Trading Blocs

Trading Blocs

An evolving trend in international economic activity is the formation of multinational trading blocs. These blocs are made up of a group of contiguous countries that decide to have common trading policies for the rest of the world in terms of tariffs and market access but have preferential treatment for one another. Organizational form varies among market regions, but the universal reason for the formation of such groups is to ensure the economic growth and benefit of the participating countries. Regional cooperative agreements have proliferated since after the end of World War II. Among the more well-known ones existing today are the European Union and the North American Free Trade Agreement. Some of the lesser-known ones include the MERCOSUR (Southern Cone Free Trade Area) and the Andean Group in South America, the Gulf Cooperation Council in West Asia (GCC), the South Asian Agreement for Regional Cooperation in South Asia (SAARC), and the Association of South East Asian Nations (ASEAN). The existence and growing influence of these multi-national groupings implies that nations need to become part of such groups to remain globally competitive. To an extent, the regional groupings reflect the countervailing force to the increasing integration of the global economy—it is an effort by governments to control the pace of the integration.

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