
Name two advantages of trade blocs
- economies of scale
- competitive advantage
Describe economies of scale
A larger size of trade blocs have a larger market population and therefore more custom and more produce and generally raw materials sold and bought in bulk to reduce costs
Describe the comparative advantage
Easier to trade different goods and services
Countries can sell what they are good at making and buy what they need more easily
Increases overall trade
The UK’s population is (1) and the EU’s is (2) so the UK’s companies have benefitted by (3) and sources their goods from within (4) countries
1 - 65m
2 - 508m
3 - expanding into the EU’s countries
4 - 28 countries
National firms can merge to form (1) but need larger (2) to generate (3) e.g. Vodafone merger with the (4) company Mannesmann to become the world’s largest telecommunications company in (5)
1 - TNCs 2 - domestic markets 3 - economies of scale 4 - German 2 - 2000
Trade blocs can also protect from foreign competitors and provide (1) e.g. in 2007, the EU blocked (2) of Chinese made clothes from entering the UK because it had already filled the (3)
1 - political stability
2 - £50m
3 - annual quota
Name three disadvantages of trade bloc memberships
1 - loss of sovereignty
2 - interdependence so impacts all members
3 - compromise and concession
Describe loss of sovereignty as a disadvantage of trading blocs
EU deals with trade and human rights, consumer protection and greenhouse gas emissions etc. Which can undermine national authority
Describe interdependence as a disadvantage of rafting blocs
A disruption of trade within a bloc consequences all nation’s economies e.g. banking sector of all eurozone countries being challenged
Describe compromise and concession as a disadvantage of trading blocs
Members must allow foreign firms to gain domestic market share which may be at the expense of local companies
What does NAFTA stand for?
North American Free Trade Agreement
NAFTA was established in (1) to eliminated (2) between (3)
1994
Tariffs and trade barriers
USA, Canada and Mexico
Give three advantages of NAFTA on the USA
- US firms can set up factories in Mexico for cheaper labour costs
- Profits made in Mexico return to US shareholders
- No strict environment laws which increases profit margin
Give two disadvantages of NAFTA on the USA
- Loss of American manufacturing jobs leading to higher unemployment
- Full access to Mexican trucks in the USA but not limited by driving times meaning more accidents but also illegal immigration
Give three advantages of NAFTA to Canada
- trade with USA increased 80% in first five years
- more than 1 million jobs created since 1994
- in 1998 68% of FDI was Mexican and American
Give two disadvantages of NAFTA on Canada
- concern from environment groups
- manufacturing jobs lost to Mexicans
Give three advantages of NAFTA on Mexico
- forced to adopt higher foreign standards and business practices
- modernises politics influenced by US and Canadian gov
- reduces tariffs with 60% of the world
Give three disadvantages of NAFTA on Mexico
- dependent on USA for 88% of exports
- many of the jobs created are poorly paid and much of profit goes back to the company’s country e.g. US
- many jobs created by FDI require employees to live in squalor with few standards of health and safety of
Give four reasons in favour of Britain staying in the UK
- World’s largest trading bloc and second largest economy following the USA
- The five largest economies (Germany, France, UK, Italy and Spain) account for 70% of the trading bloc
- A common market is the first step towards full economic integration
- Without the EU, Britain’s house prices will increase
Give four arguments in favour of BREXIT
- The EU can enforce policies micro-economically, monopoly power and anti-competitive practises
- Highly protectionist so UK received inflamed prices and restrictive work rules
- Since 2005, approx 1/4 of a million have entered the UK every year and not as many have left
- Tariffs outside the EU are very high, without this living costs may reduce living costs by around 8%
How many members does the EU have?
28
Name four stated aims of the EU
- Establish European citizenship
- Ensure freedom, security and justice
- Promote economic and social progress
- Assert Europe’s role in the world
Give three economic advantages of the EU
- average income increased up to 12%
- approx 3.5 million jobs created
- UK trade increased up to 50%
What does ASEAN stand for and who are its members?
- Association of South-East Asian Nations
- Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam
Name the two aims of ASEAN
- Accelerate economic growth, social progress and cultural development in the spirit of equality and partnership
- Promote regional peace and stability in adherence to the principles of the UN
Give four advantages of ASEAN
- Free trade
- Infrastructure and GDP development
- 1.7 billion consumers
- $2 trillion GDP
How did the WTO affect fishing in Pakistan?
Opened Pakistan’s exclusive fishing region to TNCs which forces locals out of business and fish levels have fallen dangerously low
What organisations were created by the USA after WW2 and what was their purpose?
The Bretton Woods players to eliminate communism by economic development so they rebuilt Europe with subsequent aid programmes to stimulate economic growth in SE Asia
Name three ways in which the UK government promote globalisation?
- industries reliant on subsidies forced to close e.g. coal mining decimated by cheap foreign imports during 1980/90s
- Tax breaks given to investing companies in London docklands
- Grants to foreign companies who located manufacturing plants in the UK so by 2015 was fourth largest recipient of FDI
Name five ways in which the Chinese gov promoted globalisation
- Open door policy in 1978
- Tax incentives in Export Processing Zones
- By 2005, around 50% of exports came from foreign companies
- World’s largest recipient of FDI
- Major player of inflow and outflow of FDI
Define ‘Special Economic Zone’
Areas in which tax incentives can be offered by the gov to attract investment
Define ‘Export Processing Zone’
Chinese term for SEZ
Why has China invested in Africa?
- 19% oil and natural gas
- Tanzania, Chad and SA received most FDI due to oil reserves
- Increase global economic power
Where do the BRICS invest?
USA, EU, Sub-Saharan Africa and South America
Investment flows from BRICS increased $145b between 2000-2012
Accounts for 10% of global trade
How do countries outside the main blocs work?
International agreements
E.g. EU partnerships with 89 countries
