trade blocs
- Created by: courtroberts
- Created on: 20-03-17 10:39
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- Trade Blocs
- types
- FREE TRADE AREAS
- members in the trade bloc can impose their own barriers on non-members
- CUSTOMS UNION
- members in the trade bloc have to set identical barriers to non - members (e.g EU)
- COMMON MARKETS
- allows free movement of labour and capital across boarders within the bloc
- MONETARY UNION
- countries within a trade bloc have the same currency (e.g EMU)
- FREE TRADE AREAS
- advantages
- beneficial for developing economics (e.g African Nations)
- leads to trade creation
- quick trade round negotiation as only 1 rep
- disadvantages
- can be too powerful
- ^ barriers for outsiders = less trade
- trade diversion as tariffs may ^ on old trade partners when entering bloc
- benefits of EMU
- reduces exchange rate risk as only one currency
- no transaction costs
- price comparisons easier to make
- lower currency speculation
- how to join
- similar level of inflation/IR's
- stable exchange rate
- fiscal deficit < 3% GDP
- growth and stability act
- public debt < 60% GDP
- growth and stability act
- types
- countries grouping together to form a large market
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