The world has become a small village due to modernization that has made it possible for people to interact easily. Business opportunities have sprung up in almost all countries due to accessibility to information which has promoted international trade. However, there has been need for a common ground on which all international trade activities are to be based on.
Consequently, there has been an increase in the number of organizations that strive to address key issues in international trade. These groups are referred to as trading blocs. They are organizations formed by countries within a given region in order to promote trading activities among them (U.S. Companies Export. 2012). This is a discussion about the significance of trading blocks to member states.
Economic blocs play an important role as far as trade promotion is concerned. They help in eliminating high tariffs that discourage investors from participating in foreign trade. It is important to note that every country has its own resources and abilities to exploit them (Helpman2011).
However, there is no country in the world that is self sufficient. This means that all nations rely on each other for what they are not able to produce and this necessitates the need for international trade that is facilitated by trading blocs. Members of a trading block pay cheaper tariffs compared to non members.
In addition, trading blocs enable countries to strategies on the type of goods or services they will be exporting or importing to avoid competition that arises due to production of same goods or services by member countries. Trading blocs enable member countries to engage in foreign trade in a healthy way.
The main trading bloc for America is known as Mercosur. This trading block was established by Brazil, Argentina Uruguay and Paraguay. The main objectives of this block were to improve trade among the South American countries by eliminating barriers to trade that existed among them (Lowell 2011).
These obstacles included differences in technical requirements for exports and imports, high tariffs on goods and services and the variations of income among member states. It was established on the basis of boosting trade among member states but recent debates indicate a possibility of political influence on member states. Bloc membership has enabled the United States of America to have ready market for her exports.
In addition, the blocs have made it possible for goods and services from the United States to have high demand in member countries and other countries by promoting their trade activities. The blocs have enabled America to get goods from other countries at the lowest price possible due to elimination of trade tariffs. America’s economy has developed courtesy of her membership in many trading blocs (Feenstra 2003).
However, trading bloc’s restrictions have made it impossible for non members to access essential services or goods from other countries and this has reduced international trade. Some countries regarded as world super powers like United States of America have arm twisted major decisions of some trading blocks in order to favor them at the expense of other member states.
International trade is an important activity that generates income for a country and enables it to acquire goods and services she does not produce. Trading blocks have made foreign trade be carried out without major restrictions. However, some policies of trading blocks undermine the sovereignty of countries that do not play major roles of making decisions thus limiting their participation in international trade.
Feenstra, R. (2003). Advanced International Trade: Theory and Evidence. New Jersey: Princeton University Press.
Helpman, E. (2011). Understanding Global Trade. Cambridge: Belknap Press.
Lowell, A. (2011). U.S. Involvement in Political, Economic and Social Conditions of Latin
America (Countries, Regional Studies, Trading Blocks, Unions, World Organizations). New York: Nova Science Publishers.
U.S. Companies Export. (2012 May 15). U.S. Free Trade Agreements. Trade Information Center. Retrieved from http://2016.export.gov/fta/index.asp