4.1.5 Trading Blocs

Trading Blocs

A type of intergovernmental agreement to reduce regional trade barriers.

Types of Trading Blocs

Different types include free trade areas, custom unions, and common markets.

EU Trading Bloc

The UK was a part of the EU trading bloc.

EU Facts

At the time made, it had 28 member states, started in 1951, and has a combined market of 550 million customers.

Single Market

Established as a single market with free circulation of goods, money, and people in the EU.

Eurozone

19 members also make up the Eurozone.

Power of EU

The EU has become the most powerful trading bloc in the world with a GDP nearly as large as the US.

Common Market

Also known as the single market where trade between member countries should be as easy as trade within a country.

ASEAN

The Association of South East Asian Nations set up in 1967 in Bangkok by Indonesia, Malaysia, Philippines, and Singapore.

ASEAN Membership

New members include Brunei, Laos, Vietnam, Myanmar, and Cambodia.

ASEAN Free Trade Agreement

Free trade agreement between member states with countries like China.

NAFTA

North American Free Trade Agreement among Canada, Mexico, and the US.

NAFTA Coverage

They have formed a free trade zone covering environmental and labour issues.

Benefits of Trading Blocs

Includes freedom to trade, enlarged market, and protection from international competition outside of the bloc.

Freedom of Movement

Allows businesses to source workers from a wider pool.

Drawbacks of Trading Blocs

Includes retaliation, increased competition, common rules and regulations, and inefficiency.

Retaliation

External tariffs set against countries outside of the trading bloc may lead to retaliation from these countries.

Increased Competition

An issue for small businesses as they have fewer resources available to compete.

Common Rules and Regulations

New rules and regulations may be put in place that all businesses must adhere to in order to operate as one market.

Inefficiency

There is less competition from businesses in countries outside of the bloc.