The Efficiency of Trading Blocs and Globalisation: A Detailed Analysis

This essay provides a comprehensive analysis of trading blocs, their efficiency, and their responses to globalisation. It begins by defining globalisation and outlining its impact on the global market, emphasizing the exchange of goods, workforce mobility, and technological transfer. The essay then defines trading blocs, such as NAFTA, the European Union, GATT, ASEAN, and SAARC, highlighting their objectives and the factors that lead to their formation, including geographical location, economic status, and trade policies. The essay also explores the involvement of countries in regional trading blocs, using examples like the relationship between Gulf countries and technologically advanced nations, and the investments of rich nations in African countries. The essay discusses the advantages and disadvantages of trade blocs and their impact on global competitive advantage and personal interests. Overall, the essay offers a detailed understanding of the role and impact of trading blocs in the context of globalisation, making it an essential read for students on Desklib.

EFFICIENCY OF TRADING BLOCS AND ITSREALISTIC
RESPONSE TO GLOBALISATION
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Table of Content
Table of Contents
Introduction..........................................................................................................................................3
Globalisation.........................................................................................................................................3
Trading Blocs ........................................................................................................................................5
Factors behind establishing a Trading Blocs..........................................................................................6
Involvement of Countries in Regional Trading Blocs.............................................................................7
Trading Bloc and Globalisation..............................................................................................................8
Impact of trading blocs on globalisation...............................................................................................9
Personal interest of countries in forming trading blocs......................................................................10
Global competitive advantage.............................................................................................................12
Disadvantages of trade blocs...............................................................................................................13
Conclusion...........................................................................................................................................14
Reference list.......................................................................................................................................15
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Introduction
The following discussion is based on trading blocs, effectiveness of the approach in
the world scenario and its impact on globalised market transactions. Over last three decades,
there has been a massive exchange of commercial and industrial trade among various
countries from different parts throughout the globe. This has given rise to Globalisation on a
vast scale. Furthermore, Globalisation has created many opportunities for remote nations to
connect with rest of the world via different means. To expand business in a particular
territory many of the nations made a blocs which makes them stronger in the international
market for the consideration of their significance. This, in turn, has resulted in the formation
of trading blocs among nations to improve relations, trade, economy and regional stability.
The objective of this assignment is to deliver a clear idea of Globalisation, its impact,
advantages and disadvantages, effectiveness and response of the internationalisation towards
it. In addition, the following assignment will co-relate the concept of Trading Bloc Formation
due to Globalisation and advantages and disadvantages of the former as well as the later. The
factors that lead to the formation of these trading blocs and the parameters that affect the
participation of the member nations will be discussed. It will explicitly mention major trade
blocs in the world. There is also a discussion on objectives and its impacts on international
community on a broad spectrum. The reader will be enlightened about several types of
trading blocs and the theories behind them. This assignment is having details on the trading
styles in blocs, different trading blocs, reason to make a trading bloc and involvement of
nations in trading blocs which helps to find out the basic cause to create a trading bloc. At the
last it is having influences of trading blocs to enhance the competitive advantages and
personal interest of a country to be a in a trade bloc which helps to understand response of
globalisation on them.
Globalisation
In Layman’s term Globalisation can be defined as the process of integration of
markets from different parts of the world via exchange of Goods, Raw Materials, Energy,
Technology etc. and moreover to exchange of goods and technology it enhance on the proper
development of the nation. This can also be the exchange of Ideas, Values, Cultural Aspects
and many other Parameters (Wright, 2016, p.11). Because of Globalisation, it has become
possible for one particular nation to access the resources and facilities available in some other
nation in exchange of monetary units or any other goods, the globalisation is having a main
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benefit which involvement of the nation in the international development, technological
exchange can enhance the infrastructural values of a nation and it is having a potential to
provide a proper development to a nation. The advantages of trading blocs have criticised in
both prospects i.e. positive and negative.
