Thus the formation of an association in which the European countries can work together will lead to less friction and greater chances of world peace. The main reason for this is that the long-standing rivalry between the various European powers has led to two world wars which have greatly disrupted world trade. Trading blocs such as the Common Market have as a long-term aim some form of political unity.
Free trade is impossible on a world scale but within a trading bloc it is possible and industrial and agricultural specialization can take place, with benefits in the cheapness and efficiency of production. As internal trade has grown so the external trade of the Common Market has increased substantially, though not as fast as internal trade.įree trade policies allow for more specialization of production in the areas best suited to the making of particular products. This allows for larger-scale and more efficient production which in turn allows members to produce more goods more competitively for export outside the trading bloc. When trading restrictions are reduced and goods can pass easily from one country to another, manufacturers within the bloc can reach a much larger market than any single country could provide. Looser trading associations do not enjoy this advantage to the same extent, but some, such as LAFTA (Latin American Free Trade Association), have been formed partly to increase the bargaining power of raw-material producers in their dealings with the industrial consumers. The Common Market, regarded as a single unit, has a productive capacity and a population almost as great as that of the U.S.A., and as economic and political integration progress its importance as a world economic and political power will increase.
By forming a close association which can be regarded as a single unit by other countries and trading organizations, the member nations of trading blocs gain greater economic strength and greater bargaining power in world markets.