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barriers) are reduced or eliminated among the participating states. Historic economic
blocs include the Hanseatic League, a trading alliance in northern Europe in existence
between the 13th and 17th centuries and the German Customs Union (Zollverein)
initiated in 1834, formed on the basis of the German Confederation and subsequently
German Empire from 1871. Surges of trade bloc formation were seen in the 1960s and
1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than
50% of all world commerce was conducted within regional trade blocs. Economist
Jeffrey J. Scott of the Peterson Institute for International Economics notes that members
of successful trade blocs usually share four common traits: similar levels of per capita
Advocates of worldwide free trade are generally opposed to trading blocs, which, they
argue, encourage regional as opposed to global free trade. Scholars and economists
continue to debate whether regional trade blocs are leading to a more fragmented world
economy or encouraging the extension of the existing global multilateral trading system.
Trade blocs can be stand-alone agreements between several states (such as the North
theEuropean Union). Depending on the level of economic integration, trade blocs can fall
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into different categories, such aspreferential trading areas, free trade areas, customs
A bloc means groups. Trading blocs means grouping of countries. It means a group of
nations united for some common actions. Trading bloc is a voluntary grouping of
integration of nations for mutual benefits. In general terms, regional trade blocks are
associations of nations to promote trade within the block and defend its members against
global competition. Trading blocs are highly organised and based on shared interest to
promote economic and social interest of the member countries. There are different types
of trading blocs such as Free Trade Area, Customs union, Economic Union, custom
union, political union, common market etc. trading blocs leads to greater international
etc. Lowering trade barriers is one of the most obvious means of encouraging trade.
ii. To improve social, political, economic and cultural relations among member
nations.
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v. To promote economic growth.
SAARC:
It stands for South Asian Association for Regional Cooperation. SAARC is an economic
December 1985.
It consists of nations of South Asia that includes Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan and Srilanka. SAARC focus on areas such as Science and Technology,
SAARC members signed an agreement called SAPTA (South Asian Preferential Trade
Agreement). This agreement was signed to provide a framework for the exchange of
trade concessions
It aims at accelerating the process of economic and social development in member states.
Opec is an organization consisting of world's oil and petroleum exporting countries. The
Organization of the Petroleum Exporting Countries (OPEC) was created in 1960 to unify
and protect the interests of oil-producing countries. OPEC has maintained its
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The original members of OPEC included Iran, Iraq, Kuwait, Saudi Arabia, and
Venezuela. OPEC has since expanded to include seven more countries (Algeria, Angola,
Indonesia, Libya, Nigeria, Qatar, and United Arab Emirates) making a total membership
of 12.
The main objective of this bloc is to unify and coordinate member countries petroleum
policies and to provide them with technical and economic aid. There has been a
EU - European Union:
European Union is considered as one of the powerful trading bloc in the world. It was
brought into existence in 1st January 1958 by the treaty of Rome. France, Western
Germany, Italy, Belgium, Netherland and Luxemburg were the founder members of
It has a common currency called 'EURO'. It also offers tremendous trade opportunities
for non-European firms. At present there are twenty seven members in this bloc that
includes: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia,
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NAFTA:
North American Free Trade Agreement the North American Free Trade Agreement or
NAFTA is an agreement signed by the governments of the United States, Canada, and
The agreement came into force on January 1,1994 NAFTA is the most powerful trading
blocs in the world. USA, Canada, Mexico are the members of NAFTA. The objective of
NAFTA is to reduce barriers on the flow of goods, services and people among member
nations, protection to investment in member countries etc. European Union and NAFTA
There are five major advantages of trade bloc agreements: foreign direct investment,
Foreign Direct Investment: An increase in foreign direct investment results from trade
blocs and benefits the economies of participating nations. Larger markets are created,
Economies of Scale: The larger markets created via trading blocs permit economies of
scale. The average cost of production is decreased because mass production is allowed.
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Competition: Trade blocs bring manufacturers in numerous countries closer together,
Trade Effects Trade blocs eliminate tariffs, thus driving the cost of imports down. As a
result, demand changes and consumers make purchases based on the lowest prices,
market. The disadvantages, on the other hand, include: regionalism vs. multinationalism,
Regionalism vs. Multinationalism: Trading blocs bear an inherent bias in favor of their
participating countries. For example, NAFTA, a free trade agreement between the United
States, Canada and Mexico, has contributed to an increased flow of trade among these
three countries. Trade among NAFTA partners has risen to more than 80 percent of
Mexican and Canadian trade and more than a third of U.S. trade, according to a 2009
tariffs and quotas that protect intra-regional trade from outside forces, according to the
University of California Atlas of Global Inequality. Rather than pursuing a global trading
regime within theWorld Trade Organization, which includes the majority of the world's
countries, regional trade bloc countries contribute to regionalism rather than global
integration.
