Question

What role have trading blocs played in the increase of globalization?

Answer 1

Trading blocs are groups of nations who form an economic union or customs union. For example, the European Union aims at not just a customs union but also economic union – harmonisation of taxes / monetary policy and moves towards a single currency. NAFTA is the North Atlantic Free Trade association. Here, there is free trade, but, not the same degree of harmonisation as in the EU.

Globalisation refers to the phenomena of increased integration and interdependence of the national economies. Globalisation refers to how the economic barriers between countries are being removed enabling more trade and free movement of labour and capital.

Trading blocs like the EU do speed up this process. The EU has expanded to over 26 countries and has a combined population of 356 million. Within the EU, there has been a marked integration of the national economies. Trade amongst members has increased. There has also been greater movement of capital and labour. (e.g. the immigration from Poland of many workers to UK and Ireland). Within the EU, there has also been a single currency and single monetary policy adopted by 11 members.

As well as increased integration amongst members of a trading bloc. It is argued trading blocks help globalisation through making global negotiations easier. For example, in the case of trade negotiations. The EU will negotiate as a single trading block making it easier to push through practises which increase free trade.

However, trading blocks often don’t help the process of globalisation. For example, the EU’s CAP involved high tariffs on food imports and the dumping of surplus food items onto world markets.