Trading Blocs Flashcards
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Main reasons for trading blocs
1) Improve peace and security and reduce conflict. E.g. EU and the Association of South East Asian Nations (ASEAN) decided to ban nuclear weapons.
2) To increase global trade and cooperation on trade issues by reducing berries. E.g. EU and NAFTA.
3) To help other members develop their economic standards of living. E.g. NAFTA (Mexico) or UN (disease epidemics).
What was the main reason the EU(‘s predecessor) was set up in 1957?
Integration between European countries meant conflict became less likely.
Advantages of trading blocs
Allows freedom of movement of trade
Bigger representation in world affairs
To be able to compete on a global level. E.g. Smaller countries can get together to stop exploitation by larger countries.
Allow workers to move more freely
Common currency will reduce fluctuations and simplifying transactions
To support particular sectors. E.g. Agriculture in the EU
Share technological advances
Remote or declining industrial regions can gain financial support from the bloc. E.g. EU regional fund support in South Italy.
Raise standards in education and healthcare across the region improving quality of life.
To spread democracy and human rights.
Organisation of Petroleum Exporting Countries (OPEC)
Consists of 11 states who supply 40% of the world’s oil, they try to regulate the global oil market to ensure a fair price.
G8
A small group of countries who represent 65% of the world’s trade and meet annually to discuss economic development.
G20
A larger group of countries who meet annually to discuss economic development but also includes representatives from the IMF and World Bank.
EU
An economic and political union which dates back to 1957 when the Treaty of Rome created the common market.
North America Free Trade Agreement (NAFTA)
Signed by the USA, Canada and Mexico. In 1994 whose aim was to eliminate trade barriers between the 3 nations.
What is the Schengen Convention?
The Schengen Convention allows EU citizens to cross national borders without visa or passports checks. This allowed freedom of movement of people.
When did the EU start?
Starts in 1951 by the Treaty of Paris and is still ongoing. Over time it has morphed from being focused on economics, to be more socially and politically focused.
What were the biggest reasons given by Brexiteers as to why they voted leave?
Freedom of movement, making it harder to control immigration.
Power over the UK.
o EU parliament making laws that affect the UK.
o E.g. EU courts (ECtHR and ECJ) have precedent over UK courts system. E.g. Rwanda
EU Timeline
Economic advantages of trading blocs
Trade blocs protect the area’s economy from competition.
Free trade within the bloc – countries know that they have free access to each other’s markets, so they can specialise.
Market access and trade creation – trade is likely to increase as countries have access to each other’s markets. These imports often have a lower cost because of specialisation, so there is an increase in consumption, with increased demand resulting from lower prices.
Economies of scale – goods can be produced cheaper as countries can club together and benefit from economies of scale (buying in bulk, mass production, etc.)
Jobs may be created as a consequence of increased trade between member economies. 3 million jobs are said to be directly related to the EU in 2011.
Weaker disadvantaged peripheral regions can be supported by the stronger areas, as they are in Europe.
Economic disadvantages of trading blocs
The benefits of global free trade can be lost as countries concentrate trade within their trade area or bloc.
Inefficient producers within the bloc can be protected from more efficient ones outside the bloc. For example, inefficient European farmers may be protected from low-cost imports from developing countries because of the advantages of the CAP system of support for EU farmers.
Trade wars – Trading blocs can lead to trade disputes where trading blocs argue with another. E.g. EU and NAFTA with the recent Boeing(US)/Airbus(EU) dispute.
Non-member countries of the trade bloc will be ostracised (frozen out) since trade blocs are created to help only their member countries.
Trading blocs cost money – the EU cost £960bn from 2014 to 2020. This money comes from taxation in member states.
Loss of financial controls to a central authority such as a bank. E.g. European Central Bank (ECB)
Social advantages of trading blocs
Within social and political unions people are often free to live and work in the country of their choice within the union. This is the case within the EU, meaning workers have more choice.
Living standards go up as trade prospers.
Social disadvantages of trading blocs
With relaxed borders it is easier for illegal immigrants to move around within the bloc, creating political issues and affecting security.
Legislation can limit workers as well as protecting them – e.g. people might want to work more hours than stipulated in the Working Time Directive.