Exchange of Goods: The transportation of oil and other natural resources from one
part of the world to another has become possible largely due to globalisation. The Oil Rich
countries like the Arabic Nations sell natural products to other nations that do not possess
adequate quantity of the same and have to suffice their demands and needs by importing. In
exchange, they provide the Arabic Nations, the materials that are not so in abundance there.
Therefore, it can be said that some specific group of countries have the advantage while
exchanging goods. As opined by Rupert and Smith (2016, p.28) giant amount of product
manufacturing in a respective region is the threat to the global economy and still, after the
formation of trading blocs, the scenario remains at the same stage.
Work force and Technology Transfer: Apart from natural resources, there is
another aspect of trade that has come into play because of Globalisation. It is the Regional
and Economic Stability between different countries because of marketing of Final End
Products like the sale of Advanced Mobile Phones and Transfer of Technology. Countries
like Japan and Sweden have a tremendous production capacity of goods but ample work
force is not available there. Hence, they install their manufacturing plant in a country that can
provide adequate labor like China and India (Telò, 2016, p.41).
Economic, Regional and Environmental Stability: The Global Summits and
meetings that are held periodically among the group of countries are major steps towards
strong and balanced economic conditions of nations. Major groups include the European
Union (EU) that includes most of the European Countries, Asia-Pacific (APEC), which
includes Asian nations that share boundaries with the Pacific Ocean, G20 that consists of the
developing countries (Banerjee and Chowdhury, 2017, p.61). These formations result in
cooperation and support between countries in times of natural disaster, economic crisis and
many other odd scenarios. The discussion of Global Warming on an international G20
platform is a recent example for this.
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Trading Blocs
A Trade bloc can be interpreted as a Group formed among countries that share
common interests in order to boost the trading activity and economic condition of the
participants. This is a type of agreement that is signed between the governing bodies of the
participating or even the interested nations (Chang, Chen and Saito, 2016, p.93). It is usually
done to eliminate or reduce the geographical, regional or sometimes even economic barriers
among the members. The resultant outcome of the trade conditions and the terms of the
agreement is in favour of all the nations that hold the membership of that particular trading
bloc. In order to make a critical evaluation, it will be better to say that it is the availability of
resources to introduce a particular trade bloc (Ghosh, 2016, p.102).
As stated above, many Trading Blocs have formed in the recent times with an intention of
increasing regional cooperation, economic stability and trade activities among the countries.
Some of them are as follows.
NAFTA: The North American Free Trade Agreement is a pact that was signed
between the United States, Canada and Mexico on January 1, 1994. This was formed to
enhance trade and relation between these three countries. This US $ 767 Billion trade bloc is
known to be the most powerful one in the world.
EUROPEAN UNION: It is a largest trade union or a bloc of 28 nations as a member
which are situated in to the Europe. It is group which provides barrier less trading of goods
and services and companies are free to move their business in new markets. Belgium, France,
Italy, Luxembourg, Netherlands and West Germany are the main countries which are leading
the EU.
GATT: It is a type of agreement which was done by 23 nations in the Geneva, it is
an agreement of the nations to enhance their international trade to circulate their economy
and make a better employment and trade and as well as to make a better relationship in these
countries.
ASEAN: It is a group of South East Asian countries which is called as a ASEAN for
the economical development. It is having a main objective to improve economical
development in the group members. The combine economy is the sixth largest economy in
the world. So these countries governments are making a better development by supporting
each other.
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SAARC: The South Asian Association for Regional Cooperation that is
headquartered in the capital of Nepal that is Kathmandu was established in December 1985.
The members are the South Asian nations like the India, Bhutan, Afghanistan, Bangladesh,
Sri Lanka, Nepal, Maldives and Pakistan. The aim of the policies of SAARC is to develop
better internal and external relations, developed welfare economics, self and mutual reliance
among the nations of South Asia and boost up the social and cultural development of the
region.
Factors behind establishing a Trading Blocs
Many factors play important roles in the creation of Trading Blocs among different
countries. Throughout the world, there are countless trading blocs and not all of those are
based on trading. However, in earlier 1960, the base of trading started according to trade
benefits. Some of them are mentioned below:
Geographical location: The member nations of a particular Trading Block need to be
close to each other geographically. Geographical Location plays an essential role as
respective countries need to maintain similar interests and level of participation in the group.
