Trade blocs have helped shape the global economy, allowing nations to trade with each other without many restrictions. For example, the ASEAN trading bloc has allowed its members to negotiate trade deals with other partners around the world while giving exporters from other countries better access to ASEAN markets.
However, many believe the influence of trade blocs has declined over the years, especially with the UK leaving the European Union (EU) and deciding to negotiate its own trade deals. So is it safe to assume that trade blocs are now obsolete?
The Changing Role of Trade Blocs
Trade blocs became extremely popular during the 20th century. They were usually composed of geographically similar countries that wanted to leverage the power of collective bargaining. These blocs ensured free movement of trade, lower tariffs, easy access to markets, and were used mainly for geopolitical purposes. By the end of the century, trade blocs were seen as key components of the global economy and were adding much value to the international trade process.
However, this has changed in recent years as the role of trade blocs became less prominent in the 21st century. A higher number of countries are choosing to negotiate their own trade deals to meet their interests. The US, along with the UK, has already indicated its reluctance to accept the terms proposed by trade blocs, threatening to leave the ones with Canada and Mexico.
The Advantages & Disadvantages
Still, there are many benefits to trade blocs. With these blocs, there is usually an increase in foreign direct investments, which boosts the economics of the countries that are involved. Countries mainly focus on their expertise, allowing businesses to develop economies of scale while improving the quality of goods.
On the other hand, the biggest disadvantage would most likely be the loss of sovereignty. This is the main reason why many countries are choosing to abandon this system and fear that they can grow too dependent on each other. Smaller companies may also find themselves at a disadvantage when compared to the big corporations that have enough resources and money to trade at an international level. As a result, more and more countries are now looking to sign trade deals on their own accord, in hopes of gaining more freedom and fulfilling their individual goals.
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