The paper “ The Role of European Trading Bloc" is an intriguing example of a term paper on macro & microeconomics. The European countries first came together in 1951 by establishing the European Coal and Steel Community and then by forming the European Economic Community (EEC) through the Rome Treaty in 1957 that established the right of free movement of goods, capital, services, and people between the member states. The Single European Act of 1986 emphasized further the issue of safety at work and introduced EEC actions on consumer protection and the environment.
The EEC was renamed and finally, the European Union (EU), with the monetary union and a single currency, was formed by the Maastricht Treaty in 1992 by providing the EC more powers as also the obligation that issues that can be resolved at the national level will not be dealt with at the Union level. The Treaty of Amsterdam replaced the Maastricht Treaty in 1997, Beside the three founding treaties, a series of agenda and policies have guided various policy issues in the European Union. In 2004, eight central and eastern European countries were incorporated into the European Union (Cucic, 2000).
The European Union has been the most successful trading bloc and the monetary union has been a huge success, with the Euro has become a stronger currency than the dollar, which has for long been the principal currency against which global trade has been conducted. In this paper, I will discuss the various aspects of the trading bloc in Europe that have made it successful while also highlighting some of the disadvantages of the arrangement. Preferential Trading Arrangement (PTA) in the European UnionPreferential Trading Arrangement (PTA) can be of many forms – customs union (CU), free trade zone, free trade agreements (FTA) and so on.
However, in terms of definition, PTA, FTA, and customs unions are not the same. While PTAs are agreements between two or more countries to impose lower tariff rates for goods traded between them than on those traded outside, an FTA is a PTA that does not impose any tariff for goods traded between them but do so for goods traded outside and a customs union is an FTA in which the member countries impose a common tariff rate for goods traded outside (Panagriya, 1999).
Thus, a PTA progresses to an FTA and then to a CU as the regional trading bloc develops. PTAs are aimed to bring about economic and social prosperity between member countries by hastening multilateral trade negotiations (Rosson et al, n.d). In practice, PTAs rarely eliminate trade barriers between member countries completely. For example, in the EU, competition policy restricts the flow of imports from member countries (Panagriya, 1999).
PTAs often is accompanied by other policies. The EU has harmonized product standards, introduced competition and social policies like health standards (which are essential for the free movement of people within the union) and monetary union. The European Economic Community (EEC), now the European Union (EU) has had the most successful customs union for decades. Beginning with the Common Agricultural Program (CAP), which is a variable levy system that limits trade of agricultural products between member states, the EU established the common market with the Single European Act in 1993 some or all tariff and non-tariff barriers for movement of goods, capital, labor and services between member countries (Panagriya, 1999).