There may also be common policies affecting key industries, such as the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP).įirms inside the bloc are protected from cheaper imports from outside, such as the protection of the EU shoe industry from cheap imports from China and Vietnam. For a common market to be successful there must also be a significant level of harmonisation of micro-economic policies, and common rules regarding monopoly power and other anti-competitive practices. #Eu trade blocs fullEU Membership 2017Ī ‘common market’ is the first significant step towards full economic integration. A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others). Croatia was the latest country to join, in July 2013. In terms of dealing with non-members, common tariff barriers were erected against cheap imports, such as those from Japan, whose goods prices were artificially low because of the undervalued yen.īy 2014, following continuous enlargement, the EU had 28 members. #Eu trade blocs freeOr they might affect consumers indirectly because producers now have to pay more for their imports from the 3rd party.The initial aim of the EU was to create a single (‘common’) market for goods, services, capital, and labour by eliminating all barriers to trade and hence promoting free trade between members. These higher prices might affect consumers directly e.g. Once inside a customs union, the country must now adopt a common external tariff which will then increase the cost of importing from the 3rd party nation. When a country joins a customs union it might initially be trading freely with a low cost supplier in a 3rd party nation. an area where there is free trade within the customs union but also a common external tariff. Trade diversion is a feature of a country deciding to join a customs union i.e. Trade diversion is a switch from a lower-cost foreign source/supplier outside of a customs union towards a higher-cost supplier located inside the customs union. Trade creation occurs when a country enters a free trade area / agreement or becomes involved in a customs union in which there is free trade between members but also a common external tariff. Trade creation is the movement from a higher cost source of output to a lower cost source of supply as a result of joining a trade agreement. Pacific Alliance – 2013 – a regional trade agreement between Chile, Colombia, Mexico and Peru Trading Blocs and Trade Creation South Asian Free Trade Area (SAFTA) created in 2006 with countries such as India and Pakistan Mercosur - a customs union between Brazil, Argentina, Uruguay, Paraguay and VenezuelaĪssociation of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA)Ĭommon Market of Eastern and Southern Africa (COMESA) On the welfare impact of the formation of regional trading blocs. North American Free Trade Agreement (NAFTA) between the USA, Canada and Mexico In Europe, the European Union (EU) and the European Free Trade Association (EFTA). The most significant trading blocs currently are:Įuropean Union (EU) – a customs union, a single market and now with a single currency The World Trade Organisation (WTO) permits the existence of trading blocs, provided that they result in lower protection against outside countries than existed before the creation of the trading bloc. Trading blocs lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non-members. Trading blocs are usually groups of countries in specific regions that manage and promote trade activities.
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