This means there doesn’t need to be internal checking on ‘ Rules of origin‘. This means that it doesn’t matter which country the imports enter – because all countries have the same import tariff.
It has aspirations to become a free trade area.ĭifference between free trade area and customs unionĪ customs union has a common external tariff on imports. Created to forge closer political and economic ties. African Union 55 countries of the continent of Africa.Developed from free trade area to become customs union. With associate members including Bolivia, Chile, Colombia, Ecuador.
Includes full members of Argentina, Brazil, Paraguay and Uruguay. Mercosur – a southern American trading block formed in 1991.Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. SAFTA South Asia free trade area based around the Indian sub-continent.Includes: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar and Cambodia. ASEAN Free Trade Area Free trade area in South East Asia founded 1992.A free trade area between Canada, US and Mexico NAFTA – North Atlantic Free Trade Association.The EU27 have free trade and common regulations and are part of a customs union. European Union – The most integrated trading block.Also, the move to free trade tends to create winners and losers – with some domestic industries losing out to lower-cost imports.Įxamples of Global trading blocks Free trade areas However, it can lead to compromise as countries pool economic sovereignty.This can lead to lower prices, increased export potential, higher growth, economies of scale and greater competition. They have advantages in enabling free trade between geographically close countries.Trading blocks have become increasingly influential for world trade. Economic union/Single market – Customs union + common rules and regulations.Customs union – free trade area + a common external tariff with non-members.Free trade areas – elimination of tariffs between economies in the trading block.Trading blocks are groups of countries who form trade agreements between themselves.