1 Answer | Add Yours
The European Union is more than just a trade bloc. A trade bloc is created to make it easier for cross-border trade between members of the trade bloc. This is done by eliminating tariff and non-tariff restrictions in trade between member nations but they are free to have different trade relations with other nations and have different laws regulating production of goods.
The European union is a customs and monetary union with a common currency. The extra features of this extended form of a trading bloc are that all the member nations have common labor laws, laws concerning production of goods, etc. This makes the conditions under which products are manufactured in all member nations the same and none of them can be accused of gaining an edge by using unfair practices. An example of which would be the case within NAFTA with the US accusing Mexico of gaining a competitive advantage by using low wage rates.
The members of the European Union also have common trading terms with all nations lying outside the European Union. This prevents some member nations from benefiting by trading with non-member nations under different terms than others. An example of this could be a member of a trading bloc importing certain products at a reduced rate while the others don’t and then exporting the same to other member nations without incurring any tariffs.
Most of the members of the European Union have also adopted a common currency. This eases the monetary transactions involved in trade as there is no requirement to deal with different exchange rates while trading with members having different currencies.
We’ve answered 319,864 questions. We can answer yours, too.Ask a question