Trading Blocs:: North American Free Trade Agreement (NAFTA)

Trading blocs:
A regional trading bloc is a group of countries within a geographical region that protect
themselves from imports from non-members. Trading blocs are a form of economic integration,
and increasingly shape the pattern of world trade. There are several types of trading bloc:
The European Union (EU):

The EU is the world’s largest trading bloc, and second largest economy, after the USA. In 2014 the
value of the EU’s output totalled $18.5 trillion*. The five largest Economies, Germany, France, the
United Kingdom, Italy and Spain, account for around 70% of the 28-country trading bloc.
The UK’s decision to leave the EU, following its referendum vote in June 2016, will have a considerable
impact on the overall value of the EU’s output, as well as triggering a period of uncertainty during the
exit negotiations to create a new trade relationship.
North American Free Trade Agreement (NAFTA) :
The North American Free Trade Agreement (NAFTA) was implemented in order to promote
trade between the U.S., Canada, and Mexico. The agreement, which eliminated most tariffs on
trade between the three countries, went into effect on January 1, 1994. Numerous tariffs–
particularly those related to agriculture, textiles, and automobiles–were gradually phased out
between January 1, 1994 and January 1, 2008.
NAFTA was supplemented by two other regulations: the North American Agreement on
Environmental Cooperation (NAAEC) and the North American Agreement on Labor
Cooperation (NAALC). These tangential agreements were intended to prevent businesses from
relocating to other countries to exploit lower wages, more lenient worker health and safety
regulations, and looser environmental regulations.
NAFTA did not eliminate regulatory requirements on companies wishing to trade

internationally, such as rule-of-origin regulations and documentation requirements that determine
whether certain goods can be traded under NAFTA. The free-trade agreement also contains
administrative, civil, and criminal penalties for businesses that violate any of the three countries’
laws or customs procedures.
 ASEAN: Association of South-East Asian Nations :
ASEAN is a trade bloc of 10 nations with an aggregate economic size (as measured by the total
GDP of the member countries) of $2.3 trillion. The aim is to establish a fully-fledged economic
community (AEC) . The trading bloc’s diversity – ranging from advanced economies like
Singapore to developing countries like Myanmar is an interesting feature – who will be the
long-term winners and losers from deeper integration and many other features like that.
ASEAN’s member countries (in 2015) are Brunei Darussalam, Cambodia, Indonesia, Lao
People’s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand and
Vietnam.
SAARC : The South Asian Association for Regional Co-operation:
The South Asian Association for Regional Co-operation (SAARC) is an organisation of South
Asian nations, which was established on 8 December 1985 when the government of Bangladesh,
Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka formally adopted its charter providing
for the promotion of economic and social progress, cultural development within the South Asia
region and also for friendship and cooperation with other developing countries.
It is dedicated to economic, technological, social and cultural development emphasising

collective self- reliance. In terms of population, its sphere of influence is the largest of any
regional organisation: almost 1.5 billion combined population of its member states. In April
2007, Afghanistan became its eighth member.
Objectives of SAARC:
i. Promote the welfare of the peoples of South Asia and improve their quality of life;
ii. Accelerate economic growth, social progress and cultural development in the region by
providing all individuals the opportunity to live in dignity and realise their full potential;
iii. Promote and strengthen collective self-reliance among the countries of South Asia;
iv. Contribute to mutual trust, understanding and appreciation of one another’s problems;
SADC : The Southern African Development Community:
The Southern African Development Community (SADC) Protocol on Trade (1996), as amended
in 2010, is one of the most important legal instruments guiding SADC's work on Trade. It is an
agreement between SADC Member States to reduce customs duties and other barriers to trade on
imported products amongst SADC Member States. The Protocol envisioned the establishment of
a Free Trade Area in the region. The Regional Indicative Strategic Development Plan targeted
achievement of SADC Free Trade Area by 2008 and a Customs Union by 2010.
A Free Trade Area, in which Member States agree to remove tariffs against each other but are
free to levy their own external tariffs on non-member nations, fosters economic cooperation
between Member States. A Customs Union adds a common external tariff against non-SADC
countries, with all members of the union receiving shares from that tariff.
During the 28th SADC Summit, held in Johannesburg in August 2008, the Free Trade Area was
officially launched by 12 of the 15 SADC Member States. By the beginning of 2008, most
customs duties had been eliminated on goods from the participating Member States (i.e. about
85% of goods attained zero duty in January 2008) and a Common Tariff System was applied to
import of goods from non-Member States. The Protocol on Trade in Services was developed
and signed in August, 2012 as a step towards achieving a Free Trade Area in Services. These are
important steps towards achieving the subsequent SADC Integration Milestones such as the
Customs Union, Common Market and Monetary Union.

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Trading blocs:

The European Union (EU):

North American Free Trade Agreement (NAFTA) :

NAFTA did not eliminate regulatory requirements on companies wishing to trade

 ASEAN: Association of South-East Asian Nations :

SAARC : The South Asian Association for Regional Co-operation:

It is dedicated to economic, technological, social and cultural development emphasising

SADC : The Southern African Development Community:

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