The concept of trade blocks is crucial in the context of international trade. Trade blocks are free trade zones designed to encourage trade activities across nations. The formation of trade blocks involves a number of agreements on tariff, trade and tax. The activities of trade blocks have huge importance in the economic and political scenarios of the contemporary world. Over the years trading blocks have played a major role in regulating the trend and pattern of international trade.
Regional Trade Blocks at a Glance
Regional trade blocks protect the interests of the member countries. The primary aim of trade block activities is to create a favorable economic framework for promotion of cross border trade among the member countries.
Different regional blocks have come up in the period of economic liberalization in various parts of the world. Some of the functionally active trading blocks are listed below:
- NAFTA (North American Free Trade Agreement)
- EU (European Union)
- ASEAN (Association of Southeast Asian Nations)
- MERCOSUR (Mercado Comun del Cono Sur)
- CEFTA (Central European Free Trade Agreement)
- GAFTA (Greater Arab Free Trade Area)
- SAARC (South Asian Association for Regional Cooperation)
- CEMAC (Economic and Monetary Community of Central Africa)
- East African Community (EAC)
- SACU (South African Customs Union)
- PARTA or PIF (Pacific Regional Trade Agreement)
- AEC (African Economic Community)
- CACM (Central American Common Market)
A particular country may be a member of more than one regional trading block. However, in order to do away with overlapping, such nations are normally put within the most dynamic trade block.
Activities of Trade Blocks
It is true that the principal objective of all trade blocks is promotion of trade; however the difference lies in their modes of operation. The activities of trade blocks can be evaluated by using three basic measures.
- The number of latest agreements, meetings and other activities undertaken by the regional trade blocks
- The pattern of future planning regarding trade promotion and focus on intergovernmental associations and quicker timeframe for policy implementation
- Number of practical achievements attained by the member countries
In practice, the success of trading blocks crucially depends on the performance of the member countries. To ensure effective trade promotion the trading blocks need to be more flexible and accommodative. Besides trade promotion, the regional blocks are also expected to take part in other domains of the member countries. Effective management of trade block activities ensures all-round development of the member nations.