Advantages And Disadvantages Of Economic Blocs
An economic bloc can be defined as a group of countries who act together for a common purpose, in order to increase trade between themselves or gain economic benefits from cooperation on some level. An economic bloc can also be referred as a Trading bloc which is defined as follows; a set of countries which engage in international trade together, and are usually related through a free trade agreement or other association. There are three prominent examples of economic blocs and this include ; North American Free Trade Agreement (NAFTA), European Economic Area ( EEA), Union of South American Nations( Unasur/ Unasul) . The economic bloc in this region is the East African Community (EAC), which is an intergovernmental organization composed …show more content…
This means that all barriers to trade among members like; trade in goods, services, capital, and labour is removed. This also is implemented as well in removing tariffs, and reducing and eliminating on non tariff barriers. So as to have a common market, there must also be a significant level of harmonization of microeconomic policies, rules regarding monopoly power and other factors of anti competitive …show more content…
This means that, at regional level, there is a wider application of the principle of comparative advantage.
Market access; easier access to each others markets means that trade between members is likely to increase. Trade creation exists when free trade enables high cost domestic producers to be replaced by lower cost, and more efficient imports. Because low cost imports lead to lower priced imports, there is a consumption effect; which increased demand resulting from lower prices.
Economies of scale; producers can benefit from the application of scale of economies which will lead to lower costs and lower prices for consumers.
Employment opportunies; jobs may be created as a consequence of increased trade between member economies
Protection; firms inside the bloc are protected from cheaper imports from outside, such as the protection of the EU SHOE INDUSTRY from cheap imports from China and Vietnam.
THE MAIN DISADVANTAGES OF ECONOMIC BLOCS
Loss of benefits; The benefits of free trade between countries in different blocs is
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