Introduction to Global
Global Trade Blocs
Explore the world of global trade blocs - powerful economic and political
alliances that shape international commerce. Discover how these blocs
influence the flow of goods, services, and investments across borders.
Regional Economic Grouping
Regional economic groupings, also known as regional economic communities (RECs) or regional trade blocs, refer to alliances
of countries within a specific geographic region that come together to promote economic integration and cooperation. These
groupings aim to facilitate trade, investment, and economic development among member countries. Regional economic
groupings can take various forms, ranging from customs unions to common markets to economic unions, depending on the level
of integration achieved among member states.
Characteristics
• Trade Facilities(to promote trade among member countries by reducing tariffs, eliminating trade barriers, and harmonizing
trade policies and regulations.)
• Economic Integration(the establishment of common external tariffs, the coordination of monetary policies, and the free
movement of goods, services, capital, and labor within the region.)
• Enhanced Economic Cooperation: Regional economic groupings provide a platform for member countries to cooperate on
various economic issues, including infrastructure development, investment promotion, industrial development, and
technology transfer.
• Political Cooperation
• Capacity Building
Regional Economic Integration Organizations
These include entities like the European Union (EU), the Association of Southeast Asian
Nations (ASEAN), the North American Free Trade Agreement (NAFTA), and Mercosur
(Southern Common Market), among others. These organizations create forums and mechanisms
for member states to discuss and implement policies related to trade, investment, and other
economic activities.
International Economic Forums
These include gatherings such as the World Economic Forum (WEF), the International
Monetary Fund (IMF) and World Bank meetings, and the World Trade Organization (WTO)
ministerial conferences. While not solely focused on economic integration, these forums often
discuss policies and initiatives aimed at promoting global economic cooperation and
integration.
Bilateral and Multilateral Trade Forums
These encompass negotiations and discussions between two or more countries aimed at enhancing
economic ties through trade agreements, investment treaties, and other arrangements.
Preferential Trade Agreement
a trade pact between countries or regions that reduces tariffs and other
trade barriers on certain goods and services traded among the participating
nations.
The primary objective of a PTA is to promote economic cooperation and
trade between the signatory parties by granting preferential treatment to
each other's products compared to those from non-member countries.
This is the term used in the WTO for trade preferences, such as lower or
zero tariffs, which a member may offer to a trade partner unilaterally.
Tariff
Reduction
Rules of
Origin
Multilateral
Preferential
Trade
Agreement
Scope of
Coverage
Regional
Integration
Benefits
and
Challenges
Free Trade Area
A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among
them. Under a free trade policy, goods and services can be bought and sold across international borders with
little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
Pros
Increased Efficiency
Cons
Threat to Intellectual Property
Specialization Of Countries
No Monopoly
Unhealthy working Conditions
Lowered Prices
Increased Variety
Less tax revenue
Custom Union
A customs union is an agreement between two or more countries to remove trade barriers and lower or
eliminate tariffs. Members of a customs union generally apply a common external tariff on imports
from non-member countries.
The European Union (EU) is an example of a customs union. Goods move between EU member
countries without tariffs (duty-free). In addition, all EU members charge non-member countries the
same tariffs for imported goods.
Pros
Cons
Increased Trade
Loss of Economic Sovereignty
Economies of Scale
Distribution Of Tariff revenue
Common External Tariff
Political Cooperation
Complexity of setting the tariff rate
Economic Union
An economic union is an agreement between two or more nations to allow goods, services, money and
workers to move over borders freely. The countries may also coordinate social and financial policies to
support this common market.
Sources :- Economic Union Definition | (Objectives, Examples) (wallstreetmojo.com)
The European Union (EU)
Single Market
The EU's single market
allows for the free
movement of goods,
services, capital, and
labor within its
member states.
Common
Currency
The Euro is the
common currency used
by 19 of the 27 EU
member states.
Expansion
The EU has expanded
from 6 founding
members to 27
member states,
covering much of the
European continent.
Trade Agreement
These agreements cover
various aspects of trade,
including tariffs, quotas,
regulatory standards, and
intellectual property rights.
The EU has a network of
preferential trade
agreements with over 70
countries and regions.
WTO
The EU is a member of the WTO
and actively participates in
multilateral trade negotiations.
It advocates for free and fair
trade practices on the global
stage and seeks to resolve
trade disputes through the
WTO's dispute settlement
mechanism.
Supranational
al Institutions
Institutions
The EU has various
supranational
institutions, such as
the European
Parliament and
European
Commission, that
govern the union.
The North American Free Trade
Agreement (NAFTA)
1
Establishment
NAFTA was established in 1994 between the United States, Canada, and Mexico to
eliminate tariffs and promote free trade.
2
Key Provisions
NAFTA eliminated tariffs on most goods, expanded market access, and established
rules for intellectual property, investment, and dispute resolution.
3
Impact
NAFTA has led to increased trade and investment among the three countries, but
also faced criticism over job losses and environmental concerns.
U.S. Customs and Border Protection. "North American Free Trade Agreement."
