Examine the roles and place of trade blocs in the global economy.

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                Bianca René

Economics – Mr. Russell        

“ Free Trade and comparative (economic) advantage are the main justification for international trade.”

  1. Examine the roles and place of trade blocs in the global economy.

A trade bloc or free trade area is a group of countries between which there is free trade in goods and services but which allows member countries to set their own level of tariffs against non-member countries. The European Union is the largest multi-national free trade bloc, followed by NAFTA (North American Free Trade Agreement), MERCOSUR and AFTA (ASEAN free trade area).

NAFTA is a free trade agreement involving Canada, Mexico and the USA. Of the free trade unions NAFTA is the most limited, as it is restricted to eliminating tariffs, quotas and other trade impediments amongst the 3 countries involved. There is no common customs or tariff agreement for imported goods and services or any free movement of citizens allowed. It is a very powerful trade bloc, because of the economic and political power of the USA. NAFTA is in the process of becoming a free trade zone, as it has not reached this goal completely, since there are still a number of industries, which receive protection, such as citrus, lumber and Mexican petroleum.

MERCOSUR is a trade agreement has members in the South America and within ten years will represent possibly almost all the countries on the continent. Not only a free trade area, it is a customs union, which means there is a common tariff on all imports from outside the trade bloc.

ASEAN initially began as a political organisation and later created AFTA, which is representative of Southeast Asian countries. It is a free trade area in the making, as it continues to work out agreements to eliminate tariffs, quotas and other restrictions on trade. It has concentrated recently on removing restrictions on capital and services, but it is behind other trade blocs in these areas. ASEAN is trying to protect themselves from their powerful neighbours - China, Japan and India.

The European Union (EU) is probably the most successful multi-national organisation ever created. Primarily it started out to reduce or eliminate tariffs, it is now evolving into a government that is bringing its nations of Europe closer together, politically, economically and socially. It may be suggested that this is the trade bloc that others are trying to become.

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The completion of a trade bloc involves the removal of all remaining regulatory and administrative barriers to trade and to the free movement of labour and capital. Such barriers can be physical i.e. border checks which are carried out on the flow of goods and the movement of people between countries. This not only facilitates the movements of goods between member countries, but also for non-member countries, as they only have to meet one set of requirements and can ship goods to all countries in the EU. For example, the EU has common tariff, custom and commercial policies towards ...

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