Gaia Ierace, Paula Grisdale, Down to Business © Loescher Editore, 2016
International trade
CLIL – Economia aziendale
INTERNATIONAL TRADE: MAPPING THE TERRITORY
OF BUSINESS TRANSACTIONS
272
Trading blocs
If a group of countries within a geographical
territory wish to protect themselves from imports
from outsiders, they set up a regional trading bloc.
Trading blocs are a form of economic integration
and determine the pattern of world trade.
There are several kinds of trading bloc:
• Preferential trade area - Preferential Trade
Areas (PTAs) exist when countries agree to lower
or eliminate tariff barriers on a selection of goods
imported from other members
of their territory. This is often the first move
towards the creation of a trading bloc.
• Free trade area - Free Trade Areas (FTAs) are
created when two or more countries within a
region agree to reduce or eliminate trade barriers
on all goods coming from other members.
For example, the North American Free Trade
Agreement, NAFTA, was set up by the US, Canada
and Mexico in 1994. This trilateral union
laid the foundations for remarkable economic
growth and prosperity for the three countries
involved. NAFTA has shown how free trade
increases wealth and competitiveness, so that
eveyone can enjoy economic benefits.
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In January 2010 China and six founding members
of Asean (the Association of South East Asian
Nations) came to an agreement called Asean Free
Trade Agreement. In terms of population involved,
this is now the largest free trade agreement and
includes some leading economies driven by export.
China benefits because it imports raw materials
at better prices, in order to produce larger
quantities of finished goods for export.
• Customs union - A customs union involves the
elimination of tariff barriers between members,
the reduction of non-tariff barriers (for example,
the time that it takes to clear goods at borders)
plus agreement on a common external tariff
on imports from outsiders. This enables members
to trade as a single bloc with third parties.
A successful example of this type of union is the
Customs Union of Russia, Belarus and Kazakhstan.
These countries agreed to establish the Customs
Union in 2009. The strategies adopted have affected
trade both within each country, among the three
members, and with the rest of the world. Since
the creation of the union, trade among the three
countries has doubled. This increase owes a lot to
the Customs Union. The reduction of non-tariff
barriers has been as decisive as lowering more
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NOTES
traditional barriers, like customs duties.
The structure of exports from Belarus, Kazakhstan
and Russia also suggests that a union of this kind
has the potential to act as a platform for exports
to the rest of the world.
• Common market - A common market aims at full
economic integration, in which member countries
promote duty-free trade and free movement of
labour and capital. This means that barriers to
trade in goods, services, capital and labour no
longer exist. Moreover, as well as removing tariffs,
non-tariff barriers are also reduced and removed.
Microeconomic policies, common rules regarding
monopoly power and other anticompetitive
practices must also be dealt with in a harmonious,
uniform way. As far as large companies are
concerned, common policies such as the Common
Agricultural Policy (CAP) and Common Fisheries
Policy (CFP) of the European Single Market (ESM)
can play a decisive role.
The European Union
The European Union (EU) is the largest trading bloc
in the world, and second largest economy to the US.
The original group of member countries, following
the Treaty of Rome in 1957, was called the Economic
Community (also Common Market or The Six).
The original six were Germany, France, Italy, Belgium,
Netherlands and Luxembourg. Their initial purpose
was to create a single market for goods, services,
capital and labour by removing trade barriers, thus
promoting free trade between members.
With regard to trade with non-members, common
tariff barriers were put up against cheap imports,
such as those from Japan, whose prices at the time
were low because of the undervalued currency (yen).
By 2014, as a result of gradual expansion, the EU had
28 members. Croatia, the most recent member,
joined in July 2013.
MODULE 8 International trade
1. firmatarie
2. accordi
3. sede centrale
The World Trade Organization
The World Trade Organization (WTO) is an
international, multilateral organisation which sets
down the rules for the global trading system and
settles disputes between its member states, all of
whom are signatories1 to its 30 agreements2.
WTO headquarters3 are in Geneva, Switzerland.
❶ INFO SEARCH Read the text and write the following information in your notebook.
• What is a trading bloc;
• list examples of trading blocs in the text;
• name two free trade areas mentioned in the
text;
• describe what happened in January 2010;
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• outline why the Customs Union of Russia,
Belarus and Kazakhstan was successful;
• mention the secrets for a successful common
market;
• clarify why the EU was founded.
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A world map of WTO participation:
■ Members
■ Members, dually
represented with
the European Union
■ Observers
■ Non-members
❷ SPEAKING With a partner, choose a role and act out the situation described.
Student A: Read the information about free trade and ask your partner the following questions.
Then answer your partner’s questions.
• What is a trading bloc and what does it do?
• How does it promote economic growth?
• What is a PTA?
• What is an FTA?
Student B: Read the text and ask your partner the following questions. Then answer your partner’s
questions.
• What is a customs union?
• What is the WTO’s mission?
• What do the colours green, blue, yellow and red mean on the map?
• What does the WTO want to achieve in terms of development?
• How can the WTO help weaker countries?
❸ GUIDED WRITING Write a report with the information gathered from the speaking activity
and read it out to the class.
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