Trade bloc

East African Community West African Economic and Monetary Union Treaty of Tlatelolco

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states.

Trade blocs can be stand-alone agreements between several states (such as the North American Free Trade Agreement) or part of a regional organization (such as the European Union). Depending on the level of economic integration, trade blocs can be classified as preferential trading areas, free-trade areas, customs unions, common markets, or economic and monetary unions.[1]

Lists of trade blocs

Use

Stages of economic integration around the World (each country colored according to the most integrated form that it participates with):
  Economic and monetary union (CSME/EC$, EU/, Switzerland–Liechtenstein/CHF)
  Common market (EEA–Switzerland, ASEAN[dubious ])

Historic trading blocs include the Hanseatic League, a Northern European economic alliance between the 12th and 17th centuries, and the German Customs Union, formed on the basis of the German Confederation and subsequently the German Empire from 1871. Surges of trade bloc formation occurred in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all world commerce was conducted within regional trade blocs.[2] Economist Jeffrey J. Schott of the Peterson Institute for International Economics notes that members of successful trade blocs usually share four common traits: similar levels of per capita GNP, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization.[3]

Some advocates of global free trade are opposed to trading blocs. Trade blocs are seen by them to encourage regional free trade at the expense of global free trade.[4] Those who advocate for it claim that global free trade is in the interest of every country, as it would create more opportunities to turn local resources into goods and services that are both currently in demand and will be in demand in the future by consumers.[5] However, scholars and economists continue to debate whether regional trade blocs fragment the global economy or encourage the extension of the existing global multilateral trading system.[6][7]

Terminology

A common market is seen as a stage of economic integration towards an economic union[8] or possibly towards the goal of a unified market.

A single market is a type of trade bloc in which most trade barriers (for goods) have been removed

Advantages and disadvantages

Advantages

Disadvantages

Statistics

Selection of GDP PPP data (top 10 countries and blocs) in no particular order
Trade bloc Population Gross domestic product (USD) Members
2006 2007 growth per capita
Economic and monetary unions
EMU 324,879,195 10,685,946,928,310 12,225,304,229,686 14.41% 37,630
OECS 593,905 3,752,679,562 3,998,281,731 6.54% 6,732
OII 504,476 12,264,278,329 14,165,953,200 15.51% 28,081
CCCM 6,418,417 39,616,485,623 43,967,600,765 10.98% 6,850
EEA 499,620,521 14,924,076,504,592 17,186,876,431,709 15.16% 34,400
Customs and monetary unions
CEMAC 39,278,645 51,265,460,685 58,519,380,755 14.15% 1,490
UEMOA 90,299,945 50,395,629,494 58,453,871,283 15.99% 647
Customs unions
CAN 96,924,486 281,269,141,372 334,172,968,648 18.81% 3,448
EAC 127,107,838 49,882,030,443 61,345,180,041 22.98% 483
EUCU 574,602,745 15,331,827,900,202 17,679,376,474,719 15.31% 30,768
GCC 36,154,528 724,460,151,595 802,641,302,477 10.79% 22,200
MERCOSUR 271,304,946 1,517,510,000,000 1,886,817,000,000 12.44% 9,757
SACU 58,000,000 1,499,811,549,187 1,848,337,158,281 23.24% 6,885
Preferential trade areas and Free trade areas
AANZFTA-ASEAN+3 2,085,858,841 10,216,029,899,764 11,323,947,181,804 10.84% 5,429
ALADI 499,807,662 2,823,198,095,131 3,292,088,771,480 16.61% 6,587
AFTZ 553,915,405 643,541,709,413 739,927,625,273 14.98% 1,336
APTA 2,714,464,027 4,868,614,302,744 5,828,692,637,764 19.72% 2,147
CARIFORUM-EUCU-OCTs 592,083,950 15,437,771,092,522 17,798,283,524,961 15.29% 30,060
CACM 37,388,063 87,209,524,889 97,718,800,794 12.05% 2,614
CEFTA 27,968,711 110,263,802,023 135,404,501,031 22.80% 4,841
CISFTA 272,897,834 1,271,909,586,018 1,661,429,920,721 30.62% 6,088
DR-CAFTA-US 356,964,477 13,345,469,865,037 14,008,686,684,089 4.97% 39,244
ECOWAS 283,096,250 215,999,071,943 255,784,634,128 18.42% 904
EFTA-SACU 68,199,991 1,021,509,931,918 1,139,385,636,888 11.54% 16,707
EAEC 207,033,990 1,125,634,333,117 1,465,256,182,498 30.17% 7,077
NAFTA 449,227,672 15,337,094,304,218 16,189,097,801,318 5.56% 36,038
TPP 25,639,622 401,810,366,865 468,101,167,294 16.50% 18,257
SAARC 1,567,187,373 1,162,684,650,544 1,428,392,756,312 22.85% 911
SPARTECA 35,079,659 918,557,785,031 1,102,745,750,172 20.05% 31,435
Pacific Alliance 218,649,115 1,371,197,216,140 1,525,825,175,045 11.28% 6,978
This list is based on the data obtained from  United Nations Statistics Division.

Comparison between regional trade blocs

1 not all members participating yet
2 involving goods, services, telecommunications, transport (full liberalisation of railways from 2012), energy (full liberalisation from 2007)
3 telecommunications, transport and energy - proposed
4 sensitive goods to be covered from 2019
5 least developed members to join from 2012
6 least developed members to join from 2017
7 Additionally some non member states also participate (the European Union, EFTA have overlapping membership and various common initiatives regarding the European integration).
8 Additionally some non member states also participate (ASEAN Plus Three)
9 Limited to "entitled persons" and duration of one year.

See also

Further reading

Does Economic Integration Cause Foreign Direct Investment?

Massimo Motta and George Norman

Vol. 37, No. 4 (Nov., 1996), pp. 757-783

Published by: Wiley for the Economics Department of the University of Pennsylvania and Institute of Social and Economic Research, Osaka University

DOI: 10.2307/2527310

https://www.jstor.org/stable/2527310

References

  1. ^ Mansfield and Milner 2005, 333.
  2. ^ Milner 2002, 450.
  3. ^ Schott 1991, 2.
  4. ^ O'Loughlin and Anselin 1996, 136.
  5. ^ Lal, Deepak (1993). "Trade Blocs and Multilateral Free Trade" (PDF). Journal of Common Market Studies. 31 (3): 349–358. doi:10.1111/j.1468-5965.1993.tb00468.x.
  6. ^ Milner 2002, 458.
  7. ^ Mansfield and Milner 2005, 330.
  8. ^ http://publications.gc.ca/collections/Collection-R/LoPBdP/inbrief/prb0249-e.htm. Missing or empty |title= (help)
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  12. ^ "WT/REG238/M/1". wto.org. Archived from the original on 2009-03-04.
  13. ^ "Definidos critérios para o Parlamento do Mercosul". Senado Federal – Notícias. February 3, 2007.
  14. ^ Twelfth Andean Presidential Council Act of Lima Archived 2010-07-07 at the Wayback Machine
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  19. ^ Yemen Proposes Replacing Arab League With Arab Union, Agence France-Presse, 11 February 2004
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  24. ^ "ASEAN defense ministers aim for security community". ABS-CBN. February 3, 2007. Archived from the original on June 27, 2006.