IBL ASSIGNMENT

Regional Grouping

Submitted by :

Ann Maria Antony(21382005)

Avinashkumar.T(21382006)
 Regional Grouping
• Regional trading agreements or Regional groupings refer to a treaty that is signed by
two or more countries to encourage free movement of goods and services across the
borders of its members.

• It is an agreements between countries to reduce tariff and non-tariff barriers to the

free flow of goods, services, and factors of production between each other.

• The agreement comes with internal rules that member countries follow among
themselves.
irrespective of the stage of their economic development, seem to be interested to become
full members of or in forging some sort of alliance with one grouping or the other.

The main aim is to accelerate the development process and

improve the quality of life of the residents of the region by
providing them with greater choice both as producers and
as consumers
In short, in a regional grouping, the economic significance of national political
boundaries is completely lost.
 HISTORY
Two distinct waves of regional groupings appear to have swept the world since the end of
the second world war. The first one surfaced during the 1950s with the formation of
European Common Market (ECM) by the then West Germany, France, Italy, Belgium,
Luxemburg and the Netherlands on 1st January 1958.The first' wave of regionalism can be
said to have come to a halt by the end of 1960s or, the latest, by the first half of 1970s.

The second wave surfaced during the mid 1980s wjth the United States of America (USA)
as a significant player. Thus, the Canada-US Free Trade Agreement was negotiated in
1989 and later, the North American Free Trade Area (NAFTA), with USA, Canada and
I Mexico as members, came into existence during 1992.

The above developments triggered more initiative and activities among many countries.
Attempts are continuing towards greater integration and increased cooperation among a
number of countries. .
 Preferred trading arrangements
• Preferential trading arrangement refers to an arrangement under which the
member countries lower barriers to imports of identified products from one
another.
• Preferential trading arrangement requires the lowest level of commitment to
reduce trade barriers, though members countries do not eliminate the barrier
among themselves.
 Free trade area
• A free trade area (FTA) refers to a specific region wherein a group of countries
signs a trade agreement that seals the economic cooperation among them.
The FTA’s main goals are to bring down barriers in trading, specifically tariffs
and import quotas, and encourage the free trade of goods and services among
its member countries.
• Countries that belong to a free trade area can maintain independent trade
policies with 3rd countries or non-member countries.
 Customs Union
• Customs union refers to a regional grouping where countries have agreed to
abolish all trade barriers among themselves and they follow a common policy
regarding their trade with non-member countries.

• Customs union is an extension of the free trade area where along with
elimination of internal barriers to trade the member countries agree to
establish common external barriers.
Common Market
• Common Market refers to a regional grouping of countries which
eliminates all barriers to movement of all factors of production
between the member countries.

• The most famous example of a common market is

the European Common Market, which aims to provide the free
movement of goods, capital, services, and labor within the
European Union.
 Economic Community
• Economic community or economic union refers to a regional grouping
where member countries follow common policies related to economic
matters/
• In this type of regional grouping, countries enter into an economic
agreement to remove barriers to trade and adopt common economic
policies.
Why should Countries integrate their
Economies?
• All countries gain from free trade and investment.
• It is an attempt to exploit the gains from free trade and investment.
• Linking countries together, making them more dependent on each
other.
• It creates incentives for political cooperation and reduces the violent
conflict.
• It gives countries greater political clout when dealing with other
nations.