5/8/2023 0 Comments Trade blocs help countries by![]() The Central European Free Trade Agreement (CEFTA)Įstablished in 1992, members of CEFTA are Albania, Bosnia, Croatia, Herzegovina, Kosovo, North Macedonia, Moldova, Montenegro, and Serbia. Members include the EU plus Iceland, Liechtenstein, and Norway. The EEA was established so that members of the EU could also house member states from the EFTA. Established in 1960, the EFTA encourages integration and free trade between its members. The EFTA is a trade bloc composed of Iceland, Liechtenstein, Norway, and Switzerland as its members. Its 27 member states form this political and economic union. The EU is the most significant trade bloc in Europe. The following are some of the most current significant trading blocs. However, non-members who want to trade will find that the tariff remains the same (or higher) because it doesn’t adhere to the same trade agreements. Trade blocs remove or reduce tariffs for its members. For instance, the point of a trade bloc is to reduce barriers as it pertains to trade, not as other forms of political bargaining. The WTO will only permit a new trade bloc if it means that member countries can’t discriminate against non-member countries. Members are treated more favorably compared to non-member countries.Free trade between countries (aka lowered or eliminated barriers).Member countries who promote and manage trade activities.Groups of countries with neighboring or predetermined regions.EU trade bloc) has adopted a common currency.Ī few trade bloc characteristics include: In addition to eliminating member trade barriers, adopting common barriers for non-members and allowing a free movement of resources, an economic union also adopts similar economic policies. The East African Common Market is one such example of an economic union. Members in a common market will eliminate internal trade barriers, adopt common policies for non-members, and allow a free movement of resources (like labor). As a single trade block, members within a customs union can negotiate with other trading blocs or third-parties like the World Trade Organization (WTO). Member countries in a customs union remove all trade barriers and adopt policies/external tariffs when dealing with non-members. ![]() Members can maintain their independent trade policies with non-members. With a free trade area, members remove all trade barriers, leaving them free to import and export goods and services between them. ![]() It doesn’t address how to work with non-members. In other words, members will reduce or eliminate tariff barriers on certain goods from other members. Preferential Trade AreaĪ preferential trade area has low levels of commitment when it comes to reducing trade barriers. The following types of trade blocs vary based on different arrangements and commitment between its members. This can create a trade diversion where a non-member country may be prevented from trading with a member of a trading bloc – or barriers like increased external tariffs may be put into place. In some cases, members adopt similar economic and political policies in order to facilitate easier trade.ĭepending on the agreement, members establish rules when it comes to trading with non-members, such as the inability for a member to negotiate with another non-member by themselves. ![]() This type of intergovernmental agreement reduces or eliminates barriers to international trade. Trade blocs (in many cases part of a regional intergovernmental organization) help countries trade with other member countries as easily as possible. ![]()
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