Trading Blocs and Regional Trade Agreements (RTAs) | tutor2u Economics
Study notes

Trading Blocs and Regional Trade Agreements (RTAs)

  • Levels: A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

In recent years there has been a flurry of bi-lateral trade deals between countries and the emergence of regional trading blocs. For example, the European Union now has over 30 separate international trade agreements including those with countries such as Colombia and South Korea.

Some of these deals are free-trade agreements that involve a reduction in tariff and non-tariff import controls to liberalise trade in goods and services between countries.

The most sophisticated RTAs include rules on flows of investment, co-ordination of competition policies, agreements on environmental policies and the free movement of labour.

Examples of Regional Trade Agreements (RTAs):

The number of RTAs has risen from around 70 in 1990 to over 300 now – this both reflects and reinforces a switch towards greater intra-regional trade most notably between many of the world's fast-growing emerging market economies. No regional trade agreement is the same!

The World Trade Organisation permits trade blocs, provided that they result in lower protection against outside countries than existed before the creation of the trade bloc

  • North American Free Trade Agreement (1994) – USA, Canada and Mexico
  • Mercosur – Brazil, Argentina, Uruguay, Paraguay and Venezuela
  • Association of Southeast Asian Nations Free Trade Area
  • Common Market of Eastern and Southern Africa (COMESA) includes Zambia, Rwanda, Swaziland, Ethiopia and Kenya
  • Trans-Pacific Partnership – an agreement negotiated between Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. (The USA under Trump has decided to leave TPP)

General notes on regional trade blocs

Trade blocs are usually groups of countries in specific regions that manage and promote trade activities. Trade blocs lead to trade liberalisation (the freeing of trade from protectionist measures) and trade creation between members, since they are treated favourably in comparison to non-members. However, trade diversion away from non-members is also likely to occur, especially if protectionist measures are imposed against non-members. Trade diversion contradicts the aims of the WTO and distorts comparative advantage

Subscribe to email updates from tutor2u Economics

Join 1000s of fellow Economics teachers and students all getting the tutor2u Economics team's latest resources and support delivered fresh in their inbox every morning.

You can also follow @tutor2uEconomics on Twitter, subscribe to our YouTube channel, or join our popular Facebook Groups.

Teaching Vacancies


Advertise your vacancies with tutor2u

Much cheaper & more effective than TES or the Guardian. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences.

Find our more ›

Advertise your teaching jobs with tutor2u

A New Home for tutor2u Resources

We've just flicked the switch on moving all our digital resources to instant digital download - via our new subject stores.

For every subject you can now access each digital resource as soon as it is ordered. This will always be the latest edition of each resource too (and we'll update you automatically if there is an upgraded version to use).

Simply add the required resources to your cart, checkout using the usual options and your resources will be available to access immediately via your mytutor2u account.