![]() When they do that, they create a so-called customs union which is what the European Union is, it's a customs union. Now a third step that countries may take is to coordinate their external trade policy relative to countries that are not members of the bloc. And, as you know, tangible goods, merchandise can move freely from Mexico to the United States, from the United States to Canada, and vice versa. For example, the North American Free Trade Agreement is a free trade area among Canada, the US, and Mexico. And when they do that, they create a free trade area. Now, another thing that countries may do is to remove all internal trade barriers for all types of tangible goods, all types of merchandise. ![]() This is what the Europeans did back in the 1950s when France and Germany and Italy agreed to have a preferential trade area for coal and for steel. And when countries reach such an agreement, they create a so-called preferential trade area. At the very least, a bloc must agree to reduce tariffs on certain types of goods. That is to say, a group of countries that agree to one or more of the following things. The other approach is the one that is going to focus our attention here which is blocs. So in other words, this is one approach to free trade in the world. And then in red you see a handful of countries that have no membership at all in the World Trade Organization. One is a yellow category, which is 20 countries in the world that are observers members, so they're not quite members. And then there's two other categories of members here, or countries on the map. And the European Union, with 28 member countries, is also a member, but it just votes and negotiates as one bloc inside of the World Trade Organization. And you can see here on the map that most countries in the world, those in green, are members of this World Trade Organization. At the present time, the GATT, the General Agreement on Tariff and Trades, it's called the World Trade Organization. And that it was very difficult to deal simultaneously in negotiations that included more than 120 or 140 different countries. So in other words, what became readily apparent is that multilateralism had its limits. And the round, which once again started at the turn of the 21st century, has not yet been concluded. That was a long time ago, and more than 140 countries have been part to these negotiations. And, in fact, the most recent attempt at facilitating trade, especially in services around the world, was initiated as you can see on the table in the year 2001. Now what you can also tell from the information in the table is that each round of negotiations among an increasingly larger number of countries took longer and longer. And they committed to lowering barriers to trade, and, of course as a result of this, global trade expanded very, very quickly. As you can see on this table, over the years in the 1940s, and the 50s, and the 60s, and the 70s, more and more countries became members of these worldwide organization. And that sought to lower tariffs, that is to say taxes on trade, so as to promote more economic exchange around the world. It was launched in 1947, with an agreement that originally had no more than 25 countries. And it aimed at bringing to the negotiation table as many countries in the world as possible. The United States proposed an organization called the General Agreement on Tariffs and Trade. Which essentially involved not picking and choosing members of a trade bloc, but rather trying to agree on basic trade and investment matters with all countries in the world. First of all, the phenomenon of trade blocs has to be compared with the so-called multilateralism, which was the policy pioneered or sponsored by the United States after World War II. ![]() And what's the future of trade blocs because, obviously, over the last few years they have become extremely controversial, both from an economic and a political point of view. And then share with you some thoughts as to what are the effects that those trade blocs have on the global economy. So, I would like to share with you a definition, and some information about trade blocs first. That's associations of countries that decide to adopt some common policies regarding global economic exchange relative to other countries that are not members of the bloc. And that's the phenomenon of trade blocs. ![]() Let's now turn to another very important phenomenon in the global economy right now, which is also producing quite a bit of instability.
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