Definition
- Trading bloc
- A trading bloc is a regional agreement between pairs or groups of countries to reduce tariffs, import quotas and non-tariff barriers among themselves.
- Not to be confused with: WTO
- The WTO, or World Trade Organization, is the main international body through which nations negotiate their trade rules and settle trade disputes.
Example
Can you think of a country that shares the EU's external tariff without joining its single market?
Turkey has been in a customs union with the EU for decades. A car made in Turkey enters Germany with no tariff, and Turkey charges the EU's common external tariff on cars from outside. But Turkey is not in the single market: a Turkish worker needs a permit to take a job in Germany, so the arrangement stops at a customs union.
Test yourself
What is the difference between trading bloc and WTO?
A trading bloc is a regional agreement among some countries; the WTO is the worldwide body for trade rules.