Trading Blocs
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9 Terms
what are trading blocs
when countries join together to remove trading barriers
types of trading blocs
Free Trade Areas
Custom Unions
Common Markets
Monetary unions
What is Free Trade area
e.g USMCA
Remove trade barriers between each other
Free to set their own trade barriers to non-market countries
what is custom union
e.g EU
Trade barriers removed between member countries
common external tariffs on countries outside the trade bloc
what is common market
e.g European single market
Trade barriers removed between market countries
common external tariffs on non-members
free movement of factors of production between countries
What is monetary union
Trade barriers removed between member countries
Common external tariffs on non-member countries
free movement of factors of production between countries
common currency
effects of trade blocs
Trade creation
trade diversion
affects of trade creation
removal of barriers , increase trade , increase quantity of goods , increase consumer welfare , increase standard of livings
what is trade diversion
when trade is diverted from low costs outside the bloc producers to higher producers inside the bloc
increase price , decrease quantity , decrease consumer welfare , decrease living standards