Joining a bloc opens markets and gives members a stronger voice.
Why countries join
Larger markets
Selling freely to every member: economies of scale.
More jobs
In a common market workers can move to where the jobs are.
Bargaining power
The EU negotiates trade deals for all its members as one.
Stability
Countries that trade closely rarely go to war.
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Membership also has costs.
What members give up
Sovereignty
Rules are set jointly. "Take back control" was a slogan of the 2016 UK vote to leave the EU.
Weaker world talks
Countries focus on their blocs instead of WTO agreements.
Losers inside
Firms that cannot compete with partners' firms shrink or close.
The points to remember
- Write it like this: "Members gain larger markets and economies of scale, but lose some sovereignty."
- At Higher Level add trade creation and trade diversion.
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At Higher Level, the efficiency test: does the bloc make goods come from a cheaper source or a costlier one?
Trade creation and trade diversion (HL)
| Before joining | After joining | Result | |
|---|---|---|---|
| Trade creation | Cars made at home cost €12,000 | Imported from a partner at €11,000 | Cheaper source: efficiency up |
| Trade diversion | Japanese car €10,000 + €2,000 tariff = €12,000; partner's €11,000 + €2,200 = €13,200 | Partner's car now €11,000, no tariff | Costlier source than Japan: efficiency down |
The points to remember
- Trade creation: a cheaper partner replaces home production.
- Trade diversion: a costlier partner replaces a cheaper outsider.
Paper 1 asked this in November 2023, as part (b) for 15 marks; also May 2022 and November 2022.
Using real-world examples, discuss the advantages and disadvantages of membership of a trading bloc.
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How the 15 marks are given
| Marks | What your answer needs |
|---|---|
| 13–15 | Theory fully explained, terms right all the way through, balanced evaluation, real examples fully developed to support the argument |
| 10–12 | Theory explained, terms mostly right, evaluation mostly balanced, real examples developed |
| 7–9 | Theory partly explained, some evaluation but one-sided, examples partly developed |
| 4–6 | Theory only described, evaluation superficial, examples only named |
| 1–3 | Theory stated but not relevant, no evaluation |