Moreover, the countries that share common geographical locations and features are likely to
have similar issues to be discussed and identical ways of trade (Shinyekwa and Othieno,
2016, p.129).
Economical Status: The economic conditions are often taken into consideration
while forming a trading bloc. The reason for this is the possibility of a successful trade
among them and the scope of resources and work force available (Van Hoa and Harvie, 2016,
p.157).
Trade Policies: The members of any bloc need to have similar trade policies in order
to maintain an effective way of trade execution and a set of successful business parameters.
This includes the policies and principles adopted by the nations for trade and ease of doing
business internally and their compatibility with international trade market (Joshua, 2016,
p.172).
Therefore, it can be said that countries of a particular region tend to make partnership
with other countries for additional benefit and sustainability support, but in most of the terms,
such collaborations lead to threatened situations and prove to be a cause of dependence on
others (Hirst et al. 2015). All of these prospects are highly variable as well as critical. In the
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following discussion, some important advantages and disadvantages are reflected according
to current global scenario of trade bloc. These trading bloc helps to the nation and as well as
to those companies wants to explore their business and as well as which wants to make a
better position in their sector. Geographical locations, economical conditions and trade
policies are the main reason behind to establish a trade bloc which helps to them to make an
economical, social, cultural and technological development of the nation.
Involvement of Countries in Regional Trading Blocs
The effective participation and engagement of countries in Trade blocs are very much
necessary in order to make the phenomena of Globalisation a success. Each country has its
own sets of resources and expertise (Riveras and Harrison 2016 p.375). Through active
participation, the nations can discuss the needs and demands of the goods and raw materials
for each other. The formation of trading blocs mentioned and discussed in the above
paragraphs has resulted in the involvement of many countries to follow this culture.
An example can be considered of a Gulf country that is rich in petroleum reserves and
a country that is technologically very advanced, like Japan or Germany. The technologically
advanced nations will lend their state of the art machinery and another form of technology to
the Gulf countries in order to enhance their lifestyle, daily facilities and to do the refining of
petroleum products. However, in exchange of the high-tech infrastructures, these
technologically advanced nations will fulfil their requirements of natural gas and petroleum
products by importing the later from the Gulf nations.
Another example for engagement of countries in regional trading bloc establishment
is the investment of rich nations like USA, Britain and Australia in the countries of Africa.
The African countries are very under-developed compared to other parts of the world due to
lack of education, infrastructures, communication system and bare necessities like drinking
water and ample supply of food. However, these nations have huge reserves and mines of
diamonds and other precious and semi-precious stones (Odularu and Adekunle 2017). Hence,
the rich nations put their investments in the African countries in the form of the requirements
and in return, they get access to the diamonds and other resources that have high demand in
the international market. This is a deal of profit for both the sides.
Environmental Benefit: The engagement of the countries in trading blocs ensures a
sense of cooperation among them to maintain a proper balance between the manufactured
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infrastructure and the Mother Nature (Lunn and Hoffmann, 2016, p. 194). When
industrialisation and production of finished goods are done in an excessive amount, the
chances of environmental pollution increase exponentially. Hence the all the nations
including those that produce a huge quantity of products and those that import those products
have to be cautious about the harmful effects of Globalisation and industrialisation that is one
of the major reason of Global Warming. Keeping in mind, the issue of Global Warming was
raised in the recently held G20 Summit held in Paris, France. The decision of reducing the
emission of Carbon compounds was made mutually by the member's nations.
These trade blocs enhance the potentials to increase the awareness of the particular
trade bloc on particular topic which increase the globalised values in them. Each and every
country is having their own personal interest in it but it increase their potentials to provide a
better relations and coordination among them.
Trading Bloc and Globalisation
Trading bloc and globalisation share a common and a very deep link. In a trade bloc,
the countries make a separated group to do business all over the world. This help the global
market to have a fixed and reasonable market price for a product. If countries are doing a
business separately then market price of products will be only increased in order to make
profit. When trade blocs are made, they fix price of products that the participant countries
need to follow while dealing with other countries in the bloc. Therefore, trade blocs have
positive effects on global economy and able to fix a reasonable price of products that is
affordable for everyone.