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Concessions: No country wants to let foreign firms gain domestic market share at the
expense of local companies without getting something in return. Any country that wants
to join a trading bloc must be prepared to make concessions. For example, in trading
blocs that involve developed and developing countries, such as bilateral agreements
between the U.S. or the EU and relatively poor Asian, Latin American or African
countries, the latter may have to allow multinational corporations to enter their home
the countries become increasingly dependent on each other. A disruption of trade within a
trading bloc as a result of a natural disaster, conflict or revolution may have severe
Yet, this does not mean that trade barriers are non-existent. While the World Trade
Organization (WTO) promotes global multilateral free trade, regional trade blocks
provide their members with the mechanisms for competing in an aggressive global
market.
Regardless of the size of your business, it is essential to know the international trade
regulations that govern your import and/or export operations. This article provides a brief
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description of each trade block – date established, list of members, goals, population, and
GDP (PPP). Links are provided for more detailed information of trade agreements and
tariffs.
level to promote trade within the block and defend its members against global
Since trade is not an isolated activity, member states within regional blocks also
cooperate in economic, political, security, climatic, and other issues affecting the region.
In terms of their size and trade value, there are four major trade blocks and a larger
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ASEAN Economic Community (AEC): Learn more about ASEAN Leaders'
vision to transform ASEAN into a single market and production base that is highly
Founded in 1951 by six neighboring states as the European Coal and Steel
Community (ECSC).
Over time evolved into the European Economic Community, then the European
Community and, in 1992, was finally transformed into the European Union.
Regional block with the largest number of members states (28). These include Austria,
Belgium, Bulgaria, Croatia (2013), Cyprus, Czech Republic, Denmark, Estonia, Finland,
Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, The Netherlands,
MERCOSUR (Mercado Comun del Cono Sul - Southern Cone Common Market)
Full members include Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Boliivia
Colombia, Ecuador, Guyana, Peru, and Suriname. Associate members have access to
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NAFTA (North American Free Trade Agreement) Updated 27 Jan
Goals: Eliminate trade barriers among member states, promote conditions for free
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. There are several types of
trading bloc:
Preferential Trade Areas (PTAs) exist when countries within a geographical region agree
the area. This is often the first small step towards the creation of a trading bloc.
Free Trade Areas (FTAs) are created when two or more countries in a region agree to
reduce or eliminate barriers to trade on all goods coming from other members.
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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 3rd parties, such as with other trading blocs,
Common Market
A ‘common market’ is the first significant step towards full economic integration, and
occurs when member countries trade freely in all economic resources – not just tangible
goods. This means that all barriers to trade in goods, services, capital, and labour are
removed. In addition, as well as removing tariffs, non-tariff barriers are also reduced and
eliminated. For a common market to be successful there must also be a significant level
The EU is the world’s largest trading bloc, and second largest economy, after the USA.
The EU was originally called the Economic Community (Common Market, or The Six)
after Its formation following theTreaty of Rome in 1957. The original six members
The initial aim was to create a single market for goods, services, capital, and labour by
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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
By 2014, following continuous enlargement, the EU had 28 members. Croatia is the latest
Knowing that they have free access to each other's markets, members are encouraged to
specialise. This means that, at the regional level, there is a wider application of the
Easier access to each other’s markets means that trade between members is likely to
increase. Trade creation exists when free trade enables high cost domestic producers to
be replaced by lower cost, and more efficient imports. Because low cost imports lead to
lower priced imports, there is a 'consumption effect', with increased demand resulting
Loss of benefits
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Distortion of trade
Trading blocs are likely to distort world trade, and reduce the beneficial effects of
Inefficient producers within the bloc can be protected from more efficient ones outside
the bloc. For example, inefficient European farmers may be protected from low-cost
imports from developing countries. Trade diversion arises when trade is diverted away
from efficient producers who are based outside the trading area.
TRADE BARRIES
Tariffs
Import licenses
Export licenses
Import quotas
Subsidies
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Local content requirements
Embargo
Currency devaluation[2]
Trade restriction
Most trade barriers work on the same principle: the imposition of some sort of cost on
trade that raises the price of the traded products. If two or more nations repeatedly use
Economists generally agree that trade barriers are detrimental and decrease overall
theory, free trade involves the removal of all such barriers, except perhaps those
considered necessary for health or national security. In practice, however, even those
countries promoting free trade heavily subsidize certain industries, such as agriculture
and steel.
