Trade Blocks Trade Creation

1
Trade BlocksTrade Creation Trade Diversion

• Econ 303, International Economics
• Carlos A. Benito

2
Types of Economic Blocs
Political Union
Economic Union
Common Market
Custom Union
Free Trade Area
3
Economic Block Typology
4
Trade diversion dominates
P
With trade bloc
Xrwtariff
6
X partner
5.5
X rw
5
M
10
15
20
Q
Trade creation
Trade diversion
5
Trade creation dominates
P
With trade bloc
Xrwtariff
6
X partner
5.1
X rw
5
M
10
19
20
Q imports
Trade creation
Trade diversion
6
Trade blocks and larger markets
P
With trade bloc
Xrwtariff
6
X partner(1)
5.1
X partner(2)
X rw
5
M
10
19
20
Q imports
7
Trade blocks and larger markets
P
With trade bloc
Xrwtariff
6
X partner(1)
5.1
X rw
5
M
10
19
20
Q imports