In addition, trade blocs have other positive effects like the member countries might
not face Visa problem for business purpose in abroad. Group members will not face
communication problem as they are of a same trade bloc (Gleeson and Friel 2013 p.1510).
They can compare their business with other trade blocs and improve their business. If this
comparison of business considers in a positive way it can lead the global market to an
immense success and developed economic system.
Globalisation also has negative impact on developing countries. As the developed
countries have the opportunity to dominate developing countries. Developing countries that
do not have sufficient supply of certain product instead of supplying, developed countries try
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to own the market and empower their own economic system. Hence, developing countries are
affected by globalisation.
Trade blocs are also not supportive in globalisation in few cases, like the members are
interested in doing business with the bloc members only. Therefore, the business will be
limited in a small circle. It will not proceed in the global market. That means, other countries
that are not included in that group will be out of the business. It can harm the global economy
and loses the balance between supply and demand of products.
To conclude in a broad perspective, the establishing of Trading Blocs are very
important to make the Globalisation a success (Fredrick et al. 2014). It is usually very
difficult to manage and conduct the trade in a big domain. Hence, the phenomena of Trading
Blocs help to create smaller modules regarding the trade. This further simplifies the policies
and monitoring of the trade segments and maintains a transparency among the nations. This
also helps them to stand united during the times of odd circumstances.
For example, during the Greece crisis, the European Union was a major and
significant help to the Greece. The combined efforts of the EU nations helped the Greek
economy to regain its pace and growth by providing monetary and ideal support.
Similarly, during the earthquake that happened in Nepal, India immediately sent the
food and other essential supplies along with military and disaster management support for
rescue purposes. So these trade blocs supports to each others but as well as they creates
limitations among different nations, it divides the international market in to different parts
which creates a boundaries in the international trade and as well as it decrease the
international development of the country.
Impact of trading blocs on globalisation
As it has been defined earlier that trading blocs and globalisation seem to have a
contrary stage. After the introduction of common international trading, some of the leading
countries especially some trade giants had lost their geographic boundary. It cannot be said
that there were only negative impacts that globalisation had introduced. Formation of
regional groups rebuilt the boundary and there were some new trading phenomena those
faced by the member countries. One of the important ones is free trade agreement among
member countries. As for example, some of the countries within EU are engaged in free trade
agreement (Miroudout and Shepherd, 2014, p.1752). It means that while transacting some
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trading items within member countries, there are lesser pressures of legal guidelines and
taxation policies. EU has a large circle of trading throughout the world. They expanded their
business over 26 countries. EU has a major impact on global economy.
Trading blocs have both good and bad effects on globalisation. As there are many
trade blocs around the world and they have specified group of employees and officials to
monitor the workflow of the group (Yang and Martinez-Zarzoso, 2014, p.140 ). Therefore,
employees are hired in a huge number for these trading blocs. It helps to develop the scenario
of unemployment in a global stage. Trade blocs help the world to become more focus on the
future of a business and extract profit in a rational way. Before, the formation of trade blocs
has happened there were no unity among the top brands and companies of the world. Hence,
trade blocs made people aware first to do businesses in a rational and organised manner.
However, it is practically hard to get actual operational outcomes of some active trade blocs
(Saboo et al. 2014, p.14). Trade bloc included countries have advantages of dealing with a
large scale of economy. The participant companies can make profit from staying in the trade
blocs.
Trade blocs also have bad effects as EU has put high tariff on food, and materials that
they export to other countries. It affects the economic system of those countries who import
their products and EU manages to gain maximum revenue from it. Formation of trading bloc
can enhance the values of a particular nation and they can create a back support for them but
it makes them dependent on them so it is essential for the nation to make a better
globalisation strategies by which they can make a better political, social, environmental and
technological development in the country.
