The Role and Importance of Trading Blocs (8 Points) | Business

The Role and Importance of Trading BlocsĀ  are as follows:

Trading blocs have played a positive role in the development of international trade. This can be explained with the help of following points:

1. Economic integration:

Trading blocs have resulted in economic integration. It represents various forms of economic integration in a region like SAARC, OPEC, ASEAN, EU etc. Trading blocs unifies different independent economies and bring the nations closer.

Trading blocs helps in enhancing degree of regional co-operation and interrelationship. It brings the nation closer by unifying independent economies and facilitates economic cooperation among the members of the group.

2. Free transfer of resources:

Trading blocs helps in elimination of tariff, and non-tariff barriers and facilitates free transfer of resources across the border of member countries. This help in optimum utilisation of available resources.

This is because no country in the world is self-sufficient and they need to depend upon one another for the fulfillment of their requirement.

3. Increase in Trade:

Free transfer of resources helps in increasing the productivity of member nations. They eliminate trade barriers and encourage free trade. This increase import and export activities of member nations, which results into increase in trade revenues.

Trading blocs are sound and efficient to create sustainable economic growth. Trading blocs are created to encourage trading partners to buy and sell goods already made in their home countries. It also encourages economies of scale.

4. Employment opportunities:

Large-scale production and distribution leads to an increase in employment opportunities directly and indirectly. This results into increase in income level of the people, which enhances the standard of living of the economy.

Trading blocs tend to increase in income and employment level of the member countries. Capital is required to generate more and more employment opportunities. Trading blocs lead to free transfer of resources viz natural, human and capital resources, which are optimally utilised for creating employment opportunities.

5. Benefit to the consumers:

Formation of trading blocs enables transfer of technologies across borders resulting into improvement in productivity and quality of goods and services ultimately benefiting the consumers to a greater extent.

Removal of trade barriers and free transfer of resources have resulted into mass production and distribution. This facilitates provision of quality product in competitive prices to the consumers.

6. Cooperative spirit:

Trading blocs leads to economic, political and cultural integration of member -countries. This develops a spirit of cooperation and coordination among member nations. This helps in maintaining good relations among the member nations.

7. Competition:

Trading blocs has resulted into increase in competition between companies of entire region. It also facilitates to face competition effectively. Trading blocs gives competitive advantage not only to large establish firms but also to the newly emerging firm.

8. Development of region:

Trading bloc plays an important role in contributing the development, industrialisation and economic growth of whole region. Trading blocs are a sound and efficient way to create sustainable economic growth.

Liberal policies and removal of trade barriers has resulted in the growth of industries in those regions. This in turn increased the production and distribution activities leading to economic growth of those regions.