Business

TRADE BLOCS – “Importance”

A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states, says Wikipedia. Trade blocs are very necessary in the easy flow of business transactions  between countries. Some of its importance are listed below.

Trade bloc increases foreign direct investment.A foreign direct investment  is an investment in the form of controlling ownership in a business in one country by an entity based in another country. When trade bloc is established between countries, it gives each country the freedom to open and own businesses in the other countries. These businesses create employment in the countries where its established and reduces unemployment. This brings about a better economy in both countries who established the trade bloc.

With the removal of import tariff in trade bloc, goods become relatively cheap because there is less or no import duty paid for importation of goods from countries who have established trade bloc. When tariffs are eliminated or reduced, both foreign and local goods becomes less expensive and citizens and business men in those countries save money for the purchasing of other goods to boost businesses.

Also, trade bloc brings about competition between businesses since there are less or no import tariffs. These competitions ginger competitive entities to be more efficient in their work and causes the price of goods and services to be cheaper.

Both Local and International enterprises will work efficiently to make sure they are ahead of their competitors in terms of costumer services, low pricing and so on and so forth. Since tariffs are reduced or eliminated goods would be cheaper and consumers will be ‘King’ and so therefore , consumers will drastically reduce the prices of their products to gain more consumers

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