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Week11:TradeBlocs(Ch.12)McGraw-Hill/IrwinCopyright?2012byTheMcGraw-HillCompanies,Inc.Allrightsreserved.
1.Typesofeconomicblocs
Afree–tradearea:membersremovetradebarriersamongthemselvesbutkeeptheirseparatenationalbarriersagainstothersi.e.NAFTAAcustomsunion:membersremovetradebarriersamongthemselvesandadoptacommonsetofexternalbarriersEECfrom1957to1992MERCOSUR(Argentina,Brazil,ParaguayandUruguay)formedin1991
1.Typesofeconomicblocs
Acommonmarket:acustomsunionplusmembersallowfullfreedomoffactorflows(migrationoflabourandcapital)amongthemselvesAfulleconomicunion:acommonmarketplusmembercountriesunifyalltheireconomicpoliciesincludingmonetary,fiscalandwelfarepolicies.AustraliaaftertheFederationin1901.TheEUisonthepathtowardeconomicunity.
Figure12.1TypesofEconomicBlocs
2.PreferentialTradeAgreements(PTAs)SettingupafreetradeareawouldnormallyviolatetheWTOprinciples(i.e.MFN).However,ArticleXXIVofGATTallowsregionaltradearrangementsasaspecialexception.Thearticlecovers:Customsunions:barriersbetweenmembercountriesareremoved,withacommonexternaltariffFreeTradeAreas:barriersbetweenmembercountriesareremoved,buteachmemberhasitsownexternaltariffsagainstnon-members.
RegionalandbilateralPTAshaveproliferatedaftertheformationofNAFTA(1994)Therearenowover400PTAsthathavebeennotifiedtotheWTOLargeeconomiessuchastheUS,EU,Japan,ChinahavemademanyPTAsinrecentyears,butthereisnopreferentialtradeagreementbetweentheseeconomies
AustraliahasaFreeTradeAgreementswith:NewZealand(1983)Singapore(2003)Thailand(2005)UnitedStates(2005)Chile(2009)ASEAN-NewZealand(2009)
AustraliahasrecentlysignedFTAswith:JapanChinaAndSouthKorea
AustraliaisnegotiatingFTAswith:IndonesiaMalaysiaIndiaGulfstates(GulfCooperationCouncilismadeupofBahrain,Kuwait,Oman,
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