Trade blocs consist of official pacts executed between nations, which allow those involved to obtain benefits related to international trade.
The members of the trade bloc are those who promote foreign investment, increased skills, as well as commercial exports and imports.
This type of mechanism is found in all parts of the world, from America through Europe and ending in Asia or Africa.
Trade Blocs team a group of countries, with the objective of obtaining economic benefits in International Trade, today we will talk about the main trade blocs in the world.
Types of trade blocs
Usually, trade blocs are classified according to the degree of economic integration reached by their member countries. Thus, one can speak of:
• Economic Complementation Agreements: They hardly imply reciprocal tariff preferences for some of the products made in the countries that sign them.
• Customs Agreements: A single and same customs policy is implemented between the subscribing countries.
• Free Trade Areas: Founded by Free Trade Agreements (FTA), they usually imply the full lifting of tariffs between countries, except for certain protected products, considered “sensitive”.
• Economic Community: They imply the total liberation of trade in factors of production.
• Economic Union: It implies the total and full economic integration, not only in commercial and tariff matters but even in monetary and fiscal matters.
Main trade blocs of the world
- The European Union (EU): this bloc is formed by countries such as Germany, Ireland, Belgium, Spain, Greece, the Czech Republic up to Latvia, Croatia, France, and many more. This organization was founded in 1945 after the end of the Second World War and seeks to increase commercial and political consolidation between their countries, establish peace and solidarity among brothers.
- MERCOSUR: Founded in 1991. It seeks to eliminate the barriers that separate nations, increase productive activity, and generate opportunities. The countries that form this organization are Argentina, Paraguay, Uruguay, and Brazil. Venezuela and Bolivia were part, currently, they have been suspended and are in a state of adhesion.
- The Pacific Alliance: born in 2012 creates strategies to integrate and influence free trade in countries. It promotes and advocates for cultural, academic, and tourism exchanges, as well as research, among others. The countries in charge of this agreement are Peru, Chile, Mexico, and Colombia.
- North American Free Trade Agreement (NAFTA): Founded in 1988, the countries that are part of are: the United States, Mexico, and Canada. Among the regulations of this agreement are the following: promoting free trade, increasing investment opportunities, ending trade barriers at the border, and consolidating benefits for citizens.
- ANDEAN PACT: the member countries are: Peru, Ecuador, Colombia, and Bolivia. Associates and observers. It seeks to consolidate, strengthen progress in terms of the quality of human life.
- The Association of Southeast Asian Nations (ASEAN): It was founded in 1967 by the Philippines, Indonesia, Malaysia, Singapore, and Thailand. There are currently ten member countries of this organization. It maintains international ties, seeks to increase economic growth and state stability.
- The Southern African Development Community (SADC): the member countries are Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.
Importance of these blocs
Trade blocs arise according to the needs of different nations, no matter how close or far they are. These are agreements and treaties signed and accepted by the members involved, which allow obtaining the benefits of free trade, allowing a greater variety of products to compete in the local market. This will favor the consumer who is likely to have the opportunity to pay lower prices on some goods.
The member countries together have greater negotiating power if they want to sign a trade agreement with another country or trade bloc.