Trade barriers are often criticized for the effect they have on the developing world.
Because rich-country players call most of the shots and set trade policies, goods such as
crops that developing countries are best at producing still face high barriers. Trade
barriers such as taxes on food imports or subsidies for farmers in developed economies
lead to overproduction and dumping on world markets, thus lowering prices and hurting
poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw
commodities and high rates for labor-intensive processed goods. The Commitment to
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Development Index measures the effect that rich country trade policies actually have on
Another negative aspect of trade barriers is that it would cause a limited choice of
products and would therefore force customers to pay higher prices and accept inferior
quality. Trade barriers may occur in international trade when goods have to cross political
boundaries. A trade barrier is a restriction on what would otherwise be free trade. The
most common form of trade barriers are tariffs, or duties (the two words are often used
imports. There is also a category of nontariff barriers, also known as nontariff measures,
There are several different types of duties or tariffs. An export duty is a tax levied on
goods leaving a country, while an import duty is charged on goods entering a country. A
is one that is calculated as a percentage of the value of the goods being imported or
exported. For example, a 20 percent ad valorem duty means that a duty equal to 20
percent of the value of the goods in question must be paid. Duties that are calculated in
other ways include a specific duty, which is based on the quantity, weight, or volume of
goods, and a compound duty (also known as a mixed tariff), which is calculated as a
Duties and tariffs are also categorized according to their function or purpose. An
antidumping duty is imposed on imports that are priced below fair market value and that
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would damage domestic producers. Antidumping duties are also called punitive tariffs. A
countervailing duty, another type of punitive tariff, is levied after there has been
specifically charged on imports that have been subsidized by the exporting country's
government. The purpose of a countervailing duty is to offset the subsidy and increase
typically used when the amount of an imported good exceeds a certain permitted level. It
may be used to protect domestic producers. Another type of tariff is the end-use tariff,
which is based on the use of an imported product. For example, the same product may be
use.
In addition to duties and tariffs, there are also nontariff barriers (NTBs) to international
trade. These include quantitative restrictions, or quotas, that may be imposed by one
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Administrative regulations constitute a second category of NTBs. These include a variety
of requirements that must be met in order for trade to occur, including fees, licenses,
permits, domestic content requirements, financial bonds and deposits, and government
procurement practices. The third type of NTB covers technical regulations that apply to
In 1980 the Agreement on Technical Barriers to Trade, also known as the Standards
Code, came into effect for the purpose of ensuring that administrative and technical
practices do not act as trade barriers. By the end of 1988 the agreement had been signed
was conducted by the General Agreement on Tariffs and Trade (GATT) Standards
Committee, which in 1994 was succeeded by the newly created World Trade
Organization (WTO). As a result more than 131 governments accepted the provisions of
Standards and testing practices can become technical barriers to trade when they are
developed by national or regional interests and then imposed on the international trading.
The U.S. Department of Commerce' s 1998 report, "National Export Strategy," identified
and regional economic blocs" as a major threat to U.S. competitiveness abroad. Under the
TBT Agreement the WTO is supposed to guarantee due process and transparency in the
presented examples where narrow regional or market interests have resulted in standards
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forced on international trade, and governments and regional economic blocs such as the
European Union (EU) have openly used standards and related practices to achieve market
domination. The United States was among those countries calling for technology- and
trade neutral standards, especially for markets in Latin America and Asia.
Other types of existing technical trade barriers include environmental, health, and safety
beef from cattle raised with hormones to not allowing older airplanes to land because of
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CONCLUISON
Trade barriers may occur in international trade when goods have to cross political
boundaries. A trade barrier is a restriction on what would otherwise be free trade. The
most common form of trade barriers are tariffs, or duties (the two words are often used
imports. There is also a category of nontariff barriers, also known as nontariff measures,
which also serve to restrict global trade. Tariffs and other trade barriers have a definite
effect on consumption and production. They serve to reduce consumption of the imported
product, because the tariff raises the domestic price of the import. They also serve to
stimulate domestic production of the product when that is possible, also because of the
higher domestic price. Proponents of tariffs argue that such an increase in domestic
standpoint. The overall effect of tariffs and trade barriers on international trade is to
reduce the volume of trade and to increase the prices of imports. Proponents of free trade
argue that both of those results are undesirable, while proponents of protectionism argue
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