Trade bloc

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A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states.^[1]

Description

Stages of economic integration around the World (each country colored according to the most integrated form that it participates with):

  Economic and monetary union (CSME/EC$, EU/€, Switzerland–Liechtenstein/CHF)

  Economic union (CSME, EU, EAEU, MERCOSUR, GCC, SICA)

  Customs and monetary union (CEMAC/XAF, UEMOA/XOF)

  Common market (EEA–Switzerland, ASEAN)

  Customs union (CAN, EAC, EUCU, SACU)

  Multilateral Free Trade Area (CEFTA, CISFTA, COMESA, EFTA, GAFTA, NAFTA, SAFTA, AANZFTA, PAFTA, SADCFTA)

Historic trading blocs include the Hanseatic League, a Northern European economic alliance between the 12th and 17th centuries, and the German Customs Union, formed on the basis of the German Confederation and subsequently the German Empire from 1871. Surges of trade bloc formation occurred 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.^[2] 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 GNP, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization.^[3]

Many advocates of global free trade are opposed to trading blocs. Trade blocs are seen by them to encourage regional free trade at the expense of global free trade.^[4] Those who advocate for it claim that global free trade is in the interest of every country, as it would create more opportunities to turn local resources into goods and services that are both currently in demand and will be in demand in the future by consumers.^[5] However, scholars and economists continue to debate whether regional trade blocs fragment the global economy or encourage the extension of the existing global multilateral trading system.^[6][7]

Trade blocs can be stand-alone agreements between several states (such as the North American Free Trade Agreement) or part of a regional organization (such as the European Union). Depending on the level of economic integration, trade blocs can be classified as preferential trading areas, free trade areas, customs unions, common markets, or economic and monetary unions.^[8]

Advantages and disadvantages

Advantages

• Increased foreign direct investment: An increase in foreign direct investment may result from the creation of trade blocs. This can benefit the economies of participating nations by creating jobs in new or expanded businesses.
• Economies of scale: The larger markets created by trade blocs permit companies to take advantage of economies of scale. Since the average cost of each good produced tends to fall as production increases, this results in lower prices for consumers.
• Competition: Trade blocs force the manufacturers in participating countries to compete with each other. Increased competition creates pressures for greater efficiency within firms, which results in lower prices for consumers.
• Trade Effects: Trade blocs eliminate tariffs, which drives down the cost of imports. As a result, consumers can save money by buying imported goods when cheaper than locally-produced ones—they can then spend those savings on other goods. Reducing the cost of imports also reduces the cost of locally-produced goods that use imported parts or components.
• Improved Market Efficiency: Increased competition and the removal of tariffs, which may act as a price floor, drive down prices and allow for increased consumption. This reduces deadweight loss and hence improves market efficiency.

Disadvantages

• Regionalism vs. Multinationalism: Trading blocs inherently favor their participating countries. For example, among NAFTA partners, the United States, Canada and Mexico, trade 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 report by the Council on Foreign Relations. However, regional economies establish 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 the World Trade Organization, which includes the majority of the world's countries, regional trade bloc countries contribute to regionalism rather than global integration.
• Loss of Sovereignty: A trading bloc, particularly when it is coupled with a political union, is likely to lead to at least partial loss of sovereignty for its participants. For example, the European Union, started as a trading bloc in 1957 by the Treaty of Rome, has transformed itself into a far-reaching political organization that deals not only with trade matters, but also with human rights, consumer protection, greenhouse gas emissions and other issues which are only marginally related.
• 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 markets, hurting the business of some local firms.
• Interdependence: Because trading blocs increase trade among participating countries, those 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 consequences for the economies of all participating countries.

Lists of trade blocs

Monetary unions.

Customs unions worldwide.

