4.1.5 Trading blocs

Define trading blocs

A trading bloc is a group of countries that form an agreement to reduce or eliminate protectionist measures between each other

Benefits of trading blocs

• Access to more markets - can sell to more customers due to free movement of goods

• Increased trade between members due to lower/no tariffs.

• Economies of scale - access to new larger markets meet producing more quantities which lowers average cost per unit.

• Countries build stronger economic and diplomatic ties.

• Free movement of labour

Limitations of trading blocs

• New rules and regulations, e.g. EU working time states employees can work maximum 48 hours per week.

• When a trading bloc places tariffs on imports from outside countries, those countries may fight back by imposing their own tariffs.

.What are the 3 largest trading blocs?

• The European Union (EU)

• The Association of Southeast Asian Nations (ASEAN),

• USMCA (United States, Mexico and Canada, formerly known as NAFTA)

What is the European Union (EU)?

An economic union of 28 countries (as of 2023) that allows free movement of goods and people, with no internal trade barriers and common external tariffs for non-members. The UK officially left in 2020.

What is ASEAN?

A free trade area of 10 Southeast Asian nations focused on eliminating trade barriers to allow free flow of goods. Unlike the EU, it does not allow free movement of people between member states.

What is the NAFTA?

A trade bloc between the USA, Mexico, and Canada, formerly known as NAFTA. It promotes tariff-free trade; many US firms moved production