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Trading Blocs - Coggle Diagram
Trading Blocs
ADVANTAGES
Access to overseas market without exports being penalised with tariffs, this lowers prices, should result in more sales and profits.
Domestic manufacturers can import from bloc members without tariffs, lowering costs of production and prices.
Possibility of economies of scale, size of markets increase, domestic firms have acsess to a larger number of customers, Increased sales leads to ,ower unit costs.
Spreading risk, domestic firms now oporate across more than one countru, if sales fal in one market, sales may be higher in another.
A trading bloc creates a larger market which sttracts FDI from countries enabling higher spending on domestic goofs and services. Plus more tax is earned by the goverment which can imrpove infrastructrue and education benififitng a business. FDI can also bring new tech and ideas that can be adopted by the domestic firm.
Greater competition as domestic firms are now competing with overseas firms within trading blocs, this can create efficiency.
Trading Blocs
Trade policy's are standards, goals, rules and regulations to trade relations between countries. Their aim is to boost the nation’s international trade. These are normally specific to each country and are formulated by its public officials however a unified trade policy is where multiple countries are in agreeance
Trading blocs are a group of countries where barriers to trade are reduced or eliminated between the member countries.
Trading blocs are usually groups of countries in specific regions that lead to trade liberalisation ( the freeing of trade from protectionist measures) and trade creation between members, as they are treated favourably in comparison to non-members
With the move away from protectionism in favour of free trade, one result has been the creation of a number of trading blocs allowing free trade between member states. As well as promoting free trade, trade blocs also encourage the harmonisation of laws and free movement of labour.
DISADVANTAGES
No protection for domestic industries from other bloc members exports which are now cheaper, this may make it difficult for some domestic firms to remain in business
Increased competition for domestic producers, some firms from toher member countries may be more efficient and able to charge lower prices produce better quality products that may make it difficult for domestic firms to compete.
A common external tarrif in a common market can increase costs of raw materials/suppliers frim outside the trading bloc and it is possible that these costs may have been lower if the country could set its own Common external tarriff
New rules and regulations may not sit all businesses. The more integrated the trading bloc, a single market the more rules and regulations need to be followed the more costly it is for the firm.
The Attraction
The harmonisation of laws allows one product to be made that meets the legal requirements of all member countries, allowing the company's to simultaneously enjoy economies of scale.
Countries working together within a trading bloc have more POWER than individual nations to stand up to non-member countries using techniques such as dumping - the practice of selling off excess production in a foreign market at a exceptionally low price which destroys sales for local producers ( domestic firms )
Competing in a larger 'home' market encourages the boosting of efficiency for firms and member states.
Free Trade .
Free-trade areas are groups of countries which trade completely freely, with few or no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world
A trade bloc can be a free-trade area, a loose alliance of countries that want to trade freely with each other.
Common Market
Common markets have completely free trade internally and single unified trade policy,
Other trade blocs may become a common market, which will be more closely integrated than a free trade area, it will have common external tariffs for products and services imported from outside of the world
Single Market
A single Market has harmonised business regulations so that their is a regulated playing field with all businesses competing on equal terms, it has minimum border control between member countries, this could in time make them alike a single economy.
A single market - the same as a common market, but in addition there are common laws and policies and tax harmonisation between member countries to make the movement of goods, capital and labour easier.
Customs Union
Customs union - there is free trade between member countries and members adopt a common set of barriers against non-members. This means that when a product is shipped from outside the union to any of the member states only one set of rules regarding customs duties and rules of origin will apply
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