Theme 3 - Trading blocs

  • Created by: becky.65
  • Created on: 13-02-18 09:04
What are trade blocs?
Groups of countries where barriers to trade are reduced or eliminated between the member states
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What has been the significance of trade blocs?
They have made it much easier to access member countries' markets without hindrance and have encouraged specialisation and opened up new markets
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What is the best known free trade area?
NAFTA (North American Free Trade Area)
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What is the best known common market and single market?
EU
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What is ASEAN
Association of South East Asian Nations; it has reduced trade barriers between members and aims to be a free trade area by 2020
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What are free trade areas?
Groups of counties that trade completely free with each other, with no trade barriers, but each member country retains its own independent trade policies in relation to the rest of the world
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What are common markets?
They have completely free trade internally and a single unified trade policy covering all member countries' trade with the rest of the world. There is free movement of goods and services
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What is a single market?
It involves free movement of people and capital. Individuals in all member countries can work in any other member country. Businesses based in a common market can invest in any member country
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What do trade blocs encourage?
Trade creation whereby there is increased trade amongst the member states
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What is trade creation?
It occurs when there is an increase in the total amount of goods and services traded because of reduced trade restrictions within a trading bloc
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What is trade diversion?
It occurs when a trading bloc reduces imports from non-member countries, enabling businesses within member countries to increase sales inside the trading bloc
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What are the benefits of trading within a trading bloc?
Export levels increase, lower prices for consumers and businesses, possibility of economies of scale, spreading of risk, more FDI due to a larger market, greater competition can reduce prices and costs
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What are the constraints of trading within a free trade area?
No protection for domestic industries competing with other bloc members, stiffer competition for domestic producers, reaching an agreement can be very slow
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What are the constraints of trading within a common market?
A common external tariff can increase costs of raw materials or supplies outside the bloc, harmonised regulation may not suit all businesses
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What impact do trading blocs have on firms?
Businesses that can increase exports within a trading bloc will always benefit, there will be increased competition, all businesses have an incentive to adapt to cut costs and increase their competitive advantage but some businesses may resist regula
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What has the growth of trade and FDI made all economies?
More reliant on each other as businesses are likely to be affected by adverse events in economies by which they trade
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Card 2

Front

What has been the significance of trade blocs?

Back

They have made it much easier to access member countries' markets without hindrance and have encouraged specialisation and opened up new markets

Card 3

Front

What is the best known free trade area?

Back

Preview of the front of card 3

Card 4

Front

What is the best known common market and single market?

Back

Preview of the front of card 4

Card 5

Front

What is ASEAN

Back

Preview of the front of card 5
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