Trade Areas – Hierarchical/Freedom of Movement Perspectives

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(1) The Introduction:

What are the hierarchical perspective and the freedom of the movement perspective as regards the concept of the trade area? What are the main examples of the international trade areas?

(2) The Exposition:

The Trade Area:

The term the ‘Trade Area' means any area or space where any kind of the trade activity takes place.

The trade area can variously be perceived as under:

•1.      The Hierarchical Perspective

•2.      The Freedom of the Movement Perspective

•1.      The Hierarchical Perspective:

•A.     The Local Trade Area: This is the trade area at the lowest level. It may include a village, city or district.

•B.     The Regional Trade Area: This is the trade area above the local trade area. It consists of a combination of several local trade areas.

•C.     The National Trade Area: This is the trade area above the regional trade area. It consists of a combination of several regional trade areas.

•D.    The International Trade Area: This is a trade area above the national trade area. It consists of a combination of several national trade areas.

•2.      The Freedom of the Movement Perspective:

•A.     The Free Trade Area: A trade area at any level characterized by the near-full and the free movement of the trade.

•B.     The Restrictive Trade Area: A trade area at any level characterized by the restrictive movement of the trade.

The Examples:

The International Trade Areas:

These are formed through the regional trade agreements amongst several countries. These represent a kind of the regional international economic integration where a group of countries removes the barriers to the international trade/competition on the regional scale and not on the global scale.

The following are the main international Trade Areas/Blocs:

(A) The Common Market for Eastern and South Africa (COMESA):

It was established in 1994 replacing a former preferential trade area operative since 1981. It had 20 members and a population of 385 million people in the year 2001. It is executing a Free Trade Area. It was to have the common external tariffs for the non-members by 2004 A.D. Its main aim is the promotion of the peace, the security and the economic prosperity of the members.

(B) The Association of South-East Asian Nations (ASEAN):

It was established in 1967 by 5 countries. It had 10 members with a population of 500 million in 2001. It had decided in 1992 to form the ASEAN Free Trade Area by 2004.

(C) The Regional International Trade Agreements/Areas in America:

Central American Common Market (CACM - 5 members), Caribbean Community (CARICOM - 13 members), Andean Pact (ANDEAN - 5 members), Mercado Commun Del Sur (MERCOSUR - 4 members), North American Free Trade Agreement (NAFTA - 3 members) were the regional international trade   agreements/areas in America in the year 2002. These were formed to increase the size of the local market which was too small and inefficient for the production.

(D)The Regional International Trade Agreements/Areas in the Europe:

European Union (EU - 15 members) established in 1993, European Free Trade Association (EFTA - 3 members) established in 1960 and Central European Free Trade Area (CEFTA - 7 members) established in 1993. The members of the EU have a common currency the Euro except the UK, Denmark and Sweden. The EU is the most powerful/successful economic integration scheme till now in the world.

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