Countries in Eastern Europe have made considerable progress in catching up with average income levels in Western Europe. Countries joining a rich trading block can benefit from inward investment and increased trade opportunities. Increased trade enables increased specialisation – which gives benefits of economies of scale (lower average costs from increased output).Tariff removal leads to trade creation – lower prices for consumers and greater opportunity for exporters.However, since trade deals are complicated and take several years, there is an advantage to negotiating trade deals as part of a regional trade block – rather than separate individual countries. For example, if imports from Africa enter Spain then if goods travel across the border from Spain to France, there is no need to check whether goods are paying the correct import tariff – because the import tariffs are all the same.Ī disadvantage of joining a customs union is that a country is not able to pursue its own independent trade deals. This means there doesn’t need to be internal checking on ‘ Rules of origin‘. This means that it doesn’t matter which country the imports enter – because all countries have the same import tariff. It has aspirations to become a free trade area.ĭifference between free trade area and customs unionĪ customs union has a common external tariff on imports. Created to forge closer political and economic ties. African Union 55 countries of the continent of Africa.Developed from free trade area to become customs union. With associate members including Bolivia, Chile, Colombia, Ecuador. Includes full members of Argentina, Brazil, Paraguay and Uruguay. Mercosur – a southern American trading block formed in 1991.Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. SAFTA South Asia free trade area based around the Indian sub-continent.Includes: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar and Cambodia. ASEAN Free Trade Area Free trade area in South East Asia founded 1992.A free trade area between Canada, US and Mexico ![]() NAFTA – North Atlantic Free Trade Association.The EU27 have free trade and common regulations and are part of a customs union. European Union – The most integrated trading block. ![]() ![]() Also, the move to free trade tends to create winners and losers – with some domestic industries losing out to lower-cost imports.Įxamples of Global trading blocks Free trade areas
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