Trade Blocs and World Trade Flashcards
Define ‘trade bloc’.
A group of countries that are situated in the same region that join together and enjoy trade free from protectionism
What are the 3 features of countries trade blocs?
Geographically close to each other
Have similar trade policies
Mutually cooperate to allow free flow of goods
What are the 5 levels of integration in a trade bloc?
Free Trade
Customs Union - common external tariffs
Common Market - factors of production mobile between members
Economic Union - common currency, tax rates and FP/MP
Political Union - common government
What are the 7 advantages of trade blocs on member countries?
Cheaper goods/more competition/more choice
Firms have access to larger markets
Economies of scale
Innovation - better quality products
Increased in FDI
Cooperation between trading partners
Common policies and standards
What are the 5 disadvantages of trade blocs?
Not in favour of globalisation
Financial cost of membership - lost revenue/bureaucracy
Mergers can make firms anti-competitive
Over-reliance on countries - increased vulnerability
Protectionism makes it harder for non-member countries to compete with member countries
Define ‘World Trade Organisation’.
An international organisation that oversees a large number of agreements defining the rules of trade between its member states
What are the 2 purposes of the WTO?
To help trade flow as freely as possible without any unwanted side effects
To abolish trade barriers
What are the 4 advantages of the WTO?
Democratic
Raises living standards
Increases economic growth globally
Facilitates disputes - objectively provides verdict
What are the 4 disadvantages of the WTO?
Too powerful
Run by the rich
Indifferent to impact of free trade
Lacks democratic accountability
