Trading blocs Flashcards
Define the term trading bloc.
A trading bloc is a type of intergovernmental agreement to reduce regional trade barriers
Depending on how closely the members wish to integrate their economies they may form different types of trading blocs such as free trade areas, customs unions, common markets and full economic & monetary union
UK is no longer part of the EU trading bloc
What is the EU trading bloc?
The EU is a single marketplace between the 28 member countries (with a notable exception of Switzerland which remains independent).
There is free movement of; people, money, goods and services between all 28 countries
19 of these countries also opted to have the Euro as their currency (to stabilise their currency), this is the Eurozone
Explain the impact of Brexit on the UK.
The UK has made a trade agreement with the UK, but there are several factors that are different to the EU agreement.
Companies will need to file new paperwork to trade goods/services and their products may be held up at the border
Finance firms will lose their passport to offer services across the EU
People will see their rights to live/stay in the EU and UK curtailed. (This changes the make-up of the work forces as well as consumers in the UK.)
Businesses exporting to the the EU will have to file customs declarations and other paperwork. This can cause delays. Companies relying on just-in-time production methods (such as car markers, aerospace firms) will have to either build up stockpiles or trade with other EU companies instead. Fresh produce could be go bad.
Finance firms will only be allowed to offer services to EU customers if the EU deems our new rules to be the equivalent of theirs.
Services (which make up 80% of UK’s economy) will face new restrictions, such as needing approval form each EU country on their professional qualifications.
Companies may have to comply with two separate regimes for productions standards and regulations, needing approval from both UK and EU bodies to be able to sell goods in both places.
There is a zero-tariff trade aspect but companies can only take advantage of this if they file documents proving that the origin of their goods contain a sufficient quantity from the UK or EU.
What is the ASEAN trading bloc?
ASEAN was started in 1967 by Thailand, Malaysia, Philippines, and Singapore to promote economic and social growth in the region
Since then it has expanded several times with five more countries joining the trade bloc
It has negotiated a free trade agreement among member states and with other countries such as China, as well as eased travel in the region for citizens of member countries.
What is the NAFTA trading bloc.
NAFTA was created in 1992 with the simple idea of giving the customers in the USA, Canada and Mexico cheaper goods.
Without import tariffs between the countries the goods are less expensive which is a bonus for the consumer, but not always popular with business
NAFTA was created in 1992 with the simple idea of giving the customers in the USA, Canada and Mexico cheaper goods.
Without import tariffs between the countries the goods are less expensive which is a bonus for the consumer, but not always popular with business
Define trading bloc expansion.
the process of more countries joining an existing trading bloc, thereby making it expand
Explain expansion of trading blocs.
As other countries see the benefits of belonging to a free trade area, they may eventually apply to join
These benefits might be; access to larger markets, economies of scale by producing more and selling more, enhanced competition and migration with a good supply of able bodied labour
Explain the expansion of trading blocs.
As other countries see the benefits of belonging to a free trade area, they may eventually apply to join
These benefits might be; access to larger markets, economies of scale by producing more and selling more, enhanced competition and migration with a good supply of able bodied labour
What are the opportunities of free trade?
1 Freedom to trade; For example UK businesses can sell goods and services freely across the whole of the European Union
Free trade is trade that takes place between counties without protectionism e.g. no tariffs or quotas on imports
This brings with it opportunities to business:
What are the drawbacks of free trade?
Free trade agreements (such as trading blocs) can also create problems for business
Dominance of developed countries in global trading
It can kill off domestic business in developing nations
It can reduce national sovereignty or identity as countries become standardised, westernised and Mcdonaldized
