Trade agreements

• What is a trade bloc?

  A trade bloc is a group of countries that form an economic alliance to promote trade and economic cooperation among themselves.
• Trade blocs advantages:

  • Trade blocs remove or reduce barriers to trade between them such as tariffs and quotas 
  • This facilitates free trade and results in larger volumes of trade between member nations
  • Trade agreements encourage cooperation between countries and promote peace and stability
• Trade blocs disadvantages:

  • However, there are often external barriers or restrictions which may reduce trade with countries that are not part of the trade bloc
  • There may also be a backlash against loss of sovereighty which is the authority of a state to govern itself to make its own laws which could result in members leaving trade blocs e.g. Brexit
• Trade increasing globalisation:

  • trade agreements made inter trading less expensive and easier
  • countries trade products to diff countries
  • millions of products imported and exported / yr
• North American Free Trade Agreement (NAFTA):

  • reduced tariffs between Canada, USA and Mexico
  • created largest free trade area > 450 million people
  • 75% of Canadian exports go to US
• Restrictions of imports and exports:

  • tariffs (tax)
  • bans on certain products
  • trade agreements can remove restrictions
  • World Trade Organisation overseas all trade
  • quotas (limit on quantity)
  • requirements
• Explain how trade agreements are a factor in globalisation:

  • Trade agreements are formed by countries joining together to form a trade bloc that encourages trade between themselves and promotes economic co-operation (1), for example NAFTA (1d) 
  • Trade agreements are a factor in globalisation by encouraging trade across a number of countries. This may lead to increased investment from other countries (1) for example Audi has built a factory in Mexico in order to gain access to other NAFTA countries 
  • Trade agreements can lead to people moving more freely to seek work in the trading bloc (1). This encourages globalisation by increasing links between countries as often supporting goods and services will follow (1d)
• Explain how trade agreements are a factor in globalisation:


  • Bilateral agreements allow trade between two countries and can therefore enable greater flow of goods and labour between the two countries (1).
  • Without trade agreement some countries wouldn’t trade with others (1). Therefore, agreements such as the WTO which covers trade in goods, services and designs (1d) help trade flow freely by providing a forum for negotiations encouraging trade across the globe (1d).
  • However, it can also be argued that trade agreements are necessary because of globalisation (1). Countries need to act as bloc to be able to negotiate on a global scale due to unequal power (1d). Credit given for how lack of agreements, e.g. quotas and tariffs, will act against globalisation.