Question

What are trade blocks?

Answer 1

1. Trade blocks cover different kinds of arrangements between or among countries for mutual benefit. Economic integration takes the form of a Free Trade Area, a Customs Union, a Common Market, and an Economic Union.
2. A free trade area is the region encompassing a trade bloc whose member countries have signed a free-trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, e.g. SAFTA, EFTA.
3. A customs union is defined as a type of trade block that is composed of a free trade area with no tariff among members and (zero tariffs among members) with a common external tariff, e.g. BENELUX (Belgium, Netherland, and Luxembourg).
4. A common market is established through trade pacts. A group formed by countries within a geographical area to promote duty-free trade and free movement of labour and capital among its members, e.g. European Common Market (ECM).
5. An economic union is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services, and the factors of production, and a common external trade policy. (e.g. European Economic Union).