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A
trading bloc is a preferential economic arrangement among a group of countries.
There are several different forms a trading bloc may take on, including, but not
limited to, the Customs Union, Economic Union, and the Free Trade Area. The
different levels of economic integration are what sets these separate unions
apart from each other.
The free trade
area is the least restrictive of the unions among countries. Two well-known
examples are the NAFTA (North American Free Trade Agreement) and EFTA (European
Free Trade Area. In these trade agreements, all trade barriers are removed and
goods and services can be freely traded among the member countries. No barriers
are allowed whatsoever: no taxes, quotas, tariffs, etc. Some of the countries
that are included in the Free Trade Area agreements are Canada, the United
States, Mexico, Myanmar, Philippines, Thailand, Laos, Cambodia, Vietnam,
Indonesia, Malaysia, Singapore, Chile, Bolivia, and Brunei.
One step
farther along the process of economic integration is the Customs Union. This
involves collaboration among trading companies where members dismantle trade
barriers in order to trade goods and services, and also establish a common trade
policy with nonmembers. Their member countries include Botswana, Lesotho,
Namibia, South Africa, and Swaziland.
The Common
Market is next in line along the spectrum. The common market, as well, has no
barriers to trade among members, and has a common external trade policy; they
also are able to move the factors of production among members. The members of a
common market must be able to cooperate closely with each other in monetary,
fiscal, and employment policies. The individual countries do not always benefit,
although the common market will definitely enhance the productivity of the
members. Some of the members of the Common Market include Egypt, Sudan,
Ethiopia, Kenya, Somalia, Eritrea, Madagascar, Venezuela, Peru, Colombia,
Ecuador, Bolivia, Guatemala, El Salvador, Honduras, Costa Rica, Panama, Guyana,
Suriname, Jamaica, French Guinea, Bahamas, Barbados, Brazil, Argentina, and
many, many more.
Last in line
is the Economic Union. This requires the integration of economic policies in
addition to the free movement of goods, services, and factors of production
across borders. Under this type of union, members harmonize monetary polices,
taxation, and government spending, and a common currency would be used by all
members. This can be accomplished by a system of fixed exchange rates. This
system requires nations to surrender a large measure of their national
sovereignty to authorities of community-wide institutions. Despite the
disadvantages of this type of union, however, there are currently fifteen
countries that are part of the European Union, which is an economic union. They
are as follows: Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the
UK. The economic union states in Africa include Nigeria, Mali, Sierra Leone, and
Mauritania.
These
are the different types of unions and trading blocs that a country can belong
to. While they seem to vary only slightly, an in-depth look at any and all of
the comparisons show that they are, in fact, quite different. Each is unique in
its own way and conforms to the countries’ needs. |
