Trading blocs & WTO

Research the current trading blocs

Trading Blocs A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members. Trading blocs are a form of economic integration, and increasingly shape the pattern of world trade.

reach-trade-deal php Who is in the trading bloc? What purpose does the trading bloc have? What are the benefits to the member countries? What are the criticisms?

Free Trade Area Free Trade Areas (FTAs) are created when two or more countries in a region agree to eliminate barriers to trade on all goods coming from other members.

With just 7% of the world’s population, the EU's trade with the rest of the world accounts for around 20% of global exports and imports. Around two-thirds of EU countries’ total trade is done with other EU countries. Potential economic gains The European Commission calculates that completion of all the free trade talks now under way could increase the EU’s GDP by more than 2 %. That is the equivalent of adding a country like Austria or Denmark to the EU economy. It could also support the jobs of more than 2 million people. n.pdf Article research: What are the aims of a FTA?

Customs Union A customs union involves the removal of tariff barriers between members, plus the acceptance of a common (unified) external tariff against non-members. This means that members may negotiate as a single bloc with 3 rd parties, such as with other trading blocs, or with the WTO.WTO. trade-area-but-a-customs-union-until-we-understand-the-difference-the-debate- about-our-membership-is-meaningless/

Common Market Like customs union, but also have common taxation laws on production employment free movement of labour absence of special treatment by members toward their own domestic industries (EU not quite here yet – may never be)

The main advantages for members of trading blocs Free trade within the bloc Market access and trade creation Economies of scale Jobs Protection

The main disadvantages of trading blocs Loss of benefits Distortion of trade Inefficiencies and trade diversion (CAP – EU Sugar case) omics/Common_Agricultural_Policy.html#The_Ca se_of_Sugar omics/Common_Agricultural_Policy.html#The_Ca se_of_Sugar Retaliation ( or/transport/ /EU-launches-trade- dispute-against-US-over-Boeing-subsidies.html) or/transport/ /EU-launches-trade- dispute-against-US-over-Boeing-subsidies.html

Trading Bloc Definitions Trade Creation – consumption shifts from high-cost producer to low cost producer – specialisation leads to comparative advantage winning the trade battle Trade Diversion – consumption shifts from lower-cost producer to a higher-cost producer (reducing world efficiency) – eg. if tariff exists on all imports of wool, and New Zealand is the lowest cost producer, then UK will import from New Zealand. But once customs union created, no tariff on Irish wool so it bears a cheaper price tag, even though Irish may be higher cost producers – loss to world efficiency as UK chooses Irish wool. Dumping: – the practice of selling products for below the cost it is sold at in the domestic market – usually for the purpose of attempting to push out competition or just to get rid of extra stock

Potential Conflict Between WTO & Trading Blocs barriers go up between members & non-members members trading can lead to trade diversion – less efficiency weaker countries may not be excluded from larger markets trading bloc rules may prevent members from pursuing potential benefits of trade with non-members if trade becomes concentrated in these zones, WTO may become obsolete or powerless

Evaluating the WTO WTO role particularly important during times of world recession (countries tempted to look inward and ↑ protectionism) General reduction in world tariffs may be more due to groups of countries recognising mutually beneficial trade rather than through action of the WTO (states tend to operate in their own interests) Some poorer countries were allowed to join even with high tariffs in place (eg. India) whereas other are still blocked (eg. China & Russia) Special exemptions for “economic emergency” give convenient cover for predatory tariffs (eg. USA steel tariff) Many countries have replaced tariffs with non-tariff barriers to trade (eg. Exports subsidies & import regulations) – this is harder to combat Anti-globalisation protestors view the global marketplace as the source for poverty and inequality as the rich countries MNC’s get richer without the poor countries being able to benefit