Question

3. Some people believe that the rise of regional trading blocs threatens free trade progress made by the World Trade Organization (WTO). Do you think regional trading blocs promote or undermine regional or global stability? Explain.

Answer 1

Trading blocs are agreements made between two or more governments in which the rules, regulations, and business aspects of trade may occur between them.

Here, the barriers to trade are reduced or eliminated among the participating states.

Example:

• The United States, Mexico, and Canada Agreement

Regional trading blocs, like the United States Mexico and Canada Agreement, promote regional stability. The pacts enables businesses to know how exactly financial transactions  are occurring in these areas and allow them to plan accordingly. The reverse occurs when there is no plan, and there are no constraints on what is happening.

Other advantages of trading bloc includes competition, market efficiency, improved foreign investment etc.

The disadvantages of trading bloc includes interdependency and loss of sovereignty etc.