Trading blocs

Question 1

What are trade blocs?

Answer 1

Groups of countries in specific regions that manage and promote trade activities

Question 2

What do trade blocs lead to?

Answer 2

Lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non members

Question 3

Examples of trade blocs

Answer 3

EU
ASEAN
NAFTA

Question 4

Benefits of trade blocs

Answer 4

• FDI- an increase in FDI results from trade blocs and benefits the economies of participating nations
• EOS- larger markets created via trading blocs permit EOS
• competition- trading blocs bring businesses in numerous countries closer together, resulting in greater competition
• greater trade- trading blocs seek to reduce protectionist measures such as tariffs and quota tariffs, which should stimulate greater demand within the trading bloc

Question 5

Types of trade bloc

Answer 5

Free trade area
Customs union
Single market

Question 6

What is a free trade area trade bloc?

Answer 6

• no tariffs between members
• no external tariff
• can negotiate own trade deals

Question 7

What is a customs union trade bloc?

Answer 7

• no tariffs
• no border checks
• common external tariff
• trade deals for whole customs union

Question 8

What is a single market trade bloc?

Answer 8

• no tariffs
• common external tariff
• freedom of movement goods and people
• common rules and regulations

Question 9

EU

Answer 9

a group of countries that have formed a regional bloc based on a treaty of political, social and economic issues

• 28 member countries
• aims: peace, prosperity and freedom
• single market

Question 10

ASEAN

Answer 10

trade bloc of 10 nations with an aggregate economic size of $2.3 trillion.

• aim: establish an economic community
• fastest growing markets in the world and is a major producer of manufactured products, many of which are exported to the US and European countries

Question 11

NAFTA

Answer 11

North American Free Trade Agreement

• trade agreement that sets the rules of trade and investment between Canada, US and Mexico
• since it was formed in 1994 NAFTA has effectively eliminated most tariff and non tariff barriers to free trade and investment between the three NAFTA countries