For that reason, some economists believe that it would be hard to achieve free trade internationally all of a sudden. Therefore, it should first be divided into 3 major regional trading blocks (Europe, America, Asia), which has protectionism to some extent, and in the future achieve the main goal of global free trade. Slowly we are able to observe these movements. Especially with the formation of the EU it is clear that one major trading block has established. EU has agreed on removing all trade barriers upon its member countries. Also the NAFTA which is the North American Free Trade Association, is a tree trade agreement between the US, Mexico and Canada.
Regional trading blocks, which have been formed with neighboring countries, have been beneficial since most times since countries have large quantities of trade with countries close to them. Therefore un-necessary tariffs and process of trade between these neighboring countries are eliminated. Although regional trading blocks are beneficial, when compared to the benefits created by international free trade, it is shown that there is only a slight decrease in prices. However it does not encourage specialization and therefore, productivity is only increased slightly prices are only able to go down to a certain extent. Thus the most productive method would be if each country invests in what they are best at doing, and concentrate on producing that product, and export it at a low price and import other goods from other countries at a cheap price as well.
The benefits of regional trading blocks are questioned by some economists since it is only beneficial to some parts of the world, not all. For example, Asian countries or African countries are argued to have fewer benefits of these compared to Europe of the US since they do not tend to export as much with their neighboring countries. Instead the majority of their exports would be to other continents. Therefore, these areas wouldn’t benefit as much as others since they would have to face the trade barriers set by countries they trade with mostly. The EU and the US would also have disadvantages of taking protectionist measures and not entering the free trade markets since protectionism would lead to higher domestic prices and reduce customer’s choices. Also by eliminating competition with foreign companies, would create the domestic firs to become less efficient and hence, prices wouldn’t drop and quality improvements would not be achieved since there is no pressure on them.
Due to the following arguments, it is shown that trading blocks only seems to be partially effective and it would actually hinder international free trade. Therefore the trading blocks have actually caused businesses to become less efficient and high prices of products which can be modified by free trade. Also free trade would allow many countries in Asia and Africa, where most LEDC’s(less economically developed countries) located, to concentrate on what they are best at producing and export more on the international market and therefore boosting their economy.
