The economic blocs are associations of countries that aim to strengthen and privilege trade relations and improve the economy among themselves, in addition to boosting relations with other blocs and countries.
The end of the Cold War acted as a stimulus for the regionalization of the economy and the formation of blocs organized based on commercial interests. The dispute for hegemony started to be determined by commercial competition, and the power became multi-polarized among several blocks, causing a new world organization.
The countries participating in these economic blocs seek to make regional agreements to facilitate the flow of capital, services and, above all, goods.
The free movement of people has been left in the background. These agreements are fundamentally aimed at expanding markets for companies through the integration of member countries.
In the last decade of the twentieth century there was an acceleration in the formation of multilateral trade agreements, at the same time as three major international markets were consolidated , under the hegemony of the European Union, NAFTA and the Pacific Basin. According to homeagerly, within these blocs, three nations – the United States, Germany and Japan – emerge as dominant superpowers.
The accelerated growth of international economic organizations and their growing trade flow, according to neoliberals, indicate that the world is moving quickly towards greater freedom of movement of capital, goods and people.
In fact, it is not quite what happens. These organizations are opening their internal borders, in an apparent liberal attitude, but they are closing their external borders more than ever. The European Union and the United States, for example, normally use the practice of subsidizing agriculture, limiting foreign investments and imposing import quotas, which is, in fact, a protectionist policy under the command of the State, and not the openness that neoliberals defend.
There are controversies about the weight and importance of supranational organizations in the globalization process . Many scholars point out that regionalization with the formation of supranational organizations is a trend contrary to globalization.
They believe that economic blocks form closed geographical spaces, making integration with the rest of the world difficult. Others argue that regionalization is a first step towards globalization. The overthrow of trade borders in a region, however small, is a first step towards organizing the economy towards broader competition, for a future insertion in the globalized economy.
Types of economic blocks:
Depending on the degree of integration, it is possible to define four types of blocks: free trade zone, customs union, common market and economic and monetary union.
Free trade area – It is characterized by the free movement of goods and services, that is, there is no payment of taxes on the circulation of products.
The World Trade Organization (WTO) defines that a free trade area is only constituted when 85% of trade is free. Each country establishes the import tax for countries that are not signatories to the agreement and also the rules for the transit of capital, services and people. Example: Naphtha.
Customs union – It has the same characteristics as the free trade areas, and the participating countries also adopt common external tariffs, that is, they import products and services from third parties with equal tariffs. Example: Mercosur .
Common market – is characterized by the free movement of goods (goods and services), capital and labor and common import tax for products from non – member countries of the bloc.
The only bloc of this type is the European Union , in which there was also a standardization of taxes paid by the population and companies and of many civil, labor, social and environmental laws. Supranational bodies were created, such as the European Commission, the bloc’s executive body, and the European Parliament, the legislative body.
Economic and monetary union – This is a common market, with a united macroeconomic and interest policy and a single currency. Banking and financial systems completely homogenized, common area of professional performance. Example: European Union, although not all member countries have adopted the single currency (Euro). Switzerland continues to use the Swiss franc.
Most of the economic blocs were created in the early 1990s, coinciding with the emergence of globalization, the consequent intensification of flows and the intensification of global competition between large corporations.
This proves that regionalization and globalization are not antagonistic phenomena, but complementary. Both seek to expand markets for companies.
The Phases of Economic Integration Between Countries
There are five phases of economic integration between countries:
- The free trade zone : barriers to trade in goods between member countries are eliminated, but they maintain autonomy in the administration of their trade policy;
- customs union:the internal circulation of goods and services is free, trade policy is uniform and member countries use a common external tariff;
- common market: once the customs union phase is over, a higher form of economic integration is achieved, in which not only the restrictions on traded products are abolished, but also the restrictions on productive factors (labor and capital);
- economic union:this phase associates the removal of restrictions on investment of goods and factors with a certain degree of harmonization of national economic policies, in order to abolish the discrimination resulting from disparities between these policies, making them as similar as possible;
- and full economic integration: a uniform monetary, fiscal, social and countercyclical policy is adopted, as well as powers delegated to a supranational authority to design and apply these policies. The decisions of that authority must be followed by all member states.