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Trade Blocks
Forms of Economic Integration
• Free Trade Area
– No tariffs (example: EFTA)
• Customs Union
– Joint external tariffs (example:
Caribbean Common Market)
• Common Market
• Economic Union
• Political Union
Forms of Economic Integration
• Free Trade Area
• Customs Union
• Common Market
– Free movement of labor
– Free movement of capital
(example: European Union)
• Economic Union
– United fiscal/monetary policies
(example: Belgium/Luxembourg)
• Political Union
Forms of Economic Integration
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Free Trade Area
Customs Union
Common Market
Economic Union
Political Union
– Loss of local status, gain of national identity
– Single federal government (examples: USA,
Canada, former USSR)
European Community
• Established 1958 through the Treaty of Rome
• Founding Members:
– Germany
– France
– Italy
– Belgium
– Luxembourg
– Netherlands
European Community
• 1973 Additions:
– United Kingdom
– Ireland
– Denmark
• 1981 Addition:
– Greece
• 1986 Additions:
– Spain
– Portugal
European Community
• 1990 Addition:
– East Germany (through merger)
• 1995 Additions:
– Finland
– Sweden
– Austria
• Key Features: No internal tariffs, joint external
tariffs, free movement of labor and capital.
Europe Facts
• 71.3% of young people speak at least
one additional language. 53.7% speak
English, 19.9% French and 11%
German as foreign language.
• 37.8 holidays/year. US: 33 days.
• EU salaries are 1/3 less than in US.
• EU: 344 million people, US: 240
million.
• 1998 EU unemployment 11%
(Germany 10%, US 4.5%).
OPEC
• Organization of Petrol Exporting Countries
• Independent association of most countries with
oil/gas reserves
• Strong and effective negotiation partner of oil
companies and governments
• Responsible for international price fixing
• Highly political
World Trade Organization
• Formerly GATT (General Agreement on Tariffs
and Trade)
• New organization with membership of all important
trading nations
• Judicial body for resolution of trade disputes
(banana war, meat quotas, etc.)
• Questionable effectiveness in forcing countries to
comply with WTO agreements
World Bank
• Established 1944 by 44 governments in Bretton
Woods, NH
• 188 member countries
International Monetary Fund
Summary: Trade Blocks
• Trade block formation is essential for local
and regional economic growth
• Political cooperation among nations costs
sovereignty
• Isolation causes independency which
reduces trade and wealth-creation
opportunities