Episode 38: Trade Blocs

You may recall from the previous episode on
the World Trade Organization, formerly known as GATT, that the process of coming to agreement
with over 150 countries involved is a long and arduous journey, with every round taking
longer and longer to complete. Given that, some countries are finding it more expedient
to work in smaller groups, usually with neighbors, to eliminate trade barriers. But even in smaller
groups, there’s a spectrum of types of trade blocs. A trade bloc is a group of countries
which trade with one another, but they have an agreement among members to reduce trade
barriers with one another. The differences among the types of trade blocs come from both
internal rules (that is, rules among the member countries) and external rules, or dealings
with nonmembers. Let me show you. The lowest level of commitment to trade barrier
reduction is a preferential trade area, where members lower, but do not eliminate, barriers
among themselves. Dealings with nonmembers are not addressed, so member countries maintain
policies of their own choosing with regard to nonmember countries. The next level of commitment is a free trade
area, where member countries agree to eliminate trade barriers among themselves, but continue
to maintain independent policies in their dealings with nonmember countries. An example
of a free trade area is NAFTA, the North American Free Trade Agreement, where Canada, Mexico
and the US have agreed to eliminate the barriers among themselves, but each maintains independent
policy when trading with other areas of the world. The third type of trade bloc is a customs
union, where member countries not only eliminate internal trade barriers, but they also adopt
common policies for trade barriers on any nonmembers. For example Russia, Kazakhstan
and Belarus formed a customs union in 2010. Those countries are eliminating trade barriers
among themselves, but would agree to some common set of trade standards on anyone who
is not in their group. After the customs union, trade blocs begin
to address the flow not only of goods and services, but also the flow of resources,
like labor. In a common market, members eliminate internal trade barriers, adopt common external
trade barriers, AND allow free movement of resources among the member countries. Think
about the US: if you lived in New York, and wanted to leave New York for a job in California,
there are no barriers to prevent you from making that choice. Examples of common markets
include Mercosur — also known as the Southern Cone Market – whose members include Argentina,
Brazil, Paraguay, Uruguay, and Venezuela’s membership pending, at the moment. Other markets
would be the East African Common Market or the West African Common Market. After the common market is economic union:
members eliminate internal barriers, adopt common external barriers, allow free movement
of resources among members, AND adopt a uniform set of economic policies. The European Union,
once the common currency had been adopted, became a prime example of an economic union.
With one currency, they had to adopt one monetary policy. At the final structure in the spectrum, there’s
full integration of the member states, like the United States. NEXT TIME: Well, we’ve reached the end of
the road where my original plan for this series is concerned, so now I think it’s going to
be up to you. I’m getting a lot of feedback from YouTube viewers so you never know — I
might be working on one of your ideas. TRANSCRIPT00EPISODE 38: TRADE BLOCS

71 thoughts on “Episode 38: Trade Blocs

  1. Thank you for your truly wonderful videos. You have helped me beyond considerably in my economics class. How about a video on a country's credit rating by ratings agencies? Who are the rating industry and how does their 'opinion' have economic impact?

  2. I watched them all several times, the cartoons and shapes are wonderful and useful to remind the subject. I have seen khanacademy videos and key economic concepts in 60 minutes. however I found these 38 episode extremely invaluable by far. thank you and good luck

  3. I love your series and has given me balance in understanding my studies. Your animations are lightly amusing without distraction from your core message. Since you asked for input I'd love to see an intermediate series. I would definitely watch then over and over again!

  4. very clear, just the right amount of info to understand the different stages of coperation on trade.
    econ teacher

  5. I can't believe how disappointed I am at coming to the end of the series! You've got to do more!
    I didn't realize how interesting economics can be. Love the illustrations. Voice is very pleasant to listen to. Excellent!

  6. Thank you very much for these excellent economics videos! Honestly i wouldn't get a thing in my head while i m in my economics class… Ur d best!

  7. Too good mam… Want to see many more videos on different topics and issues… Keep up the good work… will always be supportive…

  8. I aced my microeconomics due to your videos. Now Im revising for macroeconomics and is the go to guy for any macroeconomics questions. Thanks!

  9. Just helped me im about to walk into an international trade theory test. Got some info my lecturer forgot to deliberate on. Thanx and keep em coming

  10. bravo! I just finished watching all the episodes of this macroeconomics series. Your work is much appreciated. I'm sure this took a lot of time and effort, but I do believe that every student who watches these videos is getting something out of them.

  11. Thank you sooooo much for uploading such useful videos, it really helped me out to understand the concept of Microeconomics and Macroeconomics. once again thank u soo much :*   

  12. please don't stop doing this! can you talk about mercantilism, liberalism, and capitalism too?:) youre the best! it helps me preparing myself for the mid term exam!

  13. Most understandable presentation of Macroeconomics on youtube. Clear, concise and enjoyable. Who would of thought it possible? Thank you.

  14. Praise God! Excellent job on all of your videos, I have done my best to remember to press the Like button on all that I have viewed. Please consider producing more videos, maybe on different topics. Be well!!!

  15. I just finished watching all your series… just started college and I have my final exam tomorrow at 5pm….. Was prepared from a long time ago but this really helped me to clear up the few things that I wasn't so clear on….. On other notes though….. I did macro before doing micro which am gonna b doing next semester… So since I have the basis on the industry of the commercial businesses on a whole…. Know this will make micro much easier for me….. Thanks for all your time and dedication….. Looking forward to your micro modules too to be ahead of time….

  16. it would be better if you include the benefits and limitation for those applied trade union..thanks

  17. Thank you so much!!! It was really helpful. If you're open to suggestions, can you please do an introduction on exchange rates (fixed,floating,effective exchange rate, purchasing power parity, etc.)?

  18. It's been almost 4 years since you've posted this, so I'm guessing any other future episodes aren't coming :c Oh well, I enjoyed them nonetheless. They were really helpful, thank you for all of them!

  19. My university teacher gave us this link to study about global marketing specifically about trading. You're presentation is really awesome!! This is way better than studying and reading lengthy books. 🙂 Thank you! and more power!

  20. Just discovered these and watched the whole series. Thank you so much for sharing these videos! Much more fun and understandable that my text books!!! I feel like I have a good grasp on Micro and Macro now!!!!

  21. I don't think you understand what you are talking about. Literally all of this information can be found on first page of google. I bet you wouldn't even be able to answer why so many people are against free trade agreements, that's how abysmal your understanding of the topic is.

  22. https://smile.amazon.com/Regional-Trading-Influence-Further-Globalization-ebook/dp/B07CZQW2WM/ref=sr_1_1?ie=UTF8&qid=1538343172&sr=8-1&keywords=regional+trading+blocs+and+their+influence+on+further+globalization

  23. https://smile.amazon.com/Anarchy-Coming-Global-Steven-Castellano-ebook/dp/B07CZS477L/ref=sr_1_1?ie=UTF8&qid=1538343575&sr=8-1&keywords=anarchy+and+the+coming+global+turn

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