Many countries have organised themselves into groups that have worked to in various ways to protect and enhance their domestic economies, their social status and level of development. Examples include the G8, the EU, NAFTA and the WTO.
The introduction of a social and economic grouping is often to create a single market, such as was the case with the EU and NAFTA. The European Union is an economic and political union of 27 member states which are located in Europe – its roots are with the EEC which was formed in 1957. The European Union was fully established when the Maastricht Treaty came into force on 1st November 1993. The original objective of the EU was to create such single market, so that there was the free circulation of goods, capital, people and services within it. The integration of the economies was largely thanks to the introduction of the Euro in 1999. It helps to build a single market by easing trade and travel by eliminating issues of exchange rate. The single market is eased in to existence by the creation of a customs union with a common external tariff on all goods entering the market. The free trade that takes place within this bloc can often increase competition creating more businesses and reasonable prices, or they can offer subsidies to assist in the development of a particular sector, such as in the Common Agricultural Policy. NAFTA is a further example that is solely a trading bloc, between Canada, the USA and Mexico. Trade between NAFTAS members tripled between 1993 and 2007 ($306 billion to $930 billion).
On the other hand, by establishing a free market, it can be criticized for restricting the rest of the world. With the EU seeing the benefits of the grouping there is greater polarization with the rest of the world and these people are getting further and further behind. Furthermore, with tariff cuts in place within the EU, they are less likely to globalise in to other countries due to the breaks that the EU offers them. Yet it is arguable that this might manipulate other countries, especially NICs in to forming competitive markets, offering matching deals to the EU – in which case the EU would be catalyst to globalisation. The Common Agricultural Policy in the EU is probably the best example of the negative economic impact that it poses. It works to secure the economic stability of farmers. In promoting this development, it also taxes agricultural imports and subsidises agricultural purchases. It can therefore undercut farmers in the developing world, who arguably need the economic benefits more urgently. Even within the market, people can lose. For instance as some US firms have moved to Mexico under NAFTA, American jobs have been lost and sine Canadian companies have closed as of competition from lower-cost US firms.
Some groups act to equalize the level of development within the grouping. The EU has allocated funds to support the underdeveloped regions of the EU. They have provided funds to support their countries to conform to the standards of the EU. Poland for instance has benefitted from investment to shift to a greater market orientation from a state-controlled economy, infrastructure funds to improve the road system and particularly its links to EU neighbours, such as Germany. CAP helps develop its agricultural sector and the free movement of its people in to other countries for work and training.
Groupings may also work in the benefit of the environment. The EU has taken numerous steps in order to protect the environment. Its environmental policy addresses issues such as acid rain, the thinning of the ozone layer, air quality, noise pollution, and waste and water pollution. They also reach group aims, for example, in 2007 they agreed to use 20% renewable energy and to cut carbon emissions by 2020 compared to the levels in 1990. Whether this is the best allocation of environmental funding is questionable due to criticism from respectable scientists like Bjorn Lomborg and David Bellamy, but regardless, attempts to mitigate climate change are being made. There attempts further include forestry expansion have also been successful, increasing 10% in the west and 15% in the east. During 1990 and 2005 Europe’s forest have soaked up 126 million tonnes of carbon dioxide, equivalent to 11% of EU emissions from human activities. Not only this, but it also creates an animal habitat and protects existing forests from the threat of logging.
Economic groupings often work in common interest for the benefit of the world as a whole. The European Development Fund directs aid from the EU to developing countries. In 2008-13 it is expected to allocate over 10 billion Euros of aid. The G8 similarly is working towards global energy efficiency, and brought in the International Partnership for Energy Efficiency Cooperation along with India and China. Furthermore the UN Millennium Development Goals are a global action plan to achieve eight anti-poverty goals by their 2015 target date, including eradicating poverty and hunger and reducing child mortality rates. The World Bank also offers loans to developing countries to assist them in their progression up the development continuum, although some may argue that this isn’t wholly beneficial as they are indebted to the development world which restricts their relative ability to develop. Debt in Sub Saharan Africa is a particular problem, as a percentage of its GDP it accounts for 70% yet its aid and exports combined only reach 34% – it therefore has no means to repay these debts and therefore faces somewhat of a development lock.
On a social level the grouping can also be beneficial. One of the main objectives for the grouping of nations was to promote peace; within the EU this was especially prominent, after a period of conflict in the Second World War. It then acts as a body that can resolve conflicts between member countries. There is no evidence that the Union is the only reason behind this positive development, developments in the general improvement in welfare, closer human bonds, more travel and economic interaction are also accountable for the prevention of a Third World War and whether this is solely thanks to the EU is debatable. Furthermore it allows for the free movement of people, such as without a passport in the EU. People can therefore seek work abroad easier. Infrastructure has also been improved between nations because of groupings, for example the EU is working to improve cross-boarder infrastructure. For instance the Trans-European Networks project included the Channel Tunnel and will cover 75,000 km of new roads and 78,000km of new railways.
Some people are concerned that these groupings cause a lack of sovereignty however Many fear that such groupings lead to a decentralised Government, viewed in some as a super power or a super state – or to some even foreshadowing of global governance. In the United Kingdom there has already been a loss of financial controls to the European Central Bank and the necessity to adopt central legislation and regulations, which could potentially damage us economically. It also reduces the amount of choice that a citizen has; it’s harder for them to migrate to somewhere where they can join a different society if they dislike the one that they live in. It can also lead to cultural homogenisation, which is viewed as sad by many, with places almost losing their identity. Certain economic sectors have been damaged by these groupings. The UKs economy has suffered by sharing its resources, such as its traditional fishing grounds which it has had to allow Spain access to. They can be a drain on our economy in other ways, if one country needs aid, we have to bail them out – such as in Portugal’s recent bailout in April 2011.
To conclude, it seems that groupings of nation do serve a role, especially within the global economy, but to me it seems that it goes beyond free trade. When 80% of trade occurs within G8 countries I have to question for whether free markets such as the EU and NAFTA are justifiable. Yet I fear if the trade restrictions were lifted that the lesser developed countries would be able to trade on the level of G8 countries that we would simply be overproducing and markets worldwide would crash. Perhaps it is a necessary evil in the eyes of the developed. Regardless of this they have been successful in keeping the peace, especially in Europe and they have been able to assist in levels of development in member countries. Such as NAFTA boosting trade from $306 billion to $930 billion. They are also work on common objectives, such as the UN Millennium Development Goals on which progress has been made, or the EU tackling environmental issues. They seem to have their positives and negatives and whether they truly serve a vital role in the world today is a matter of both opinion and perspective.