Question

There are five different levels of regional trade agreements – demonstrate how each of these can work in practice.

please do it in the word form not any picture or any other type and mention references and it should be of approximately 500 words

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Answer 1

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Abstract

Regional trading agreements refer to a treaty that is signed by two or more countries to encourage free movement of goods and services across the borders of its members. The agreement comes with internal rules that member countries follow among themselves. When dealing with non-member countries, there are external rules in place that the members adhere to

Different levels of Regional Trade Agreements

Regional trading agreements vary depending on the level of commitment and the arrangement among the member countries.

1. Preferential Trade Areas

The preferential trading agreement requires the lowest level of commitment to reducing trade barriers, though member countries do not eliminate the barriers among themselves. Also, preferential trade areas do not share common external trade barriers.

For Example, North American Free Trade Agreement and the ASEAN Free Trade Area. Customs Unions: In Customs Unions, equal tariffs must be set by all members. The EU is an example of a Customs Union

2. Free Trade Area

In a free trade agreement, all trade barriers among members are eliminated, which means that they can freely move goods and services among themselves. When it comes to dealing with non-members, the trade policies of each member still take effect.

For Example, EFTA: European Free Trade Association consists of Norway, Iceland, Switzerland and Liechtenstein. NAFTA: United States, Mexico and Canada (being renegotiated)

3. Customs Union

Member countries of a customs union remove trade barriers among themselves and adopt common external trade barriers.

For Example, Zollverein, a 19th-century organization formed by several German states under Prussian leadership, and the European Union, which was a customs union at one point in its development but later achieved full economic integration as a common market.

4. Common Market

A common market is a type of trading agreement wherein members remove internal trade barriers, adopt common policies when it comes to dealing with non-members, and allow members to move resources among themselves freely.

For Example, In a common market, the members eliminate internal trade barriers, adopt common external trade barriers and allow free movement of resources, for example labor, among member countries. Examples include Mercosur (Southern Cone Market), East African Common Market, and West African Common market

5. Economic Union

An economic union is a trading agreement wherein members eliminate trade barriers among themselves, adopt common external barriers, allow free import and export of resources, adopt a set of economic policies, and use one currency.

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. The European Union (EU) is an example of an economic union.

Benefits of Regional Trading Agreements

Regional trading agreements offer the following benefits:

1. Boosts Economic Growth

Member countries benefit from trade agreements, particularly in the form of generation of more job opportunities, lower unemployment rates, and market expansions. Also, since trade agreements usually come with investment guarantees, investors who want to invest in developing countries are protected against political risk.

2. Volume of Trade

Businesses in member countries enjoy greater incentives to trade in new markets, thanks to attractive trading conditions due to the policies included in the agreements.

3. Quality and Variety of Goods

Trade agreements open a lot of doors for businesses. As they gain access to new markets, the competition becomes more intense. The increased competition compels businesses to produce higher quality products. It also leads to more variety for consumers. When there is a wide variety of high-quality products, businesses can improve customer satisfaction.

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