Geographical Trade Blocs

We could understand a country's level of economic development from the commodities it exports and the commodities it imports. For example, as we have seen, the developing countries largely export resources and agricultural products and import high cost machines and consumer products. On the other hand, the developed countries import more of the raw materials and agricultural products, convert them into machines and consumer products and then export them to the developing countries. Every country, in its efforts to achieve a favourable trade balance, tries harder with actions to decrease the imports and increase the exports. To discourage imports, it imposes customs duty. And to increase exports, it provides subsidies. As a result, international trade is affected. To avoid this difficulty, therefore, many countries have created trade blocs.

Trade Blocs

Nowadays, the conditions conducive for free international trade are rare. Yet, in some regions, the trade is without external barriers. The basic reason for this is the concept of 'trade blocs'. Such blocs are found mostly in Europe.

Eurpoean Economic Community (EEC). In 1948, Belgium, Netherlands and Luxembourg established an economic cooperation under the organisation known as the Benelux. Later, together with France, West Germany and Italy, an organisation known as the

European Coal and Steel Association was established. In the beginning, it had very little authority to act but later it formed the basis for the creation of the European Economic Community. Although all blocs have almost similar objectives and goals, they differ in their functions and development.

It was established according to the 1957 Rome Agreement. As of now, there are 15 member countries in the EEC. These countries had not removed the customs and excise nor the import restrictions, immediately after the establishment. Rather, trade restrictions on industrial commodities were removed in 1966 and a common customs duty was brought in. In this bloc, most countries are still largely agricultural communities. There is protective and integrated agricultural development. Farmers receive high prices for their agricultural products. This community ranks third in the world trade. Forty five per cent of all commodities in the world trade is accounted for by the EEC.