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Nowadays, the world is increasingly divided into trade blocs.
Two types of trading blocs are recognized by the WTO : the free trade
areas, where member states have removed all tariff barriers between
them but where each member states can set its own tariffs on imports
from non member countries ( EFTA, NAFTA, ASEAN, APEC) and the customs
union, where countries agree on common tariffs from non members and
remove all trade barriers between them ( like the EU, the Southern
Common Market MERCOSUR formed by Argentina, Brazil, Paraguay and
However there are also the common market in which members allow full
freedom of factors flows (migration of labour and capital) among
themselves in addition to having a customs union and the full economic
union, in which member countries unify all their economic policies,
including monetary, fiscal and welfare policies as well as policy
toward trade and factor migration.
Trade blocs were formed in order to facilitate exchanges between
nations that look like to each other as far as economy, politics and
culture are concerned by removing tariff barriers between its members.
is the trade between nations without protective customs
Protectionism can be definite as the establishment of barriers to the
importation of goods and services from foreign countries in order to
protect domestic producers.
We can wonder if forming a
is a step toward free trade or a
step toward protectionism and what are the advantages and
disadvantages of forming a regional trade bloc like the EU.
I – Forming a trade bloc
1 – Forming a trade bloc : a step toward free trade
On the one hand, forming a trade bloc may seem to answer the...
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trade. As a consequence cheaper imports from non partners country may
be replaced by expensive imports from a better country. In that case,
it allows free trade between members while restricting imports from
9 – Redundancies
As competition is often tougher when the customs union is implemented,
regional trade agreements may entail rounds of redundancies.
The opening of markets led to much restructuring and downsizing due to
Eventually, forming a trade bloc is a step toward free trade as it
simplifies exchanges, as it boosts the economies of the poorest
countries of the agreement and because it lowers prices by raising
competition. However, we can not but notice that it is a step toward
protectionism because it pushes back all the non member countries and
encourages discrimination between countries.