These countries make up an area called the Eurozone. 17 of the member states also agreed to use a single currency, the euro.It is believed that all member states will benefit through increased job creation and income. It aims to promote trade by creating a single market where goods, money and people can travel freely between member states.The EU is made up of 28 member countries, has a population of over 500 million people and accounts for 25% of global GDP. Examples of trading blocs include the EU, NAFTA and ASEAN. This might be through relaxing barriers to trade, or even having a common currency, and increasing taxes on products brought in from outside the bloc, protecting them from outside competition. These can include the importing firm being required to obtain various licences and permits.A trade bloc is a group of countries who have joined together to promote trade. Administrative barriers - countries or regional blocs can also use a range of administrative or legal devices to slowdown imports and to add costs.Embargo - imports from certain countries are completely prohibited.Domestic employees might enjoy more wages and job security, but domestic taxpayers are footing the bill for this. Foreign consumers will enjoy increased economic welfare as the price of their purchases fall. Export subsidies - export subsidies allow exporters to supply the market with more product than the natural market equilibrium would have allowed.The government receives no revenue from a quota, as it does with a tariff, unless it can set up a system of licences. Once again they reduce the amount of imports entering an economy and increase the equilibrium price within the market. Quotas - quotas have the effect of restricting the maximum amount of imports allowed into an economy.The EU charges a common external tariff (CET) to many goods imported into the EU. Tariffs will often be charged by regional trading blocs on imports from countries outside the area. This gives domestic equivalents a competitive advantage. Tariffs reduce supply and raise the price of imports. Tariffs - a tariff is a tax on imports.Trading blocs practice varieties of protectionist behaviour.Įxamples of protectionist policies include: These restrictions are known as protectionism.
While they may understand that free trade will benefit everyone, they may be suffering some of the costs associated with trade and feel that they want to restrict aspects of trading activity. Protectionism arises because countries may not always feel that they benefit from completely free trade. Trade diversion - the elimination of trade barriers among the member states may divert trade away from more efficient non-member states that are disadvantaged by the protectionism they still face.Uniform laws don't account for cultural differences.Loss of border control and the increased risk of smuggled goods and people.
1.6 Organisational planning tools - notes.1.5 External environment - simulations and activities.