Trade Blocs - Trade Blocs An economic bloc consists of two...

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Trade Blocs An economic bloc consists of two or more countries joined together into a closer economic union than each has with the rest of the world. types: 1. free trade area NAFTA is an example of a free trade area. In a free trade area member countries trade freely among themselves but have different policies towards non-members. 2. customes union Members of a customs union adopt common tariff policies towards non-members. 3. common market Members allow full freedom of labor and capital migration among themselves in addition to having a customs union. 4. economic union Members unify all their economic policies as well as policies toward trade and factor migration. Are preferential trade agreements beneficial? Since they represent a move towards free trade, preferential trade agreements create trade (which is good). However, since preferential trade agreements discriminate against non-members, they may divert trade away from the low cost supplier (which is bad). The above diagram represents the U.S. market for some product on
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Trade Blocs - Trade Blocs An economic bloc consists of two...

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