Regional trade blocs:

  European Union (EU)

  African Union (AU)

  Union of South American Nations (USAN)

  Caribbean Community (CARICOM)

  Central American Integration System (SICA)

  Arab League (AL)

  European Free Trade Association (EFTA)

  Eurasian Economic Community (EAEC)

  ASEAN Free Trade Area Agreement (AFTA)

  Central European Free Trade Agreement (CEFTA)

  North American Free Trade Agreement (NAFTA)

  South Asian Association for Regional Cooperation (SAARC)

  Pacific Islands Forum (PIF)

Mercosur

• List of preferential trade areas
• List of free trade areas (bilateral, multilateral)
• List of customs unions
• List of common markets
• List of economic unions
• List of monetary unions
• List of customs and monetary unions
• List of economic and monetary unions

Statistics

This list is based on the data obtained from  United Nations Statistics Division.

This list is based on the data obtained from  United Nations Statistics Division.

Trade bloc	Population	Gross domestic product (USD)				Members
		2006	2007	growth	per capita
Common markets, Economic and Monetary unions
EMU	324,879,195	10,685,946,928,310	12,225,304,229,686	14.41%	37,630	17  Austria  Belgium  Cyprus  Estonia  Finland  France  Germany  Greece  Ireland  Italy  Luxembourg  Malta  Netherlands  Portugal  Slovakia  Slovenia  Spain
OECS	593,905	3,752,679,562	3,998,281,731	6.54%	6,732	6  Antigua and Barbuda  Dominica  Grenada  Saint Kitts and Nevis  Saint Lucia  Saint Vincent and the Grenadines
OII	504,476	12,264,278,329	14,165,953,200	15.51%	28,081	3  French Polynesia  New Caledonia  Wallis and Futuna
CCCM	6,418,417	39,616,485,623	43,967,600,765	10.98%	6,850	12 6 OECS members  Barbados  Belize  Guyana  Jamaica  Suriname  Trinidad and Tobago
EEA	499,620,521	14,924,076,504,592	17,186,876,431,709	15.16%	34,400	30 27 EU members  Iceland  Liechtenstein  Norway
Customs and monetary unions
CEMAC	39,278,645	51,265,460,685	58,519,380,755	14.15%	1,490	6  Cameroon  Central African Republic  Chad  Republic of the Congo  Equatorial Guinea  Gabon
UEMOA	90,299,945	50,395,629,494	58,453,871,283	15.99%	647	8  Benin  Burkina Faso  Ivory Coast  Guinea-Bissau  Mali  Niger  Senegal  Togo
Customs unions
CAN	96,924,486	281,269,141,372	334,172,968,648	18.81%	3,448	4  Bolivia  Colombia  Ecuador  Peru
EAC	127,107,838	49,882,030,443	61,345,180,041	22.98%	483	5  Burundi  Kenya  Rwanda  Tanzania  Uganda
EUCU	574,602,745	15,331,827,900,202	17,679,376,474,719	15.31%	30,768	33 30 EEA members  Andorra  San Marino  Turkey
GCC	36,154,528	724,460,151,595	802,641,302,477	10.79%	22,200	6  Bahrain  Kuwait  Oman  Qatar  Saudi Arabia  United Arab Emirates
MERCOSUR	271,304,946	1,517,510,000,000	1,886,817,000,000	12.44%	9,757	5  Argentina  Brazil  Paraguay  Uruguay  Venezuela
SACU	58,000,000	1,499,811,549,187	1,848,337,158,281	23.24%	6,885	5  Botswana  Lesotho  Namibia  South Africa  Swaziland
Preferential trade areas and Free trade areas
AANZFTA-ASEAN+3	2,085,858,841	10,216,029,899,764	11,323,947,181,804	10.84%	5,429	15 10 ASEAN members  Australia  China ( Hong Kong) ( Macau)  Japan  New Zealand  South Korea
