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mcom economic project

Transcript of Trding Blocs

APROJECT REPORTONSTUDY ON TRADING BLOCS MASTERS of commerce banking & FINANCE PART -1 2015-2016submitted by: JIGNA M. BHANUSHALIroll no 01project guideMS. KALAVATI

Sk somaiya college of arts SCIENCE and commerce, vidyavihar (east), mumbai 400077


This is to certify that MS. JIGNA M. BHANUSHALI of M.Com (BANKING AND FINANCE) Semester- 1(2015-16) has successfully completed the project on Study on non-performing Assets under the guidance of MS.KALAVATI

________________________________Course Coordinator Principal

________________Project Guide/Internal Examiner

_______________External Examiner



I JIGNA M. BHANUSHALI student of class in (BANKING & FINANCE) PART 1 (SEM-1), ROLL NO.01 , academic year 2015-2016 Studying at S.K. SOMAIYA COLLEGE OF ARTS, SCIENCE AND COMMERCE, hereby declare that the work done on the project Entitled Study on TRADING BLOCS is true and original and any Reference used in this project is duly acknowledged.

Date: Place: _________________ Student Signature JIGNA M. BHANUSHALIRoll No. 01


Talent and capabilities are of course necessary but opportunities and good guidance is very important things without which no person can climb those infant ladders towards progress. With regard to my project I would like to thank each and every one who offered help, guidance and support whenever required. I take immense pleasure in thanking MS.KALAVATI and other staff for their support and guidance in the project work. I am extremely grateful to my MS. KALAVATI madam for her valuable guidance and kind suggestions.Finally and yet importantly I would like to express my heartfelt thanks to my beloved parents and friends for their blessings, my classmates for their help and wishes for the successful completion of this project.

_______________JIGNA M. BHANUSHALI



1.Introduction 6

2.Meaning and definition7

3.Types of trading blocs8-9

4.Advantages and disadvantages of trade blocs 10-11

5.Political effects12-13

6.Major trade blocs 14

7.History of trading blocs 15-17










INTRODUCTION Atrade blocis a type ofintergovernmental agreement, often part of a regionalintergovernmental organization, where regional barriers to trade, (tariffsandnon-tariff barriers) are reduced or eliminated among the participating states.Historic economic blocs include theHanseatic League, a trading alliance in northern Europe in existence between the 13th and 17th centuries and the German Customs Union (Zollverein) initiated in 1834, formed on the basis of theGerman Confederation and subsequentlyGerman Empirefrom 1871. Surges of trade bloc formation were seen in the 1960s and 1970s, as well as in the 1990s after thecollapse of Communism. By 1997, more than 50% of all world commerce was conducted within regional trade blocs. EconomistJeffrey J. Scott of thePeterson Institute for International Economicsnotes that members of successful trade blocs usually share four common traits: similar levels of per capitaGNP, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization. Advocates of worldwidefree tradeare generally opposed to trading blocs, which, they argue, encourage regional as opposed to global free trade. Scholars and economists continue to debate whether regional trade blocs are leading to a more fragmented world economy or encouraging the extension of the existing globalmultilateraltrading system. Trade blocs can be stand-alone agreements between several states (such as theNorth American Free Trade Agreement(NAFTA)) or part of aregional organization(such as theEuropean Union). Depending on the level of economic integration, trade blocs can fall into different categories, such as: preferential trading areas,free trade areas,customs unions,common marketsandeconomic and monetary unions.


A set ofcountrieswhich engage ininternational tradetogether, and are usually related through afree trade agreementor otherassociation.


Are intergovernmental associations that manage & promote trade activities for specific regions of the world . Its a group of countries within a geographical region that protect themselves from imports from non-members . Are form of economic integration & increasingly shape the pattern of world trade . an agreement between states , regions , or countries to reduce barriers to trade between the participating regions


There are five different types of economic integration as given below1. Free Trade Area2. Custom Union3. Common Market4. Complete Economic Union5. Complete Political Integration.

1.Free Trade AreaIn this form of economic integration, member nations remove all trade impediments among themselves but retain their own policies with the outside world. That to say, the member countries do not charge any import tariff on imports from each other but they do have their respective policies as regards levy of import tariffs on imports from the countries outside the group.

2.Custom unionThis arrangement of economic integration is a similar to free trade area. Besides, member nations have common external commercial relations. For example, they adopt common external tariff on imports from the non member nations. Thus, custom union marks the second stage of economic integration amongst the nations.

3.Common MarketIn this type of economic integration, the member nations have custom union agreement with one another and they also agree for factor mobility across the national borders of member countries. Thus, the common market arrangement permits free movement of labor and capital amongst the member nations.

4.Complete Economic UnionThis is the final stage of economic integration to provide the basis for complete political integration. In this type of economic integration, member countries are part of common market and agree to have complete unification of monetary and fiscal policies. This arrangement is akin to economic and monetary union amongst the member nations. In a recent development, eleven out of fifteen countries of the European Union have agreed to move forward to forge economic and monetary union amongst themselves with effect from 1.1.1999 when they decided to have a common currency unit called Euro. There eleven countries are Belgium, France, Germany, Italy, Luxembourg, Netherlands, Austria, Ireland, Portugal, Spain and Finland.

5.Complete Political IntegrationThis is the ultimate stage of integration amongst the nations when the member nations literally merge their individual identities into one nation. In this form, the nation members have a central parliament with the sovereignty of a national government

Advantages and Disadvantages of trade blocsThere are five major advantages of trade bloc agreements: foreign direct investment, economies of scale, competition, trade effects, and market efficiency.Foreign Direct Investment: An increase in foreign direct investment results from trade blocs and benefits the economies of participating nations. Larger markets are created, resulting in lower costs to manufacture products locally.Economies of Scale: The larger markets created via trading blocs permit economies of scale. The average cost of production is decreased becausemass productionis allowed.Competition: Trade blocs bring manufacturers in numerous countries closer together, resulting in greater competition. Accordingly, the increased competition promotes greater efficiency within firms.Trade EffectsTrade blocs eliminatetariffs, thus driving the cost ofimportsdown. As a result,demandchanges and consumers make purchases based on the lowest prices, allowing firms with acompetitive advantagein production to thrive.MarketEfficiency: The increasedconsumptionexperienced with changes in demand combines with a greater amount of products being manufactured to result in an efficient market. The disadvantages, on the other hand, include: regionalism vs. multinationalism, loss of sovereignty, concessions, and interdependence.Regionalism vs. Multinationalism: Trading blocs bear an inherent bias in favor of their participating countries. For example,NAFTA, a free trade agreement between the United States, Canada and Mexico, has contributed to an increased flow of trade among these three countries. Trade among NAFTA partners has risen to more than 80 percent of Mexican and Canadian trade and more than a third of U.S. trade, according to a 2009 report by theCouncil on Foreign Relations. However, regional economies by establishing tariffs and quotas that protect intra-regional trade from outside forces, according to the University of California Atlas of Global Inequality . Rather than pursuing a global trading regime within theWorld Trade Organization, which includes the majority of the world's countries, regional trade bloc countries contribute to regionalism rather than global integration.Loss ofSovereignty: A trading bloc, particularly when it is coupled with apolitical union, is likely to lead to at least partial loss of sovereignty for its participants. For example, the European Union, started as a trading bloc in 1957 by theTreaty of Rome, has transformed itself into a far-reaching political organization that deals not only with trade matt