Question

Discuss the pros and cons of being regionally integrated and a member of a trading bloc, like NAFTA or the EU.

Answer 1

Answer- A trading bloc refers to an agreement between the participating nations, who agree to reduce or eleiminatebthe trade barriers between them. It is basically an economic alliance between the nations in which they reduce or eliminate the trafe barriers. NAFTA is a trading bloc of USA, Medico and Canada. Following are certain advantages and disadvantages of such trading bloc:

• PROS- Creating such trading bloc promotes the cooperation among the participating nations as they enter into a mutual agreement to trade.

CONS- All the non participating nations don’t have such agreement and thus they are not as cooperative as the natuons in a trading bloc.

• PROS- Nations enter into a trading bloc or agreement for mutual trade because they believe in other nations stability and also believe that the other nation is trading on proper terms.

CONS- In case of nation who are not a part of such trading bloc it may be due to their unstability of business.

• PROS- Regional bloc give the nations involved a security and stable environment. It also provides them with a much larger market with low or no trade barriers. And the participating regions can perform better than the non participating regions.

CONS- All the nations who are not able to participate may feel that it is not fair to not include them or create an agreement with them. They might be not included because such nations might be developing.

• PROS- Due to a larger market area the business firms are able to specialize and thus grow themselves.

CONS- It will be better if all the firms of all the nations are given such larger market as all of them may specialize and it would create a competitive environment.

•PROS- Creating a trading bloc helps the involved nations in doing business and trading and thus gives them gains and they develop further as a nation.

CONS- But non participating nations do not get such gains and thus they are still in the developing nations category.

• PROS- Due to same currency it reduces the hassle to convert the currency and cross border transactions. It makes doing the business easier and creates more revenue as well as jobs.

CONS- Such benefits are availed on by a section of nations which is not good for the world as a whole as the poor nations become more poorer and rich nations become more richer.