ALADI	499,807,662	2,823,198,095,131	3,292,088,771,480	16.61%	6,587	12 4 CAN members 5 MERCOSUL members  Chile  Cuba  Mexico
AFTZ	553,915,405	643,541,709,413	739,927,625,273	14.98%	1,336	26 5 EAC members 5 SACU members  Angola  Comoros  Democratic Republic of the Congo  Djibouti  Egypt  Eritrea  Ethiopia  Libya  Madagascar  Malawi  Mauritius  Mozambique  Seychelles  Sudan  Zambia  Zimbabwe
APTA	2,714,464,027	4,868,614,302,744	5,828,692,637,764	19.72%	2,147	6  Bangladesh  China ( Hong Kong) ( Macau)  India  Laos  Sri Lanka  South Korea
CARIFORUM-EUCU-OCTs	592,083,950	15,437,771,092,522	17,798,283,524,961	15.29%	30,060	67 12 CCCM members 33 EUCU members 3 OII members  Anguilla  Aruba  Bahamas  British Antarctic Territory  British Indian Ocean Territory  British Virgin Islands  Cayman Islands  Dominican Republic  Falkland Islands  French Southern and Antarctic Lands  Greenland  Mayotte  Montserrat  Netherlands Antilles  Pitcairn Islands  Saint Helena, Ascension and Tristan da Cunha  South Georgia and the South Sandwich Islands  Saint Pierre and Miquelon  Turks and Caicos Islands
CACM	37,388,063	87,209,524,889	97,718,800,794	12.05%	2,614	5  Costa Rica  El Salvador  Guatemala  Honduras  Nicaragua
CEFTA	27,968,711	110,263,802,023	135,404,501,031	22.80%	4,841	8  Albania  Bosnia and Herzegovina  Croatia  Kosovo  Macedonia  Moldova  Montenegro  Serbia
CISFTA	272,897,834	1,271,909,586,018	1,661,429,920,721	30.62%	6,088	11 6 EAEC members  Armenia  Azerbaijan  Georgia  Ukraine  Moldova
DR-CAFTA-US	356,964,477	13,345,469,865,037	14,008,686,684,089	4.97%	39,244	7 5 CACM members  Dominican Republic  United States ( Puerto Rico)
ECOWAS	283,096,250	215,999,071,943	255,784,634,128	18.42%	904	15 8 UEMOA members  Cape Verde  Gambia  Ghana  Guinea  Liberia  Nigeria  Sierra Leone
EFTA-SACU	68,199,991	1,021,509,931,918	1,139,385,636,888	11.54%	16,707	9 4 EFTA members 5 SACU members
EAEC	207,033,990	1,125,634,333,117	1,465,256,182,498	30.17%	7,077	6  Belarus  Kazakhstan  Kyrgyzstan  Russia  Tajikistan  Uzbekistan
NAFTA	449,227,672	15,337,094,304,218	16,189,097,801,318	5.56%	36,038	3  Canada  Mexico  United States ( Puerto Rico)
TPP	25,639,622	401,810,366,865	468,101,167,294	16.50%	18,257	4  Brunei  Chile  New Zealand  Singapore
SAARC	1,567,187,373	1,162,684,650,544	1,428,392,756,312	22.85%	911	8  Afghanistan  Bangladesh  Bhutan  India  Maldives    Nepal  Pakistan  Sri Lanka
SPARTECA	35,079,659	918,557,785,031	1,102,745,750,172	20.05%	31,435	21 3 OII members 12 PICTA members  Australia  Marshall Islands  New Zealand  Palau  Timor-Leste  Tokelau
Pacific Alliance	218,649,115	1,371,197,216,140	1,525,825,175,045	11.28%	6,978	4  Colombia  Chile  Peru  Mexico
National integrity system composition prize	510,072,000（196,940,000）	7,910,000,000	1100000,4000,2000,1500,200	100%	2000000	10  Republic of China  Hong Kong  Macau  Chinese Taipei The Government of the Republic (Constitution of the Republic each other) the Olympic reserve domain 基隆港集团 Kuomintang  International Olympic Committee Keelung district, new Taipei City Government Revolutionary Committee of the Kuomintang

Comparison between regional trade blocs

See also

• Regional integration
• Continental union

References

Bibliography