Trade Blocs

“Some day, following the

example of the United States

of America, there will be a

United States of Europe.”

- George Washington, 1732 – 1799, 1st President of the United States of America

Learning Objective

Explain the stages of integration in trade blocs and what advantages and

disadvantages they bring

By the end of this lesson I will be able to…

Trade Bloc Progress Diagram

(Starting with not being in a trade bloc)

Preferential Trade Area

Trade Bloc Progress Diagram

Preferential Trade Area

FreeTrade Area

Trade Bloc Progress Diagram

Preferential Trade Area

CustomsUnion

FreeTrade Area

Trade Bloc Progress Diagram

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

Trade Bloc Progress Diagram

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

EconomicUnion

Trade Bloc Progress Diagram

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Trade Bloc Progress Diagram

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Why hasn’t the African

Union progressed to a

free trade area?

Reduces the trade barriers between countries, but doesn’t remove them completely

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Why hasn’t the African

Union progressed to a

free trade area?

Why might higher

income countries be the

ones which benefit more

from preferential trade

areas?

Reduces the trade barriers between countries, but doesn’t remove them completely

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Why hasn’t the African

Union progressed to a

free trade area?

Why might higher

income countries be the

ones which benefit more

from preferential trade

areas?

Why would TNCs

prefer free trade areas

more than preferential

trade areas?

Reduces the trade barriers between countries, but doesn’t remove them completely

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Removes the trade barriers between countries

What do we

already know

about NAFTA?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Removes the trade barriers between countries

What do we

already know

about NAFTA?

Why do critics

claim NAFTA

benefits the USA

the most?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Removes the trade barriers between countries

What do we

already know

about NAFTA?

Why do critics

claim NAFTA

benefits the USA

the most?

Is outsourcing possible within a preferential trade area?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Customs Unions remove internal trade barriers and have a shared tariff on importing goods

from outside the trade bloc

Does having a shared tariff

on importing stop members

from competing directly

with each other?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Customs Unions remove internal trade barriers and have a shared tariff on importing goods

from outside the trade bloc

Does having a shared tariff

on importing stop members

from competing directly

with each other?Is it still possible to

outsource once you’re in a customs union?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

A common market acts as a free trade area that allows the free movement of labour internally,

but doesn’t need to have shared external tariffs

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

A common market acts as a free trade area that allows the free movement of labour internally,

but doesn’t need to have shared external tariffs

Founded in 1951 the

European Coal and Steel

Community was the world’s

first common market

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

A common market acts as a free trade area that allows the free movement of labour internally,

but doesn’t need to have shared external tariffs

Founded in 1951 the

European Coal and Steel

Community was the world’s

first common market

Why is it doubtful that NAFTA will ever develop

to be a common market?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

A common market acts as a free trade area that allows the free movement of labour internally,

but doesn’t need to have shared external tariffs

Founded in 1951 the

European Coal and Steel

Community was the world’s

first common market

Why is it doubtful that NAFTA will ever develop

to be a common market?

What was the advantage of

being allowed to move skilled

coal miners between members?

“We hope to see a Europe where men

of every country will think as much of

being a European as of belonging to

their native land, and that without

losing any of their love and loyalty of

their birthplace.”

- Winston Churchill, Former British Prime Minister, 1948

1951 saw the Schuman Declaration

unite Europe’s coal and steel industries

(the foundations of modern warfare)

setting Europe on a course to greater

unity and a lasting peace

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Economic Unions combine both customs unions and common markets, allowing the free movement

of labour and having shared tariffs on imports

What did the Treaty of Rome

do to the European Coal and

Steel Community in 1958 to

form an economic union?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Economic Unions combine both customs unions and common markets, allowing the free movement

of labour and having shared tariffs on imports

What did the Treaty of Rome

do to the European Coal and

Steel Community in 1958 to

form an economic union?

Why is the EU unlikely to

restrict the free movement of

labour between member states?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

Economic Unions combine both customs unions and common markets, allowing the free movement

of labour and having shared tariffs on imports

What did the Treaty of Rome

do to the European Coal and

Steel Community in 1958 to

form an economic union?

Why is the East African Community trying to become

an economic union?

Why is the EU unlikely to

restrict the free movement of

labour between member states?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

The 50 united states of America represent the only group that’s progress to full integration, sharing a

single government, president and economic policy.

Do we think of the USA as a

single country of as 50

united states operating

together for mutual benefit?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

The 50 united states of America represent the only group that’s progress to full integration, sharing a

single government, president and economic policy.

Do we think of the USA as a

single country of as 50

united states operating

together for mutual benefit?

Do Americans see themselves

as a single country or as 50

united states working together?

Preferential Trade Area

CustomsUnion

FreeTrade Area

CommonMarket

FullIntegration

EconomicUnion

The 50 united states of America represent the only group that’s progress to full integration, sharing a

single government, president and economic policy.

Do we think of the USA as a

single country of as 50

united states operating

together for mutual benefit?

Does Europe have a president?

Do Americans see themselves

as a single country or as 50

united states working together?

Why be in a trade bloc?Some Advantages and Disadvantages

Foreign Direct Investment

Larger markets are created attracting

further investment by TNCs as the cost of

production is low in that area

Economies of ScaleThe cost of production is reduced because mass production is possible

CompetitionCompanies become

more efficient to

remain competitive

InterdependenceIssues such as natural

disasters in one country can affect all trade bloc members

ConcessionsJoining a trade bloc involves agreeing to do things that will benefit the bloc as a whole, but which might disadvantage some members

Loss of Sovereignty

As trade blocs become more

integrated, more decision are

made at a federal level, and

members can feel they’ve lost the

ability to make their own decisions

RegionalismTo reduce costs and maximise profits, some areas lose out and unemployment increases

Research TasksInvestigate whether Europe has a president

Find out who’s in the East African

Community, how their trade bloc operates at

the moment, and what their timeline is for

becoming the East African Federation

Read up on any of the advantages and

disadvantages of trade blocs that you’re

completely secure in

Explain the stages of integration in

trade blocs and what advantages

and disadvantages they bring

Can you

?