4.1.5 trading blocs

trading blocs

a trading bloc is an agreement between countries to reduce trade barriers such as tarrifs and quotas

trade bloc expansion

expansion of trading bloc is the process of more countries joining existing trading blocs thereby making it expand

why countries join trading blocs 

• Access to larger markets → boosts exports and consumer choice

• Economies of scale → lower costs from producing and selling more

• Enhanced competition → drives innovation and efficiency

• Migration benefits → access to skilled, mobile labou

benedits of being in a trading bloc 

• Access to huge markets (e.g. EU = 447 million consumers)

• Free movement of goods and people

• Helps developing nations reach wider audiences

drawbacks of a trading bloc

• Some blocs restrict dual membership → limits access to other markets

• WTO prefers broader trade deals across more nations

• May reduce flexibility in trade negotiation

EU trading bloc

• The European Union (EU) is a single marketplace of 27 member countries

• The UK left the EU in an event called Brexit

• Within the EU, there is free movement of:

  • People

  • Money

  • Goods

  • Services

• 19 countries use the Euro as their currency → this group is called the Eurozone

impact  of the explansion of the eu on businesses 

• Removes trade barriers → easier flow of goods, services, capital, and labour

• Opens up new market opportunities for firms

• Increases competition in domestic markets

• Provides new sources of raw materials and inputs

• SMEs benefit from increased export trade (e.g. transport companies)

ASEAN

• Founded in 1967 by Indonesia, Thailand, Malaysia, Philippines, and Singapore

• Expanded to include Brunei, Vietnam, Laos, Myanmar, and Cambodia

• Cambodia joined in 1999, making it the 10th member

• Timor-Leste (East Timor) became the 11th member on 26 October 2025, after a two-decade accession process

• Negotiated free trade agreements among member states and with external partners (e.g. China)

• Eased regional travel for citizens of member countries

• Creates a marketplace of 600 million people

NAFTA - USMCA

• NAFTA was created in 1992 to provide cheaper goods to consumers in the USA, Canada, and Mexico

• USMCA replaced NAFTA in 2019

• No import tariffs between member countries → goods are less expensive for consumers

• However, this isn’t always popular with businesses (e.g. due to increased competition or outsourcing)

opportunities of free trade 

1. Freedom to trade

   • UK businesses can sell goods/services freely across the EU

2. Enlarged market

   • British goods now reach 499 million people → potential for economies of scale

3. Protection from external competition

   • UK firms shielded from non-bloc rivals (e.g. China)

4. Freedom of movement of people

• UK firms can hire talented workers from across Europ

drawbacks of free trade

1. Dominance of developed countries in global trade

2. Can kill off domestic businesses in developing nations

3. May reduce national sovereignty or identity — leads to standardisation, westernisation, and “McDonaldization”