Nowadays, the world is increasingly divided into trade blocs.
Two types of trading blocs are recognized by the WTO : the free trade areas, where member states have removed all tariff barriers between them but where each member states can set its own tariffs on imports from non member countries ( EFTA, NAFTA, ASEAN, APEC) and the customs union, where countries agree on common tariffs from non members and remove all trade barriers between them ( like the EU, the Southern Common Market MERCOSUR formed by Argentina, Brazil, Paraguay and Uruguay).
However there are also the common market in which members allow full freedom of factors flows (migration of labour and capital) among themselves in addition to having a customs union and the full economic union, in which member countries unify all their economic policies, including monetary, fiscal and welfare policies as well as policy toward trade and factor migration.
Trade blocs were formed in order to facilitate exchanges between nations that look like to each other as far as economy, politics and culture are concerned by removing tariff barriers between its members.
Free trade is the trade between nations without protective customs tariffs.
Protectionism can be definite as the establishment of barriers to the importation of goods and services from foreign countries in order to protect domestic producers.
We can wonder if forming a trade bloc is a step toward free trade or a step toward protectionism and what are the advantages and disadvantages of forming a regional trade bloc like the EU.
I – Forming a trade bloc
1 – Forming a trade bloc : a step toward free trade
On the one hand, forming a trade bloc may seem to answer the goals of the globalization as it enables member countries to develop exchanges
2 – Forming a trade bloc : a step toward protectionism
On the other hand, forming a trade bloc can be seen as a protectionist measure and is often regarded as going against the rules of globalization as it prevents non member countries from trading and as it prevents poor countries from developing by excluding them from world trade.
For example, African countries are not among the trade blocs’ members.
When there is a trade bloc, priority is given to the imports coming from the member states of the trade bloc. Consequently, the market is not easy to accede for a non member state. As a matter of fact, the European market is easier to tap for a European Union member state than for a non-member state country that is why the member state countries prefer trading with the member of their customs union and push back the other countries of the world even if there are sometimes cheaper.