The higher the level of integration, the greater the degree of controls that needs to be given up particularly in the case of a political union economic integration which requires nations to give up a high degree of sovereignty. National Sovereignty : Requires member countries to give up some degree of control over key policies like trade, monetary and fiscal policies. For example, a country has to stop trading with a low cost manufacture in a non-member country and trade with a manufacturer in a member country which has a higher cost.
#TRADING BLOCS ARE GROUPS OF COUNTRIES FREE#
The purpose of the trade blocs is to free trade from protectionis measures and to create an enabling environment for trade among members. To form a trade bloc, countries conclude international treaties. Trade Diversion : Because of trade barriers, trade is diverted from a non-member country to a member country despite the inefficiency in cost. Trade blocs are a form of economic integration and it increasingly forms the structure of world trade. For example, industries requiring mostly unskilled labor tends to shift production to low wage countries within a regional cooperationĬreation Of Trading Blocs : It can also increase trade barriers against non-member countries. Useful tool to handle the social and economic challenges associated with globalizationĮmployment Opportunities: As economic integration encourage trade liberation and lead to market expansion, more investment into the country and greater diffusion of technology, it create more employment opportunities for people to move from one country to another to find jobs or to earn higher pay.
This integration is an essential strategy to address the effects of conflicts and political instability that may affect the region. Political Cooperation: A group of nation can have significantly greater political influence than each nation would have individually. Greater Consensus: Unlike WTO with hugh membership (147 countries), easier to gain consensus amongst small memberships in regional integration Trade Creation : Member countries have (a) wider selection of goods and services not previously available (b) acquire goods and services at a lower cost after trade barriers due to lowered tariffs or removal of tariffs (c) encourage more trade between member countries the balance of money spend from cheaper goods and services, can be used to buy more products and services Append below in salient points the advantages and disadvantages of economic integration:
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