A regional trade bloc is referred to the agreement between the governments or even a part of the organizations where the trade barriers including the non tariff and tariffs barrier are eliminated between the states which are participating in the states. In addition to this the trade blocs are defined its member states against the global competitiveness. Regional trade blocs are established to promote the trade at global level (El-Agraa, 1997). In order to tackle with the global competition, the government in each country has established some restrictions including tariffs on goods manufactured by the member states, government subsidies technical and other non tariff barriers, import quotas, onerous bureaucratic import processes. At present there have been four major trade blocs such as ASEAN, EU, MERCOSUR and NAFTA. This assignment report provides the discussion on international trade and regional trade blocs along with the advantages of such blocs.

Historical View:

Historically the first economic bloc was developed in Germany under the name of German Customs Union in 1834. It was formed on the basis of German Confederation and later on by the German Empire in 1871, a main surge in the trade bloc was noticed in the decade of 60s and 70s and subsequently in 90s during the collusion of communism. Under the rise of global competition approximately 50% of the world trade was taken place from regional blocs. According to the economist Jeffery (1993), there were four common traits shared by the members of successful trade blocs such as geographic proximities, political commitment to the regional organization, similar level of per capita GNP and compatible trading regimes. The member sates who are advocating the free trade is opposed to the trade blocs as it is the argument to promote regional blocs against the global free trade (Bernal, 1997). The worldwide economists still argued that whether the regional bloc leads to the fragmented world economy or it is encouraging the stretch of present global multilateral trading system. According to the world economists, trade blocs are basically a trade agreement between the several states which produced the goods and it’s a part of the regional organization (Bernal, 1997). There are the several different categories of trade blocs which are defined based on the level of economic integration such as monetary union, custom union, economic union, preferential trading areas, and common market and free trade areas (O’Loughlin and Anselin, 1996).