2.  There are six major trading blocs around the world

3.  APEC – Asian Pacific Economic Cooperation  ASEAN – Association of South East Asian Nations

4.  Trade Blocs are groups of countries that make agreements to reduce barriers to trade  E.g. By removing tariffs (taxes on imported goods)  Blocs increase trade between members, and members can work together as a larger organisation to trade with non-members  Benefits of membership of a trade bloc are linked to two important concepts:

5.  1) Economies of scale – the advantages companies gain because of increased sales  There’s a larger market for all companies within the trade bloc because it’s easier to trade with all other member countries  This increases sales. More sales means more products need to be made, so companies can buy the raw materials for their products in greater numbers, saving money  Buying raw materials in bulk means each product costs less to make, so companies make more profit

6.  2) Comparative advantage – countries can concentrate on developing specific industries  Being in a trade bloc means it’s easier to trade for all the different goods and services a country needs, because trade is less restricted  So countries can specialise in producing the things they’re good at making and trade for the things they’re not good at making  Production will increase in each member country because they’re concentrating on what they do best, so production will increase in the trade block overall

7.   Free trade zone   MOST developed trade bloc in the world   Common currency   Migration increase   Judicial System   Parliament   Humans Rights Act   Health and Safety Legislation   Cultural links and spread

8.  The North American Free Trade Agreement is an example of a trade bloc  It’s called NAFTA because it’s an agreement between the countries of North America – USA, Canada and Mexico  It’s made trade between the members easier by removing things like import taxes on some goods  Trade between all 3 countries has increased but there are other impacts, e.g. Job losses in the USA because the manufacture of some goods has been moved to Mexico, where labour is cheaper

9. On the USAOn CanadaOn Mexico  All 3 countries would be better off with free trade as they would specialise in producing what they are best at  Free trade with Mexico would result in wage and benefit reductions if US firms are to remain competitive against cheap Mexican labour  Environmental groups saw more severe environmental damage in Mexico as the environmental laws are lax and often not enforced  Multinationals have moved operations to Mexico have gained higher profits  Growth of the visible trade deficit worth 16% of US trade  Mexican trucks are allowed full access to American highways but they don’t limit the time drivers are allowed to stay behind the wheel  Visible trade with US increased 80% in the first 5 years of NAFTA  Visible trade with Mexico has doubled to reach $9 billion in 1998  US investment in Canada reached $147 billion in 1998, up 63% from 1993  More than 1 million new jobs created since its start  In 1998, 68% of FDI in Canada came from US and Mexico  Concerns from environmental groups regarding damage  Forcing Mexican companies to adopt higher foreign standards and business practices  Makes it impossible for Mexico to go back to poor political choices from the past  Mexico has reduced or zero tariffs with 60% of the world  Many believe Mexico has become trade dependent – 88% of export go to the US  Mexican government did little to prepare the country for the significant changes e.g. before NAFTA farmers were protected by import tariffs and government-price guarantees – now unable to compete with large scale farmers in USA and Canada The impacts of NAFTA on its members:

10.  Read the Geofile photocopied sheet on NAFTA