4.1.5 Trading Blocs

Question 1

How is Trading Bloc defined ?

Answer 1

• A trading bloc is a type of intergovernmental agreement to reduce regional trade barriers
• Depending on how closely the members wish to integrate their economies they may form different types of trading blocs such as free trade areas, customs unions, common markets and full economic & monetary union

Question 2

EU trading block ?

Answer 2

• The EU is a single marketplace between the 28 member countries (with a notable exception of Switzerland which remains independent).
• There is free movement of; people, money, goods and services between all 28 countries
• 19 of these countries also opted to have the Euro as their currency (to stabilise their currency), this is the Eurozone

Question 3

country’s in ASEAN trading bloc

Answer 3

Association of Southeast Asian Nations (ASEAN)

• Thailand
• Philippines
• Malaysia
• Vietnam
• Burma
• Laos
• Cambodia • Brunei

Question 4

ASEAN trading

Answer 4

• ASEAN was started in 1967 by Thailand, Malaysia, Philippines, and Singapore to promote economic and social growth in the region

• It has negotiated a free trade agreement among member states and with other countries such as China, as well as eased travel in the region for citizens of member countries.

Question 5

NAFTA trading bloc?

Answer 5

North American Free Trade Area (NAFTA)
• USA
• Canada
• Mexico
-1992

Question 6

NAFTA trading

Answer 6

• NAFTA was created in 1992 with the simple idea of giving the customers in the USA, Canada and Mexico cheaper goods.
• Without import tariffs between the countries the goods are less expensive which is a bonus for the consumer, but not always popular with business

Question 7

Trade bloc expansion defined?

Answer 7

• Expansion of a trading bloc; the process of more countries joining an existing trading bloc, thereby making it expand

Question 8

Expansion of trading blocs?

Answer 8

• As other countries see the benefits of belonging to a free trade area, they may eventually apply to join
• These benefits might be; access to larger markets, economies of scale by producing more and selling more, enhanced competition and migration with a good supply of able bodied labour

Question 9

what are Opportunities of free trade?

Answer 9

• Free trade is trade that takes place between counties without protectionism e.g. no tariffs or quotas on imports
• This brings with it opportunities to business:
#1 Freedom to trade; For example UK businesses can sell goods and services
freely across the whole of the European Union
#2 Enlarged market; For example the size of the market for British goods is now 499 million people, can mean EOS
#3 Protection from international competition outside of the BLOC; For example UK businesses are protected from competition from China
#4 Freedom of movement of people; For example UK firms can employ talented people from across Europe.

Question 10

Drawbacks of free trade

Answer 10

• Free trade agreements (such as trading blocs) can also create problems for business
• Dominance of developed countries in global trading
• It can kill off domestic business in developing nations
• It can reduce national sovereignty or identity as countries become standardised, westernised and Mcdonaldized

Question 11

Factors to consider in trading blocs

Answer 11

• where to produce.
• where to sell
• how to enter a market
• business strategy

Question 12

What impacts on business of trading blocs

Answer 12

Opportunities for business:
- Freeing regional trade may allow individual members to specialise in line with their country’s comparative advantages.
- the market for firms’ goods and service should increase.
- As the volume of trade increases within the region, producers are able to benefit from economic of scale this leads to lower costs for them and usually lower prices for consumers.
- Resources may be easier to source and labour easier to recruit , while production and transport costs may continue to fall
- As trade increases, it may result in greater competition and thereby more efficiency in the market.

Question 13

Drawbacks for business in trade blocs

Answer 13

• Trade blocs may actually harm overall trade because countries outside the region may be better placed to specialise or develop a competitive advantage in a product or service.
• inefficient producers may be protected from competition thereby diverting trade away from more efficient producers and potentially harming consumers.
• The overall benefits may turn out to be small if an agreement limits the good/services that are traded.
• Locally , some of the benefits may be distributed unequally.

Question 14

Common markets

Answer 14

A market where goods, labour and capital can move freely across the member states; tariffs are generally removed and non-tariff barriers eliminated or at least reduced

Question 15

Customs union

Answer 15

A union where member states remove all trade barriers between themselves and members adopt a common set of barriers against non-members

Question 16

Economic and monetary union

Answer 16

an economic union that uses, a common currency

Question 17

Free trade area

Answer 17

A region where member states remove all trade barriers between themselves but each member state nevertheless keeps different barriers against non-member state

Question 18

Preferential trading area (PTA)

Answer 18

A type of trading bloc where certain types of products from participating countries receive a reduced tariff rate.

Question 19

Regional trade agreement (RTA)

Answer 19

Agreement made between two or ,ore countries within a geographical region, which is designed to facilitate trade by bringing down barriers.

Question 20

Rules of origin

Answer 20

A system of allocating certificates whereby a defined amount of a product or service must be certified as being created within that region.

Question 21

Single market

Answer 21

A market where almost all trade barriers between members have been removed and common laws or policies aim to make the movement of goods and services, labour and capital between countries as easy as the movement within each country.

Question 22

Trading bloc

Answer 22

A group of countries that has signed a regional trade agreement to reduce or eliminate tariffs , quotas and other protectionist barriers between themselves.