7.6 Identify the leading economic blocs.

The leading economic blocs are illustrated in Exhibit 7.9. Europe has the longest experience with regional integration and is home to several economic blocs. The most important of these are the EU and the European Free Trade Association.
Exhibit 7.9

The Most Active Economic Blocs
A map presents countries with the most active economic blocs.



A map presents countries with the most active economic blocs.
The European Union

In 1957, six countries—Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany—formed an alliance called the European Economic Community (EEC). Its successor is today’s European Union (EU), established in 1992. The EU features 28 countries from both Eastern and Western Europe. It is the world’s most advanced and largest regional economic bloc. Home to a half billion people, the EU’s total annual GDP is about $18 trillion.

The EU has taken the following specific steps to become an economic union.

Market access. Tariffs and most nontariff barriers have been eliminated for trade in products and services. Rules of origin favor manufacturing using inputs produced in the EU.

Common market. Barriers to the cross-national movement of production factors—labor, capital, and technology—have been removed. For example, an Italian worker now has the right to take a job in Ireland, and a French company can invest freely in Spain.

Trade rules. Customs procedures and regulations have been eliminated, streamlining transportation and logistics within Europe.

Standards harmonization. Technical standards, regulations, and enforcement procedures related to products, services, and commercial activities are being harmonized. For example, where British firms once used imperial measures (pounds, ounces, and inches), they have converted to the metric system that all EU countries use.

In the long run, the EU is seeking to adopt common fiscal, monetary, taxation, and social welfare policies. Introduction of the euro—the EU’s common currency and now one of the world’s leading currencies—simplified cross-border trade and enhanced Europe’s international competitiveness. The European Central Bank is based in Luxembourg and oversees EU monetary functions.

Other EU institutions include the Council of the European Union, a representative body that makes decisions on economic policy, budgets, foreign policy, and admission of new member countries. The European Commission proposes legislation and policies and is responsible for implementing the decisions of the European Parliament and the Council of the EU. The European Parliament consists of elected representatives and develops EU legislation, supervises EU institutions, and makes decisions about the EU budget. The European Court of Justice interprets and enforces EU laws and settles legal disputes between member states.40

The newest EU members are mainly in Eastern Europe. They are important, low-cost manufacturing sites for EU firms.41 Most of the newest EU entrants are one-time satellites of the former Soviet Union and have grown rapidly. Most are poised to achieve per-capita income levels similar to those of the EU’s wealthier countries. However, less-developed economies such as Romania, Bulgaria, and Lithuania will require years of developmental aid to catch up. In recent years, economic crises afflicted long-standing EU members such as Greece and Spain.

The EU’s Common Agricultural Policy (CAP) is a system of agricultural subsidies and programs that guarantees a minimum price to EU farmers and ranchers. The CAP consumes almost half the EU’s annual budget and complicates negotiations with the WTO for reducing global trade barriers. High import tariffs on agricultural goods harm exporters from developing economies such as Africa. The EU is working to reform the CAP, but progress has been slow.

In 2016, the United Kingdom (UK) voted to withdraw from the European Union. By a slim margin, UK voters passed the European Union Membership Referendum, commonly known as “Brexit.” The majority vote surprised the government of Prime Minister David Cameron, leading to his resignation. Many voters believed the EU central government in Belgium had too much influence over British affairs and that membership in the EU threatened UK autonomy. Some voters resented the millions of migrant workers in the UK. Brexit likely will reduce some of the advantages of free trade from which the UK had benefited under regional integration with the EU. It also will affect the status of countless migrant workers. For example, prior to Brexit the number of workers in the UK from Poland alone numbered 850,000.

In the wake of Brexit, the UK faced various options. One option was to exit from the EU altogether. Another option was to adopt an approach similar to Norway, which maintains free movement of goods, capital, and workers with the EU but is not an EU member and follows only those EU regulations accepted by the Norwegian Parliament. The Brexit vote reflects rising nationalism and a rejection of globalization. Brexit set a precedent and other European countries may seek to exit the EU.

7.6-9 Full Alternative Text: Long description

The details are as follows:

EU:

Andorra

Austria

Belgium

Bulgaria

Croatia

Cyprus

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Monaco

Netherlands

Poland

Poland

Romania

San Marino

Slovakia

Slovenia

Spain Portugal

Sweden

United Kingdom

EFTA:

Iceland

Liechtenstein

Norway

Switzerland

NATFA:

Canada

Mexico

United States of America

MERCOSUR:,

Chile,

Argentina,

Bolivia,

Brazil,

Colombia,

Ecuador,

Paraguay,

Peru,

Uruguay,

Venezuela,

CARICOM:

Jamaica

Dominican Republic

Ecuador

Guyana

Haiti

Suriname

CAN:,

Peru,

Bolivia,

Columbia,

Venezuela,

ASEAN:

Indonesia

Brunei,

Cambodia,

Laos

Myanmar (Burma)

Philippines

Singapore

Vietnam

APEC:

Australia

Brunei

Canada

Chile

China

China

Indonesia

Japan

Malaysia

Mexico

New Zealand

Papua New Guinea

Peru

Philippines

Russia

Singapore

South Korea

Thailand

United States of America

Vietnam

CER:

Australia

New Zealand