Advantages and disadvantages of trade blocs
Disadvantages: 1.Nonmember countries of the trade bloc will be ostracized since trade blocs are created to help only their member countries to reduce trade barriers. 2.Member countries will only look out for each other and ignore nonmember countries 3.Relaxed borders between member countries mean more illegal immigrants manage to get through. 4.Impair global trade. 5.Loss of benefits: The benefits of free trade between countries in different blocs are lost.
Advantages: 1.Faster way to remove trade and investment barriers within trade blocs 2.Increasing interdependency of neighbouring countries on one another. 3.Greater weight and voice on worlds political and economic stage when represented as a group. 4.Wider range of goods available. 5.Makes movement of money and goods easier. 6.Fulfills the economic interests of member states 7.Free trade within the bloc: Knowing that they have free access to each other’s markets, members are encouraged to specialize. This means that at the regional level there is a wider application of the principle of comparative advantage. 8.Market access and trade creation: Easier access to each other’s markets means that trade between members is likely to increase. Trade creation exists when free trade enables high cost domestic producers to be replaced by low cost, more efficient imports. Because low cost imports lead to lower priced imports, there is a ‘consumption effect’, with increased demand resulting from lower prices. 9.Economies of scale: Producers can benefit from the application of scale economies, which will lead to lower costs and lower prices for consumers. 10.Jobs: Jobs may be created as a consequence of increased trade between member economies. 11.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.