Trade Blocs in Global Economy

A trade bloc can be understood as a trade agreement between different divisions of countries. These types of agreements are basically intended to eliminate trade obstructions. Globalization has contributed significantly to make a long stride towards free trade system. Globalization has influenced political and economic systems of both developed and developing countries since the last century.

This paper aims to analyze the impact of two important trade blocs such as NAFTA and ASEAN on the process of globalization and also active participation of United States in influencing political and economic systems.

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Impact of Globalization

Interaction among individuals, government, and companies at the global level is known as globalization. Globalization has made money, goods and other manufactured objects to move more freely around the world than ever before.

Globalization has great impact on cultural, political, and economic systems of countries as people have started believing more in private investments rather than relying on the government sectors and as a result of it governments have less control over the businesses running in countries. An ideological expression of globalization has scattered power, and also it has made boundaries more permeable.

Moreover, advancements in technology have reduced governments` control over the economic system of any country (Yaffe, 2011). Moreover, globalization has played part in economic growth by providing outstanding opportunities to countries in order to reduced poverty and hunger from the state.

Role of United States

US is a global power, its economy works as an engine for globalization and world’s economy. It has greater effects on economies of other countries. Successful and dominant US economy has its roots in the field of science and technology through which US has explored various aspects of businesses.

Despite of the recession, the country has faced all challenges and come up with much more stronger and highly influential strategies. There are certain contributing factors through which the American economy has affected political and economical systems of many countries.

Major contributing factors include great technological innovation, large financial investments, exceptional education attainment facilities, and sky-scraping opportunities to skilled labour (Uhalde & Strohl, 2006). In addition to these, there have been numerous other factors that have facilitated the American economy to become economic super power and dominate other states.

Trade blocs

It is collection of different states that agree to have trade with each other having same interests in order to reduce trade restrictions with between countries. Two of the major trade blocs have been discussed in the following:

NAFTA

NAFTA stands for North American Free Trade Agreement. It was signed between three countries America, Canada, and Mexico on 1st January 1994. The basic aim behind its formation was to promote economic growth through easy transportation of goods and services at the international level.

Economically, trade flows have been strengthening between NAFTA as well as other countries of the world. Although, the agreement between the three countries opted to promote economic activities however, it surely had implications for each country’s economic setup.

In the early, US products received better placement in the Mexican market because of the high tariffs in its economy made it difficult for local manufacturers. However, as time passed the US trade deficit with both Mexico and Canada surged which caused a major job displacement in the US economy.

The expected rise in the exports of the US to the growing and much densely populated Mexico was overshadowed by the increasing trend in imports from that country. Mexico offers economic benefits in terms of lower wages and manufacturers in the US started to setup their manufacturing sites in Mexico allowing them to manufacture at lower cost and then import goods back into the US (Scott, 2003). This is the reason that NAFTA is often criticized as poorly devised agreement.

Even though, negotiations to get engaged in the free trade with other countries have become a controversial topic of discussion for both Mexico and Canada, but still since past few years free trade between NAFTA and other countries has become common due to which global economy has been influenced in a positive manner (Audley, Vayghan, & Polaski, 2004).

NAFTA has constructive and good influence on governments of other countries that are involved in the free trading system. It is because it has helped governments to assist the private sector in collaboration with foreign countries.

Establishment of NAFTA has positive impact on economies of the member countries as trade in all three states has been tripled over the years with an advantage of having protected properties. In addition, commodity prices have been reduced in the member countries because of NAFTA foreign direct investment has grown up to an advantageous extent. Discussing alternatives for Canada and Mexico without their link with NAFTA is useless because America is dominant over these countries which do not need any alternative.

Mexico has no such resources through which it can trade at the national level. Furthermore, the competition policy has been the major issue between NAFTA and other trade blocs such as ASEAN. Also, WTO has some major issues with NAFTA as its establishment has led to fewer job opportunities being created for other immigrants and as a result of this the WTO claims that changes should be made in free trade policies in order to offer greater job opportunities to individuals from other countries.

Moreover, there has been several conflicts between NAFTA and WTO as member countries continue to protect certain industries in various sectors by employing higher tariffs against import as in the year 1995 when Canada put up higher import restrictions against US imports to protect its poultry and bread industry (Suppan, 1996).

ASEAN

ASEAN stands for Association of South East Asian Nations. It was established in 1967, it is an agreement of free trade between South Asian Countries including Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. This organization aims to strengthen economic, social and cultural growth, in order to endorse peace at the national level by following certain rules and regulations of United Nations Charter.

All members of ASEAN contributed equally to participate in it. Their performances are based on some pillars named as economic, socio-cultural and political cooperation. They all co-operate with each other in order to attain their goal of forming free trade economy through out the world. Similar to NAFTA, governments of the member countries of ASEAN are having advantage of regulating private businesses with great flow at both national and international level.

No prominent issues or disputes have been observed between WTO and ASEAN but according to one law of WTO trading system, if member countries notice any environmental issue then they should resolve the problem as soon as possible which has become an issue in ASEAN (Hunton & Williams, 2008).

Moreover, competition affect the national sovereignty has been a core issue between ASEAN and NAFTA member countries. Most importantly consumers of member countries have advantage of importing products from each other at low cost without any duty.

Impact of Trade Blocs on Consumers

Arguably trade blocs are aimed at promoting economic activity within member countries and offer consumers lower price goods and services. As a consumer I feel that such trade blocs do tend to allow consumers to have access to cheaper products. Moreover, access to greater variety of products allows much better choice between products which are available to me as a consumer.

Conclusion

Through the above analysis, it could be said that ASEAN and NAFTA countries have undoubtedly played an important role in regulating free trade. However, there have been some flaws that were noted during their agenda implementation. The above discussion helped in developing an idea regarding globalization and changing attributes of global business community. The US has made it easier for most of the countries to trade within its economy.

The infrastructure of the US economy has played the role of a significant platform for collaboration of different countries to engage in trade. With the trade bloc presence, globalization has yielded many positives patterns. These patterns have not been limited to business world but also to the social and political systems of the world. Also, it should be noted that US has emerged as the region where globalization took place in a fast pace. In this way, ASEAN and NAFTA countries have benefited from US.

References

Audley, J., Vayghan, S., & Polaski, S. (2004). NAFTA`s Promise and Reality. Lessons from Mexico for the Hemisphere. , 1-88.

Hunton, & Williams. (2008). Introduction to the ASEAN Economic Community. International Law Office , 1-4.

Scott, R. E. (2003, November 17). The high price of ‘free’ trade. Retrieved September 11, 2011, from Economic Policy Institute: http://www.epi.org/publication/briefingpapers_bp147/

Suppan, S. (1996, April). NAFTA /WTO Conflict in Agricultural Trade. Retrieved September 12, 2011, from IATP: http://www.iatp.org/files/NAFTA_WTO_Conflict_in_Agricultural_Trade_FACT_.htm

Uhalde, R., & Strohl, J. (2006). America in Global Economy. A Background Paper For the New Commission on the Skills of the American Workforce , 1-65.

Yaffe, D. (2011). The Politics and Economics of Globalization. Retrieved September 12, 2011, from RcgFrfi: http://www.rcgfrfi.easynet.co.uk/marxism/articles/glob137.htm

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