The economic blocks or trade blocs are a group of countries that have reduced or eliminated trade barriers for their members. These blocs are a form of economic integration and constitute an important structure of world trade. Examples of economic blocs are the European Union or Mercosur.
To form an economic bloc, countries sign international treaties. Normally, these blocks have their own administrative and regulatory bodies. Some also set political goals.
The purpose of the economic blocs is to free trade from protectionist measures, creating an environment conducive to trade among their members..
The strengthening of the economic interdependence of the countries as a result of regional integration and the globalization of international economic relations, provides a strong impetus to the development of economic blocs at the national, regional and global levels..
The World Trade Organization allows the existence of economic blocs as long as they result in less protection against external countries than what existed before the creation of these blocs..
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What is sought is that the member countries of the economic bloc have free trade with each other, at the same time establishing barriers to trade with non-associated countries, generating a significant impact on the world trade pattern..
A regional organization is created, where barriers to international trade between member countries are reduced or eliminated, allowing them to trade among themselves as smoothly as possible.
The economic blocs result in an increase in foreign direct investment, benefiting the economies of the participating nations. Local investments are also increasing, as the overall size of markets for companies increases..
These international trade agreements open up new opportunities for exporters, in addition to guaranteeing access to imports from other countries at competitive prices..
The economic leverage of the entire trading block is increased. The creation of a larger market thus allows generating a greater production.
In the 1980s, multilateral trade negotiations were slow and tedious, leading the United States to move away from its policy of only setting up multilateral trade negotiations as a mechanism to promote free trade..
This has produced a profound change in the structure of the international economy due to the international improvement of regional trade blocs in all parts of the world. An economic bloc can influence in its favor in terms of trade more easily than individual countries.
It is interesting to compare the formation of economic blocs with the business merger process. If two or more companies merge, they will initially be able to gain a competitive advantage over their competition..
However, competitors will increasingly respond through their own mergers or other forms of attempts not to be left behind in the competitive fight. The end result will then be a new form of competitive equilibrium where only large corporations will negotiate with each other..
When nations within a geographic region agree to eliminate or reduce tariff barriers on selected goods imported from other countries in the region.
Customs duties, taxes and fees are abolished, as well as quantitative restrictions on mutual trade, according to an international treaty of the member countries. Each member country can independently determine its trade regime with respect to third countries.
The abolition of customs duties in trade between member countries is agreed, also having a form of collective protectionism with respect to other countries. It also provides for the formation of a single customs territory.
It arises when member countries can freely trade not only products, but all economic resources. This means that there is no barrier to trading services, goods, capital and labor. In addition, non-tariff barriers are reduced and eliminated.
The members of the bloc have free access to each other's markets, which allows them to specialize not only at the regional level but also at the national level..
Easily accessing the markets of other countries means that trade between them increases, allowing the replacement of expensive local products with cheaper imported ones.
It means reducing the cost of a unit of production according to the scale of production of a company. This benefits producers, thus resulting in lower costs..
As a result of increased trade, new jobs are created among member countries.
Companies within the bloc are protected from cheaper imports from abroad.
Countries that belong to different economic blocs may lose the possible benefits of having free trade with each other.
This distortion in world trade arises when it stops trading with efficient producers that are external to the economic bloc.
Countries must share economic sovereignty. Therefore, decisions need to be made for the entire area, which may go against the particular wishes of a country..
Moving towards free trade tends to create winners and losers, thus deteriorating some domestic industries in the face of lower-cost imports.
The development of a commercial block stimulates the development of other blocks. This can lead to retaliation and trade disputes..
It is the most integrated commercial block. The EU has free trade and also common regulations, being part of a customs union.
North Atlantic Free Trade Agreement. Corresponds to the free trade area made up of Canada, the United States and Mexico
It is the economic bloc of South America. It includes full members, such as Argentina, Brazil, Paraguay and Uruguay. In addition, it has associate members such as Bolivia, Chile, Colombia and Ecuador. It was developed as a free trade zone to later become a customs union.
Free trade zone in Southeast Asia. Includes Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar and Cambodia.
South Asia Free Trade Area, based on the Indian subcontinent. Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
An economic bloc that contains 55 countries on the African continent, which was created to strengthen economic and political ties. It aspires to become a free trade zone.
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