Trading Blocs Flashcards
Trading Blocs definition
-a group of countries that have signed an agreement to reduce or eliminate procectionist bariers between themselfs
-protect theselfs from countries outside the group
-e.g USMCA, APEC and the EU
Disadvantages of trading blocs
Un,WTO, So
-Can distract governments from larger gains like gaining free global trade through the Wold Trade Organisation>biliteral trade agreements can bring very little gain between the two countries but may take up lots of government resources to produce the agreements
-Some regional trade agreements distribute the gains from trade unequally.E.g USA and EU may heavily benefit from their trades but may not help the developing country as much
-They lesson sovereighty. For example, UKIP wanted to leave the EU due to the loss of sovereighnty to Brussels
Benefits of trading blocs
Free trade in terms of no tariffs or quotas on goods and services
Free movement of people in terms of labour
Build stronger relationships between countries
Types of trading blocs
-Preferential trading areas
-Free trade areas
-Customs unions
-Common markets
-Economic unions
Types of trading blocs-Preferential trading area
-A group of countries that have signed a preferential trade agreement lowering or abolishing some protectionist barriers such as tariffs on trade between themselfs
Types of trading blocs-Free trade areas
-A group of countries between which there is free trade in goods and services but where member countries are allowed to set their own level of tariffs against non-member countries
Types of trading blocs-Customs union
-A group of countries between which there is free trade in products and which imposes a common external tariff on imported goods from outside the market
Types of trading blocs-Common markets
-A customs union where labour and capital movement is free within the areas and where products have standards and laws concerning free movement of goods and services are the same in all countries
Types of trading blocs-Economic unions
-Economies are fully integrated between countries as different regions within a single country; e.g a single market will be combined with a fiscal market and a monetary union
Significance of CET
A Common External Tariff is a uniform tariff rate that a group of countries applies to imports from non-member countries.
-E.g all EU members have a legal obligation to increase tariff rates to non members when trading
-EU law also indicates you cant negotiate deals with non EU nations
-Tariffs are on all goods but the size of the tariff varies
