Advantages And Disadvantages Of Trade Blocs

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TRADE BLOCS

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, (tariffs and non-tariff barriers) are reduced or eliminated among the participating states . We can also say that the meaning of trading blocs is a group of countries that exist within a geographical region with the motive to protect themselves from the import of non – members . It can also be seen as a form of economic integration that is increasingly shaping the pattern of world trade .
Major types of Trade Blocs :-
1. Preferential Trade Area :- Preferential Trade Areas (PTAs) exist when countries within a geographical region agree to reduce or eliminate tariff barriers on selected
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4. Jobs :- Jobs may be created as a consequence of increased trade between member economies as trade involves various operations including manufactuting , packaging , transporting , etc .
5. 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.

Main Disadvantages of trading blocs

1. Loss of benefits :-The benefits of free trade between countries in different blocs is lost as it includes regions in a particular geographical region and different blocs have different policies and rules .

2. Distortion of trade :- Trading blocs are likely to disrupt and distort the world trade reducing the beneficial effects of specialisation and the exploitation of comparative advantage that could have easily led to an increase in profits or good level of business among different countries .

3. Inefficiencies and trade diversion :- Inefficient producers within the bloc can be protected from moreefficient ones outside the bloc. For example, inefficient European farmers may be protected from low-cost imports from developing countries. Trade diversion arises when trade is diverted away from efficient producers who are based outside the trading
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