Trading Blocs Are Groups Of Countries Free Trade Area
Economic union/Single market. Customs union free trade area + a common external tariff with non-members. Free trade areas elimination of tariffs between economies in the trading block.
Pros and Cons of Regional IntegrationThere are many theoretical advantages and disadvantages that come with regional integration, As a result it is difficult for any country to survive outside one of these blocs and the world is splitting into expanding groups of trading nations promoting free trade between themselves, at the same time as they are restricting it to those countries outside of their blocs. Impact of multinational companies on the host countryThe purpose of creating trading blocs is to reduce or eliminate unnecessary trade barriers between member states, and to allow the free movement of goods, services, labour and capital.However, non-members of trading blocs are facing with financial and non-financial restrictions on their exports to these blocs, such as tariffs, quotas and even embargoes. The impact of globalisation on business 1.7 Growth and evolution - simulations and activities 1.6 Organisational planning tools - notes
Loss of sovereignty, independence, and national identity. Trade creation-the elimination of protectionism increases trade, leading to a more efficient allocation of member state resources. The promotion of democracy and liberalisation. Improving environmental and social conditions. Freedom of movement of goods and peoples.
These restrictions are known as protectionism. While they may understand that free trade will benefit everyone, they may be suffering some of the costs associated with trade and feel that they want to restrict aspects of trading activity. Trade diversion - the elimination of trade barriers among the member states may divert trade away from more efficient non-member states that are disadvantaged by the protectionism they still face.Protectionism arises because countries may not always feel that they benefit from completely free trade. Uniform laws don't account for cultural differences. Loss of border control and the increased risk of smuggled goods and people. Increased competition leading to job losses in some domestic industries.
The EU charges a common external tariff (CET) to many goods imported into the EU. Tariffs will often be charged by regional trading blocs on imports from countries outside the area. This gives domestic equivalents a competitive advantage. Tariffs reduce supply and raise the price of imports. Tariffs - a tariff is a tax on imports.
Domestic employees might enjoy more wages and job security, but domestic taxpayers are footing the bill for this. Foreign consumers will enjoy increased economic welfare as the price of their purchases fall. Export subsidies - export subsidies allow exporters to supply the market with more product than the natural market equilibrium would have allowed. The government receives no revenue from a quota, as it does with a tariff, unless it can set up a system of licences. Once again they reduce the amount of imports entering an economy and increase the equilibrium price within the market.
These can include the importing firm being required to obtain various licences and permits. Administrative barriers - countries or regional blocs can also use a range of administrative or legal devices to slowdown imports and to add costs.
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