Trading blocs economics

Define a trading bloc

a group of countries that that come together to make agreements on trade

Define efficient trade

allocating scarce resources efficiently

What are the types of trading blocs

Free trade areas , custom unions, common markets, economic unions, preferential trading blocs

Define free trade areas

Are agreements that remove all barriers to trade on member countries, but members can set their own trade barriers on non member countries

Give an example of a free trade area

AFCTA ( African continental free trade area)

Define custom unions

All trade barriers are removed between member countries but member countries must have a common external tariff on imports from non member countries

Give an example of a custom union

The EU

What are common external tariff

Where member countries must all charge the same tax on imported goods from non member countries

Define a common market

All trade barriers are removed between member countries and must have a common external tariff on imports from non member countries as well as FREE movement of factors of production

Give an example of a common market

European single market

Define monetary/ economic unions

A type of trade barrier where countries go beyond a free trade area or customs union and adapt the same common currency

Give an example of an economic union and monetary

The eurozone

What are regional trade agreements

Are just another term for trading blocs they are agreements between countries in a region

Summarise the differences between all the eu trading blocs 


The European Union is a customs union that includes 27 countries. The European single market is a common market that includes 31 countries and the eurozone is a monetary union including 20 countries

What are the effects of trading blocs on trade

Leads to trade creation, once trade barriers are removed on member countries there will be increased trade and quantity of imports rise.

However it can lead to trade diversification which is when trading blocs divert trade away from non member countries because of common external tariff this will increase the price of imports from non-member countries