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.

.

.