1. Trading Blocs
4.1 Globalisation

2. a) Expansion of trading blocs:
What you need to know
a) Expansion of trading blocs:
EU and the single market
ASEAN
NAFTA
b) Impact on businesses of trading blocs

3. What are Trading Blocs?
Trade blocs are usually ______________________________________________________________________________________________________________. Trade blocs lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non-members.

4. Main Benefits of Trading Blocs
________________________: an increase in foreign direct investment results from trade blocs and benefits the economies of participating nations
_____________________: larger markets created via trading blocs permit economies of scale
_______________________: trading blocs bring businesses in numerous countries closer together, resulting in greater competition
____________________: trading blocs seek to reduce protectionist measures such as tariffs and quota tariffs, which should stimulate greater demand within the trading bloc
_____________________the combination of greater competition, FDI, economies of scale and greater trade should result in a more efficient market

5. Trading Blocs and Regional Trading Agreements (RTAs)
The WTO permits the existence of trade blocs, provided that they result in lower protection against outside countries than existed before the creation of the trade bloc
European Union (EU) – a customs union, a single market and now with a single currency
European Free Trade Area (EFTA)
North American Free Trade Agreement (NAFTA) between the USA, Canada and Mexico
Mercosur - a customs union between Brazil, Argentina, Uruguay, Paraguay and Venezuela
Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA)
Common Market of Eastern and Southern Africa (COMESA)
South Asian Free Trade Area (SAFTA) created in 2006 with countries such as India and Pakistan
Pacific Alliance – 2013 – a regional trade agreement between Chile, Colombia, Mexico and Peru

6. The European Union Single Market
As of July 2016, there are 28 member nations of the EU – collectively known as EU28.
The EU28 comprises Belgium (BE), Bulgaria (BG), Croatia, Czech Republic (CZ), Denmark (DK), Germany (DE), Estonia (EE), Ireland (IE), Greece (EL), Spain (ES), France (FR), Italy (IT), Cyprus (CY), Latvia (LV), Lithuania (LT), Luxembourg (LU), Hungary (HU), Malta (MT), the Netherlands (NL), Austria (AT), Poland (PL), Portugal (PT), Romania (RO), Slovenia (SI), Slovakia (SK), Finland (FI), Sweden (SE) and the United Kingdom (UK).
In June 2016, the UK voted in a binary referendum to leave the European Union. This process is known as Brexit and the UK is expected to leave between

7. Key Statistics on the European Union (EU)
These figures are prior to the Brexit vote (June 2016)
EU accounts for around 30% of the total value of global GDP
Total population 506m; live births each year 5.23m
Largest population - Germany 81 million, Smallest – Malta 0.4 million
The EU, with 503 million inhabitants, accounts for 7% of the world population
Gross domestic product of the EU €13.08tn
Per capita GDP in the EU €25,500
Average unemployment rate in the Euro area 12%
Youth unemployment rate in the Euro area 23.9%

8. The Four Freedoms of the EU
The EU single market is built upon four key freedoms:
___________________________: Businesses can sell their products anywhere in the EU’s member states and consumers can buy where they want with no penalty
________________________Citizens of EU member states can live study and work in any other country. The aim is to improve the mobility of labour.
________________________: Currencies and capital can flow freely between member states and EU citizens can use financial services in any member state.
________________________: Professional services such as pensions, architecture, telecoms and advertising can be offered in any member state

9. Main Export Partners for the UK Economy
Source: ONS; data for 2014

10. Main Import Partners for the UK Economy
Source: ONS; data for 2014

11. UK Decides to Leave the EU
On June 23rd 2016 the UK voted in a referendum to leave the European Union.
Prime Minister David Cameron resigned the morning after the vote and a few weeks later, Theresa May was elected leader of the Conservative Party and new Prime Minister
The process of Brexit has begun although the timing of the decision to invoke Article 50 of the EU treaty remains uncertain
Once Article 50 is invoked, there is a maximum period of two years before the UK finally leaves the EU
The terms of the UK’s new economic relationship with the EU also remain uncertain

12. Possible Short-term Impact for UK Economy & Business from Brexit
Comment
Weaker exchange rate (depreciation)
Sterling fell sharply against US dollar and Euro following vote
Higher prices for imports
Over 50% of UK imports come from EU
Lower economic growth?
Expected to take possibly two years to negotiate EU exit terms
Initial fall in business and consumer confidence
Weak demand in supply chains suggest businesses are being cautious
Housing market
Fall in confidence may dent mortgage demand
Possibility of decline in overseas demand although weaker pound increases real purchasing power of US dollars in UK property market
Unemployment
Unemployment tends to be a lagging indicator of the economic cycle – a month after Brexit, the UK unemployment rate fell below 5%

13. The Trans-Pacific Partnership (TPP)
The TPP is the latest, and one of the most controversial trading blocs
It involves 12 countries: the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru
The TPP aims to deepen economic ties between these nations, slashing tariffs and fostering trade to boost growth
Member countries are also hoping to develop a closer relationship on economic policies and regulation
The agreement could create a new single market something like that of the EU

14. ASEAN Trading Bloc
ASEAN is a trade bloc of 10 nations with an aggregate economic size of $2.3 trillion.
The aim is to establish an economic community (AEC)
The trading bloc’s diversity – ranging from advanced economies like Singapore to developing countries like Myanmar is an interesting feature
ASEAN’s member countries (in 2015) are Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam