Reasons Why The Memberships Of Trade Blocs, Such As The EU, Has Changed Over Time
Memberships of trade blocs changed over time because countries realized that there are a huge amount of benefits to joining a trade bloc union. Benefits such as Free trade within the bloc which means that they have free access to each other’s markets, members of the trade bloc are encouraged to specialize. This means that at the regional level there is a wider application on ability to carry out a particular economic activity e.
g. making a specific product more efficiently than another activity.
In addition countries have Market access and trade creation which is when countries have easier access to each other’s markets meaning that trade between members is likely to increase. Trade creation exists when free trade enables high cost domestic producers to be replaced by low cost and also allow more efficient imports. Because low cost imports lead to lower priced imports, there is a ‘consumption effect’, with increased demand resulting from lower prices.
Also Producers from the member country can benefit from the application of scale economies, which will lead to lower costs and lower prices for consumers. Jobs may be created as a consequence of increased trade between member economies. There is increased protection. Firms inside the bloc are protected from cheaper imports from outside, such as the protection of the EU shoe industry from cheap imports from China and Vietnam. There are other long-term political and social benefits to trade blocs.
The countries’ economies become more intertwined also the political reasons for close cooperation within the bloc increases. Countries understand that they have a stake in each other and make greater efforts to get along. In that same way, increased business contacts usually mean that people must learn the culture of their trading partners. Many must learn new languages and different business practices. In short, more people will come into contact with each other and will need to learn more about each other. This breeds increased understanding amongst people.
Another reason for the change is as for consumers are that there is often a greater variety of goods and services available in free trade blocs. Products like beer, detergent, clothing, and machine tools are often produced in all the countries after the free trade agreement they are often stocked in many stores. Products like satellite hook ups for televisions, computers and telephones are usually made more available to developing countries. Internet service providers are now able to sell to larger markets and more consumers have opportunities to purchase or use these services.