3.2B: Gvrnmnt Policies Promoting TBlocs & EcoLiberalisation

• The European Union (EU)

  • A single market trade bloc composed of 28 members and a population of 512 million.
  • It guarantees the free movement of goods, capital and people.
  • A single currency, the euro, has been adopted by 19 members.
  • Uniform product labour and environment regulations.
  • The founding Treaty of Rome in 1957 committed members to work towards an 'ever closer union'
  • Political globalisation with the European Parliament and some foreign policy determined at EU level
  • The original political aim was to integrate economies, so that interdependence prevents war.
• The Association of South East Asian Nations (ASEAN)

  • A free trade area with 10 members with a population of 625 million
  • A uniform low tariff is applied between members for specified goods. It's working towards the elimination of tariffs sector by sector.
  • Agreed to create a single market by 2015, however this was not achieved.
  • Political globalisation: ASEAN aims to co-ordinate response to regional political issues. It's more political than economic.
  • ASEAN pledged to remain nuclear weapons free in 1995.
• Free market liberalisation

  • This involves promoting free markets and reduces government intervention in the economy
  • Competition between firms leads to innovation and lowest cost production
  • Outcome is higher output, lower prices and greater choice - higher SOL
  • It was initially promoted in the 1980's by UK Prime Minister Margaret Thatcher and US President Ronald Reagan.
  • It has created competition in once restricted markets.
  • Foreign competition can be encouraged by removing legal restrictions on foreign ownership and removing capital controls, allowing inflows of FDI (and outflows)
• Privatisation

  • Since the 1980s many governments have sold of industries they once owned (so-called 'nationalised industries)
  • In the UK the steel, car, electricity, gas and water industries were all state-owned but are now privately owned
  • However, many governments still own big slices of industry, even in big countries like France.
  • It may increase efficiency as the profit motive minimises loss.
  • Permitting foreign ownership allows an injection of foreign capital through FDI, introduces new technologies and promotes globalisation.
• Encouraging Business Start-ups

  • Grants and loans are often made to new businesses especially in areas that are seen to be globally important growth areas such as ICT development, pharmaceuticals or renewable energy.
  • There could also be low business taxes, well-enforced contract laws, minimum regulation and efficiency bankruptcy procedures, which encourage new firm creation.
  • It creates innovation and competition in new production techniques, erodes excess profit of monopolies, lowers prices and increases household PP.