Explore the Role of Trading Blocs on International Trade Essay
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In this assignment, I will be defining international trading bloc and their purpose before outline all the different examples of trading blocs such as WTO, Customers Unions, and Common Markets before explaining how these impact on the international trade. I will apply the trading blocs and examples to Jaguar – Land Rover, a multimillion-pound car manufacturer distributing worldwide.
Trading Blocs is a group of countries in a geographical area that gets together to protect themselves from countries outside the group, working together to make goods or services move more easily and placing restrictions on the number of goods or services being brought into the area.
Some organizations help to make these countries work together and move goods or services more easily. These organizations include World Trade Organisation and other common markets such as the EU.
World Trade Organisation (WTO)
The WTO makes sure that countries can trade with each other as smoothly, predictably and freely as possible so that businesses can sell their goods all over the world. The WTO has negotiated agreements between countries so that businesses trading have legal rights and agreements to protect them. If there are disagreements or arguments between two countries then WTO will step in and assist the situation. WTO has a positive impact on international trading as they ensure all businesses trade fairly and legally and ensure that no one is ripped off or miss sold goods.
Customs Unions and Common Markets
In some areas of the world, customers unions and common markets have been established to allow free trade to take place between those different countries. This allows businesses more rights and opportunities to trade with each other with the support of the common market to ensure everyone is trading and operating legally and effectively.
The EU was established in Second World War through European Economic Community. At the start, 6 countries joined the EU, France, Germany, Italy, Belgium, Netherlands and Luxembourg. Over the next 60 years, more and more countries joined the EU, 28 countries including the UK joined by 1973. The EU was a very crucial in international trade as they set up their own internal market which allowed countries to move and trade goods or services even freer between the countries involved. It achieves the above through a number of different ways.
– It has its own currency, the Euro.
– It provides EU citizens the movement to other countries without VISA`s as long as they are a member of the EU.
– They have their own set of rules they must adhere to in order to maintain a member of the EU.
Rather like the EU, this group was established to help the third world, less developed countries increase the trading opportunities between each other. Countries involved within the common market are Argentina, Brazil, Paraguay, Uruguay and Venezuela, all less developed countries who can`t afford the scale and size of international trade deals occurring in the EU, hence why they are a part of the Mercosur. They have more land and size than the EU, however, have made little progression when compared to the EU, however, have similar aspirations and goals, wanting to make international trade and movement as easy as the EU do. The effect it has on the countries involved is that it provides them with a platform to trade internationally and increase the size of deals, bringing in more money to the country and helping to improve local economies. They still have the same legal rights and regulations when it comes to b2b trading.
The above have a massive positive impact on countries who are a part of the Europe Union as it provides plenty of other countries the opportunity to trade freely between each other using the same currency and operating under the same legal rules and regulations. If any deals went downhill and a business within the EU was miss sold goods or not paid the full balance then they can appeal to the EU for support and guidance, allowing them to take legal action against the other business.
Jaguar – Land Rover will be impacted in different ways by the above trading blocs due to the size and scale of them having a negative impact towards local businesses. If Jaguar – Land Rover are having a positive impact on the economy of a country, increasing the countries revenue through their taxes and increasing employment rates then the government for that country may increase the easiness of movement of goods across the country, encouraging them to continue trading within, benefiting the country as a whole. The World Trade Organisation has a big role in the trade deals of Jaguar – Land Rover as the deals they are working on is worth millions of pounds and therefore involve high risk and liability if they go wrong, this is where the World Trade Organisation will step in, resolve the issue and ensure the deal is still going to go ahead. They will ensure no party is ripped off or miss sold goods and that all parties are aware of the terms and conditions throughout the deal. The Customs Unions and Common Markets and the EU allow businesses or countries within a certain area free trade and more rights to trade between each other. This would have a negative impact on Jaguar – Land Rover as they would have to pay importation and exportation taxes, increasing the expenditure for each product meaning they can`t be as competitive on pricing as other businesses within the market. The Mercosur won`t have an impact on Jaguar – Land Rover due to the size and scale of them and how the Mercosur id directed at smaller, less established businesses acting as a platform to boost them. Jaguar – Land Rover will not face the competition from this market as the size and scale will counterbalance the benefits that Mercosur provides the smaller businesses with.
In the above assignment, I have listed, explained and evaluated the impact different common markets have on international trade for the countries involved. I have explained the different reasons for how they work and the benefits they bring. All markets have similar aims and understandings, have the same legal rules and regulations and all believe in fair, free movement of goods or services.