It aimed to encourage economic activity among North America's three major
economic powers. Its primary focus was to open up and expand trade in the
agricultural, automotive, and textile industries. Some of its main goals included:
❑Reduction of trade barriers
❑Creation of trade rules
❑Improvement of working conditions
❑Establishment of a safe market for North American goods and services
❑Expansion of global trade and cooperation
❑Dispute Resolution
❑Intellectual Property Rights
❑Investment Protection
The Association of Southeast Asian Nations
Nations (ASEAN)
Establishment
Member States
ASEAN was founded in 1967 by Indonesia,
ASEAN now has 10 member states, including
Malaysia, the Philippines, Singapore, and
Brunei, Cambodia, Laos, Myanmar, and Vietnam.
Thailand.
Economic Integration
Geopolitical Influence
ASEAN has worked to create a single market and
ASEAN plays a key role in shaping the geopolitics
production base, known as the ASEAN Economic
of the Asia-Pacific region.
Community.
Role and Promotion of Regional Stability and Peace
Function
of
Economic Integration and Cooperation
ASEAN
ASEAN Community Building
Regional Cooperation and Partnership
Cultural and Social Development
Decision-Making and Consensus Building
G20
The Group of Twenty (G-20) is an international forum comprised of 19 countries and the
European Union, representing the world's major advanced and emerging economies.
Established in 1999 in the aftermath of the Asian financial crisis, the G-20 aims to bring
together key policymakers to discuss and coordinate economic policy at the global level.
The G20 members include the European Union and 19 countries,
such as the US, China, Japan, Germany, and India.
The G20 focuses on global economic cooperation, financial
stability, and addressing major international challenges.
The G20 is an international forum that brings together the world's largest
economies, representing around 80% of global economic output.
G20 countries
Argentina
Australia
Brazil
Canada
China
France
Germany
India
Indonesia
Italy
Japan
Mexico
Republic of Korea
Republic of South Africa
Russia
Saudi Arabia
Turkey
United Kingdom
United States of America
European Union (EU)
Key Takeaways From G20 Summit 2022
• Health
• Digital Transformation & Digital Literacy
• Climate Change
• Food Security:
• Focus on the Global Economy:
• Condemning Russian Aggression
• India Takes Over Presidency of the G20
Challenges For G20 Countries
Rising Geopolitical Rifts: The global economy is having trouble coping with rising geopolitical rifts like
the conflict between the world’s two largest economies, the US and China, or the drop in trade between the
UK and the euro area following the Brexit vote.
Slow Down Of Major Economies: China, one of the main drivers of global economy, is currently
experiencing a severe slowdown as a result of its ongoing real estate crisis.
Expected Recession: While some of the world’s largest economies, including the US and the UK, are
expected to experience a recession, others, like countries in the euro area, are more likely to experience a
slowdown or even a standstill.
Persistent High Inflation: Consistently rising inflation, which is reaching historic highs in a number of
countries, has reduced purchasing power globally, slowing down economic growth.
Impact of Russia’s Invasion of Ukraine: In addition to greatly increasing geopolitical ambiguity, Russia’s
invasion of Ukraine has also significantly increased worldwide inflation. The associated Western sanctions
have made the situation worse. Read in detail about the Russia-Ukraine Conflict in the linked article.
Impact of Rising Inflation: Central banks around the world have hiked interest rates in response to the
high inflation, which has further slowed down economic activity.
Economic Coordination: One of the primary objectives of the G-20 is to facilitate discussions and
cooperation on key economic issues facing the world. This includes topics such as monetary policy, fiscal
policy, trade, financial regulation, and global economic stability. By bringing together representatives from
major economies, the G-20 aims to coordinate policies to address common challenges and promote
sustainable and balanced economic growth.
Financial Stability: The G-20 plays a crucial role in promoting financial stability at the global level. This
includes monitoring and addressing risks to the international financial system, such as excessive volatility in
financial markets, systemic banking crises, and currency fluctuations. Through dialogue and cooperation
among member countries, the G-20 seeks to strengthen the resilience of the global financial system and
prevent future financial crises.
Policy Coordination: Another key function of the G-20 is to facilitate policy coordination among member
countries to address global economic imbalances and promote inclusive growth. This involves discussions on
issues such as exchange rates, trade imbalances, structural reforms, and social inclusion. By sharing
experiences and best practices, the G-20 aims to foster policies that benefit both individual countries and the
global economy as a whole.
International Development: The G-20 also focuses on international development issues, including poverty
reduction, infrastructure investment, and sustainable development. Member countries recognize the importance
of addressing development challenges in low-income and emerging economies to achieve inclusive and
sustainable global growth. Through initiatives such as the G-20 Development Working Group, the G-20 aims
to promote dialogue and cooperation on development issues and support efforts to achieve the Sustainable
Development Goals (SDGs).
Global Governance Reform: Additionally, the G-20 serves as a platform for discussing reforms to the
international economic and financial architecture. This includes reforming international financial institutions
such as the International Monetary Fund (IMF) and the World Bank to better reflect the changing global
economic landscape and give emerging economies a greater voice in global economic governance.
Source:- India Takes Over Presidency Of G20 | G20 UPSC Notes (byjus.com)