Adam El Masmoudi Garcia
P4
A trade bloc is a group of countries in a geographical area that get together to protect
themselves from countries outside their group. They co-operate to help make goods and
services move more easily and place restrictions on goods or services being brought into the
area.
Different types of trading blocs:
Preferential Trade Area (PFA)
This occurs when countries within a geographical region agree to reduce or eliminate tariff
barriers on selected goods imported from other members of the area.
Free Trade Area (FTA)
These are created when two or more countries in a region agree to reduce or eliminate
barriers to trade on all goods coming from other members.
An example would be NAFTA (between USA, Canada & Mexico), which these countries
form a Free Trade Area abolish trade barriers but each country maintains its own tariffs
against non-member countries.
Custom Union (CU)
This involves the removal of tariff barriers between members, plus the acceptance of a
common (unified) external tariff against non-members. This means that members may
negotiate as a single bloc with 3rd parties, such as with other trading blocs, or with the WTO.
Countries that export to the customs union only need to make a single payment (duty), once
the goods have passed through the border. Members of a customs union are obliged to
negotiate collectively with non-members, or organisations like the WTO, as a single group
(bloc) of countries, and it means that members are not free to negotiate individual trade deals
in their own national interest. For example, the UK does not produce its own bananas, so a
tariff on banana imports only raises price and does not protect domestic producers. The
current EU tariff on bananas imported from outside the EU is 10.9%.
Common Market (MK)
This occurs when member countries trade freely in all economic resources, not just tangible
goods. This means that all barriers to trade in goods, services, capital, and labour are
removed. In addition, as well as removing tariffs, non-tariff barriers are also reduced and
eliminated. Common markets impose common external tariff (CET) on imports from non-
member countries. Examples include Mercosur (Southern Cone Market), East African
Common Market, and West African Common market. The members eliminate internal trade
barriers, adopt common external trade barriers and allow free movement of resources, for
example labour, among member countries.
P4
A trade bloc is a group of countries in a geographical area that get together to protect
themselves from countries outside their group. They co-operate to help make goods and
services move more easily and place restrictions on goods or services being brought into the
area.
Different types of trading blocs:
Preferential Trade Area (PFA)
This occurs when countries within a geographical region agree to reduce or eliminate tariff
barriers on selected goods imported from other members of the area.
Free Trade Area (FTA)
These are created when two or more countries in a region agree to reduce or eliminate
barriers to trade on all goods coming from other members.
An example would be NAFTA (between USA, Canada & Mexico), which these countries
form a Free Trade Area abolish trade barriers but each country maintains its own tariffs
against non-member countries.
Custom Union (CU)
This involves the removal of tariff barriers between members, plus the acceptance of a
common (unified) external tariff against non-members. This means that members may
negotiate as a single bloc with 3rd parties, such as with other trading blocs, or with the WTO.
Countries that export to the customs union only need to make a single payment (duty), once
the goods have passed through the border. Members of a customs union are obliged to
negotiate collectively with non-members, or organisations like the WTO, as a single group
(bloc) of countries, and it means that members are not free to negotiate individual trade deals
in their own national interest. For example, the UK does not produce its own bananas, so a
tariff on banana imports only raises price and does not protect domestic producers. The
current EU tariff on bananas imported from outside the EU is 10.9%.
Common Market (MK)
This occurs when member countries trade freely in all economic resources, not just tangible
goods. This means that all barriers to trade in goods, services, capital, and labour are
removed. In addition, as well as removing tariffs, non-tariff barriers are also reduced and
eliminated. Common markets impose common external tariff (CET) on imports from non-
member countries. Examples include Mercosur (Southern Cone Market), East African
Common Market, and West African Common market. The members eliminate internal trade
barriers, adopt common external trade barriers and allow free movement of resources, for
example labour, among member countries.
