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trading blocs

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Introduction

B) Examine the causes and consequences of the emergence of large trading blocs in recent years. A trading bloc is a group of countries who have an arrangement of free trade between countries which are member but impose tariffs, or charges, to those outside the bloc who trade with them. In recent years there has been a growth in the number of trading blocs, with the largest being the European Union, first established in 1957 and the North American Free Trade Agreement (NAFTA) which was first established in 1994. The main idea of a trading bloc is to increase economical development between countries and to create a larger market for goods made in a country. Many were formed after the second world war to strengthen political ties which had been made in the preceding years. The North American Free Trade Agreement (NAFTA) was formed between the USA, Canada and Mexico in 1994. It was the first trading bloc to be formed of both developing and developed countries. The need arose for a trading bloc between these countries when economic competition from Western Europe (the EU) and Asia (South Asian Free Trade Area, or SAFTA) ...read more.

Middle

An advantage of being linked with Mexico however is that Mexico has a lot of ties with other South American countries, opening the market even further. A smaller disadvantage is the difference in regulations for Mexican truck drivers, a case first bought to the public eye by a pressure group called 'public citizen'. They stated that due to Mexico having no policies as to how long drivers stay behind the wheel and a much more relaxed hazardous waste control system, Mexican trucks could be dangerous to drivers who share the same roads. At present Mexican truck drivers are restricted to a 20 mile area north of the border, however this is expected to change. Canada has really benefited from the agreement due to it's size and location. Within five years of the creation of NAFTA trade with the US rose by 80% and trade with Mexico doubled. One million new jobs have been created since 1994 and trade between the other two NAFTA members has grown much faster than it's trade with countries outside of the bloc. It's links with Mexico has also opened trading opportunities with countries Mexico is affiliated with, further increasing economic growth for the country. ...read more.

Conclusion

Industry has also been a problem for Mexico, as it has been criticised for having no industrial policy other than promoting 'maquiladoras', factories which import components to create goods for export. These exports have helped to reduce the trade deficit but the local area does not gain from this as less than 3% of the maquiladora's input is produced locally. An issue which spans all three members is that Mexico has relaxed environmental laws, attracting companies who are restricted by the laws in the US and Canada. This is exploitation of Mexico's land space and impacts the environment all over. Perhaps the most important downfall where Mexico is concerned is the fact that it is extremely dependent on the USA and it's economy. A widely used phrase is 'if the US gets a cold, Mexico gets pneumonia'. This is a very real and current concern since the USA is currently experiencing a recession. What the impact of the recession will be on Mexico still remains to be seen, but it is likely to be severe. In conclusion, the consequences of NAFTA have mainly been positive, however recent economical problems and the imminent environmental issues are going to cause problems over years to come. The availability of cheap labour is an issue which should be investigated further to make sure exploitation isn't happening. ?? ?? ?? ?? ...read more.

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