Types Of Trade Blocks 6x1v43

Sovereign countries belonging to the free trade area trade freely amongst them have individual trade barriers

but

free trade 1. areas

with countries outside the free trade area have most favored nation status

All

Examples

That is, they are all treated equally NAFTA CAFTA

countries are no longer fully sovereign over trade policy There will be some degree of unification of custom or trade policies They will have a common external tariff to all countries

which is applied

outside the customs union

Profile

at trade negotiations countries will be represented

customs 2. unions

Types of Trade Blocks

with organizations such as the WTO

by supra-national organizations e.g. the European Union

internal economies of scale external economies of scale

longer-term advantages

better of trade increased competition between certain regions of the union may suffer

longer-term disadvantages

possibility of oligopolistic collusion istrative costs

which has in addition the free movement

common 3. markets

a customs union

of factors of production

between

labour capital

without restriction the member countries

MERCOSUR is an example common market where the level of integration is more developed member states may adopt common economic policies

Economic 4. Union

e.g.

the Common Agricultural Policy (CAP) of the European Union

They may have a fixed exchange rate regime they may have integrated further

Types of Trade Blocks.mmap - 18/04/2009 - Carlos Mondragón

and have a single common currency This will involve common monetary policy