Trading Blocs

Question 1

Trading Bloc

Answer 1

A trading bloc is a group of countries that have signed an agreement to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves. The agreement is called a regional trade agreement.

Question 2

5 Main Types of Trading Blocs

Answer 2

Preferential Trading Areas - Where tariff and other trade barriers are reduced on some but not all goods traded between member countries. Member countries sign a Preferential Trade Agreement (PTA) to create the preferential trading area.

Free Trade areas - Where all tariffs and quotas are removed on trade in goods between member countries. However, each member country is able to impose its own tariffs and quotas on goods it imports from outside the trading bloc.

Customs Union - Are where there is free trade within the trading bloc and a common external tariff on goods coming from outside the bloc.

Common Markets - Are customs unions where both labour and capital have freedom of movement within the area and where product standards and laws concerning free movement of goods and services are common between countries.

Economic Unions - Are where the economies of member countries are as fully integrated as different regions within a country. Economic union implies that there is some degree of fiscal union, with a central body having some powers over taxation and spending, and monetary union, where all member countries share a common currency.

Question 3

Bilateral Agreements

Answer 3

A regional trade agreement between two countries

Regional Trade Agreement - An agreement between at least two countries to reduce or eliminate tariffs, quotas and other protectionist barriers between themselves.

Question 4

Examples of Trading Blocs

Answer 4

The EU - Started in 1945
UK Joined in 1973
To get rid of passport control - free movement of labour
No trade barrier - No government regulation, no tariffs (taxes)

ASEAN (The Association of Southeast Asian Nations)
Free movements from developed countries to developing countries
The idea is for a bigger market, more likely for multi-national companies to invest in this one big economy.

NAFTA - North American Free Trade Agreement
USA, Canada and Mexico
Benefits Mexico due to bigger market
Worlds largest trading bloc measured by GDP