A trade bloc is a type of intergovernmental agreement, often part of a regional

intergovernmental organization Globalization is social change associated with increased connectivity among societies and their elements and the explosive evolution of transportation and telecommunication technologies to facilitate international cultural and economic exchange. ...

, where barriers to trade (

tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...

s and others) are reduced or eliminated among the participating states. Trade blocs can be stand-alone agreements between several states (such as the USMCA) or part of a regional organization (such as the

European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

). Depending on the level of

economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and Non-tariff barriers to trade, non-tariff restrictions on trade. The trade-stimulation effects intended by ...

, trade blocs can be classified as preferential trading areas, free-trade areas,

customs union A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.GATTArticle 24 s. 8 (a) Customs unions are established through trade pacts where the participant countries set u ...

s, common markets, or economic and monetary unions.

Use

Historic trading blocs include the

Hanseatic League The Hanseatic League was a Middle Ages, medieval commercial and defensive network of merchant guilds and market towns in Central Europe, Central and Northern Europe, Northern Europe. Growing from a few Northern Germany, North German towns in the ...

, a Northern European economic alliance between the 12th and 17th centuries, and the German Customs Union, formed on the basis of the

German Confederation The German Confederation ( ) was an association of 39 predominantly German-speaking sovereign states in Central Europe. It was created by the Congress of Vienna in 1815 as a replacement of the former Holy Roman Empire, which had been dissolved ...

and subsequently the

German Empire The German Empire (),; ; World Book, Inc. ''The World Book dictionary, Volume 1''. World Book, Inc., 2003. p. 572. States that Deutsches Reich translates as "German Realm" and was a former official name of Germany. also referred to as Imperia ...

from 1871. Surges of trade bloc formation occurred in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all world commerce was conducted within regional trade blocs.

Economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

Jeffrey J. Schott of the Peterson Institute for International Economics notes that members of successful trade blocs usually share four common traits: similar levels of per capita GNI, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization. Some advocates of global

free trade Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold Economic liberalism, economically liberal positions, while economic nationalist politica ...

are opposed to trading blocs. Trade blocs are seen by them to encourage regional free trade at the expense of global free trade. Those who advocate for it claim that global free trade is in the interest of every country, as it would create more opportunities to turn local resources into goods and services that are both currently in demand and will be in demand in the future by consumers. However, scholars and economists continue to debate whether regional trade blocs fragment the global economy or encourage the extension of the existing global multilateral trading system.

Terminology

A common market is seen as a stage of economic integration towards an economic union or possibly towards the goal of a unified market. A single market is a type of trade bloc in which most trade barriers have been removed (for

goods In economics, goods are anything that is good, usually in the sense that it provides welfare or utility to someone. Alan V. Deardorff, 2006. ''Terms Of Trade: Glossary of International Economics'', World Scientific. Online version: Deardorffs ...

) with some common policies on product regulation, and

freedom of movement Freedom of movement, mobility rights, or the right to travel is a human rights concept encompassing the right of individuals to travel from place to place within the territory of a country,Jérémiee Gilbert, ''Nomadic Peoples and Human Rights'' ...

of the

factors of production In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilised amounts of the various inputs determine the quantity of output according to the rela ...

( capital and labour) and of

enterprise Enterprise (or the archaic spelling Enterprize) may refer to: Business and economics Brands and enterprises * Enterprise GP Holdings, an energy holding company * Enterprise plc, a UK civil engineering and maintenance company * Enterpris ...

and services.

Statistics

Comparison between regional trade blocs

¹ not all members participating
² involving

, services,

telecommunications Telecommunication, often used in its plural form or abbreviated as telecom, is the transmission of information over a distance using electronic means, typically through cables, radio waves, or other communication technologies. These means of ...

transport Transport (in British English) or transportation (in American English) is the intentional Motion, movement of humans, animals, and cargo, goods from one location to another. Mode of transport, Modes of transport include aviation, air, land tr ...

(full

liberalisation Liberalization or liberalisation (British English) is a broad term that refers to the practice of making laws, systems, or opinions less severe, usually in the sense of eliminating certain government regulations or restrictions. The term is used ...

railway Rail transport (also known as train transport) is a means of transport using wheeled vehicles running in railway track, tracks, which usually consist of two parallel steel railway track, rails. Rail transport is one of the two primary means of ...

s from 2012),

energy Energy () is the physical quantity, quantitative physical property, property that is transferred to a physical body, body or to a physical system, recognizable in the performance of Work (thermodynamics), work and in the form of heat and l ...

(full liberalisation from 2007)
³

and

- proposed
⁴ sensitive goods to be covered from 2019
⁵ least developed members to join from 2012
⁶ least developed members to join from 2017
⁷ Additionally some non member states also participate (the

, EFTA have overlapping membership and various common initiatives regarding the

European integration European integration is the process of political, legal, social, regional and economic integration of states wholly or partially in Europe, or nearby. European integration has primarily but not exclusively come about through the European Union ...

).
⁸ Additionally some non member states also participate ( ASEAN Plus Three)
⁹ Limited to "entitled persons" and duration of one year.

References

Bibliography

* Mansfield, Edward D. and Helen V. Milner, "The New Wave of Regionalism" in * Milner, Helen V., "International Trade" in * * {{DEFAULTSORT:Trade Bloc * *

Use

Terminology

Statistics

Comparison between regional trade blocs

See also

Lists of trade blocs

References

Bibliography