The post-WWII period was a time of rapid economic development, as many new trading partners entered the global market. Import competition came largely from a relatively small number of countries, with the majority of imports originating in the United States, Japan, and western Europe.
During the 1980s, growth in other regional trade agreements began, including the formation of bilateral trade agreements between the United States and most Asian countries and the creation of regional agreements between most of the Western and Eastern European countries. These bilateral and regional agreements facilitated regional trade by reducing the barriers to trade between these regions.
Overall, regional trade agreements can be a relatively quick and easy way for firms to import and export goods. As a result, they can help make it easier for firms to invest in the economy, making the nation more competitive. Regional agreements also provide a way for developing nations to compete for imports, thus improving the chances for an improvement in the standard of living for the majority of citizens of these nations.
Regional trade agreements are especially important when firms do not rely upon shipping containers to move their goods. Rather, these companies rely on long-term contracts with national trucking and shipping companies. The term long-term contracts refers to the fact that trucking firms typically agree to use shipments to transport goods at set times and dates for an agreed period of time.
Regional trade agreements are also important because they help facilitate regional specialisation. Many firms that make goods in one region are not always the most competitive in the broader global market. As a result, they may trade directly with a handful of firms in other regions. In most cases, businesses that trade with other regions are not able to compete directly with those firms that operate exclusively within a single region. Regional trade agreements can provide an incentive for firms to import from other regions and thus diversify their products and sources of raw materials.
Due to the importance of regional trade agreements, it is important that trade agreements reach the most firms in the economies in which they are formed. This is generally the case for regional trade agreements that are intended to support growth.
The Importance of Regional Trade Bloc Agreements
The importance of regional trade agreements comes primarily from their ability to increase growth. As a result, the expansion of regional trade agreements typically involves both the governments of the exporting and importing nations reaching agreements. Thus, the nations that export and import the most need to agree to provide incentives for the other nations to agree to allow free trade within their regions.
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