This research will begin with the presentation of advantages and disadvantages of trading block. A trade block represents a group of countries who make an agreement among themselves that they will not trade with the countries except the member countries. It is an economic integration has some significant economic advantages. Some important advantages are the followings.
Being a member of trading bloc, a country will get the benefit of elimination of transaction cost between the member countries.
In a trading bloc, there is single market single currency across the union like Euro in all the countries in EU which make sense for the trade in the same medium of transaction.
Trade block is an effective inflation controller.
Apart from having some beneficial areas, trade block has some painful difficulties. Some disadvantages are the followings.
If a country can produce or manufacture a good at a comparatively at a low cost as well as can sell at low price than the regional producer of a the neighbour country under trade block, then the retailer of that neighbour country cannot import that good from there at lower price so that it can sell in lower price in domestic market and can increase the demand.
The researcher believes a loss of sovereignty in the countries of EMU is there because of countries not having individual central bank run the domestic government of a country.
Some economies argued that cost advantages and trade benefit are grossly overestimate which does not reflects the real picture and recent Euro crisis is the result of long term overestimation of these. ...Show more