Countries within a trade bloc will be able to export goods to other participating members more competitively due to the removal of trade barriers as per the terms of the bloc. For instance, in the same example of the CAP, the terms of the CAP has led to participating countries experiencing higher export demand such as Denmark which since the inception of the CAP has experienced a 24.2% increase in the size of its agricultural market. However, it cannot be deduced that lower growth will manifest in every country around the world as a result of the increase in trading blocs as those who are participants are likely to experience higher growth.

These individual leakages will manifest in lower global aggregate demand (AD-AD1) and thus create lower global growth (Y-Y1). Therefore, there will be reduced global demand for non-EU country exports as they can no longer compete to sell their goods within the EU thus making their export volume and revenue fall thereby creating leakages from the individual circular flows of income in these countries around the world. Such actions would make the demand for imports from EU consumers for agricultural goods outside the EU to fall as they are now comparatively more expensive. Under the CAP all members of the EU set an extortionate import tariff of 18% of the value of the good, on all agricultural products that are being imported from outside the EU. This is evident in arguably the most influential trading bloc in the modern world, the EU in which exists the common agricultural policy. The creation of trading blocs such as a customs union, contain clauses upon which participants will impose import tariffs and other trade barriers on non-member states or countries. One effect of the growth of trading blocs on the global economy is lower global, economic growth. However there is also breadth to acknowledge the positive effects of trading blocs, namely, the effect of increased trade creation. They are often detrimental to global free trade and can therefore create lower economic growth and rising unemployment on a global scale.

The effect of the growth of trading blocs on the global economy is varied. Trading blocs may also consist of the implementation of trade barriers to the expense of non-participants. Assess the effects of the growth of Trading Blocs on the global economy (20)Ī trading bloc is created within an agreement between states, regions or countries to reduce barriers to trade between members of the agreement.

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