Trading Blocs Essay

1700 words - 7 pages

Trading Blocs

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.

For example, France is a member state of the EU who is first partner
and its major source of surplus. French exchanges out of the union are
relatively concentrated so that eighty percent of the French trade
with the industrialized...

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