Personal interest of countries in forming trading blocs
Generally, the relationship between trading blocs and globalisation is related to
countries. Membership of different countries is important to form a trade bloc. Countries that
join certain trade blocs have knowledge about benefits of trade blocs (Lake, 2016, p.48). If
the countries around the world want to compete with developed and economically powerful
countries, it will be difficult to do the job. Therefore, the developing countries join trade
blocs to empower themselves. Joining the trade blocs would help the developing countries to
have a strong political, economical and social impact of trade blocs. In regional blocs also the
countries have their regional trade blocs to empower their business and economical status. If
regional trade blocs are not able to provide their member countries what they want, the
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harmony among them will be destroyed and it can affect the global economic status and
market.
There are many strong and effective trade blocs like EU, NAFTA, GATTand ASEAN
in global economy. EU and Japan made a trade bloc, for the same Japan promotes their
domestic market in the global economic system. NAFTA collaborate with Canada and
Mexico to strengthen their performances in the global market to improve economic status of
the region. Different countries have different motto to join trade blocs (Leermakers et al.
2013, p.1484). Some countries want to strengthen their political support to compete with
strong and powerful countries of the world. Some of them want to strengthen domestic
economic system and want be presentable in global economy. Others want a standard social
status. Therefore, trade blocs need to be form with different dynamics of aspects to fulfil the
wants of member countries of certain trade bloc.
Countries join a trade bloc with the hope that it will help them to stand beside the
powerful countries of the world that they cannot do for themselves as a single economic
system (Yeung, 2016, p.1). They want trade blocs to provide them certain power to prove
themselves in the global market. Therefore, before forming a trade bloc the members in
power must consult with the member countries about their expectations from that trade bloc.
Head person of that trade bloc should decide and finalise the rules and policies of that trade
bloc.
A trade bloc has certain rules, regulation and policies to be maintained. If the
members do not properly follow rules, then it will not be successful. They should follow the
policies and rules to extract maximum benefits from the trade bloc.
Trade blocs help the countries, who are not strong enough to compete with the
developed countries. A regional trading community has other benefits also like maintaining
the economic scale of a certain market. Trade blocs make rules for doing businesses in a
same manner and with same purpose (Per et al. 2017, p.155). It helps participant countries to
develop their foreign investments in domestic market. It helps to maintaining the
effectiveness of global economic status. Participant countries are mostly benefited by market
efficiency that they could get only as a member of trade bloc.
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Global competitive advantage
In earlier times, competitive advantage used to be entertained within a restricted
boundary. Hence, there were least options to get glances of global or regional terms (Asongu,
2014, p.347). Globalisation has brought the opportunity for a regional business in terms of
global competitive advantage. In more or less global competition has made dimensional
impact while forming trading blocs. Initially, global competitive advantage has greatly
influenced in forming regional trading blocs and on the other hand, engaged countries have
found benefits to chase market policies while making benefits in business. Some renowned
trading blocs like Eu or OPEC has understood their capacity and different terms of business
needs while chasing another (Chaudhari et al. 2016, p.45). It cannot be said that a specific
trading bloc or regional business group always perform equal economic performance as there
are variations in contribution and economic stability among engaged countries. In that
concern, trading bloc has greatly emerged the prospect of competitive advantage as well as
engaged countries having found some stages to understand interests of other countries. In
terms of global competitive advantage, some of the important factors have found validation
and those include:
 Macroeconomic forces and future policies to boost economy
 Availability of resources in order to be engaged within an international business
forum
 Competition policies played by neighbour countries
 Recommendations for infrastructural improvement
 Utilisation of available workforce
One of the efficient impacts of trading blocs, in terms of competitive advantage
includes co-operative efforts of a group of nations for chasing global competition (Shinde et
al. 2017, p.75). There is no doubt that globalisation is a booster for developing trade and
economy and at the same stage, it is a threatening measure for developing countries.
Practically, some leading trading blocs like EU or OPEC are managing their own initiatives
for making trade in available and specified products. Therefore, it is very evident that other
countries especially the developing ones are getting additional pressure to chase such
combined policies. The result comes as a regional base of competition and followed by the
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