Do trading blocs help or hinder global trade?

Question

do trading blocs help or hinder global trade? do they adversely affect local economies?

Answer 1

It depends...it's better than nothing, and they have really picked up since the Doha round has stalled.  So they do help global trade when there are no other options available.  But since they do provide a way to further international trade on the terms of individual countries and without the multilateral WTO, countries may be less willing to negotiate, further dooming any hope of multilateral negotiation, since countries can get what they want (lower tariffs from their trading partners) without giving up their negotiating tools (higher tariffs on certain countries or subsidies).  Also, trading blocs create the problem of trade diversion, where goods are produced not where they are made most efficiently, but in whichever country happens to be on better terms with major importing nations, such as the US.

Local economies can be adversely affected, or they can benefit, depending on whether they produce an export product or a product that is made more cheaply in other countries.  This is usually the same case as would happen under pure international trade, except in the case of trade diversion.