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๐Ÿ’ธย Unit 7

ย ย โ€ขย ย โฑ๏ธ2 min read

7.6 Trade and the World Economy

Harrison Burnside

harrison burnside

โฑ๏ธ April 1, 2020


Neoliberal Policies

Neoliberal policies, including free trade agreements, have created new organizations, spatial connections, and trade relationships, such as the EU, World Trade Organization (WTO), Mercosur, and OPEC, that foster greater globalization. These are in Unit 4 in more detail as supranational organizations.

Comparative advantage means that a country can produce a product at less cost and with more efficiency than other countries. Complementary advantage means that the two countries have opposing comparative advantages and engage in trade with each other.


The US, Mexico, and Canada used to be in a free-trade relationship called NAFTA (North American Free Trade Agreement) that had a full removal of all tariffs (taxes on goods that cross international borders). These tariffs created more trade (free trade for that matter) between these 3 countries especially in booming border towns along the borders of each country. Free Trade also allowed for maquiladoras to be built in Mexico that sadly exploited poor Mexican migrant workers. These maquiladoras did, on the other hand, allow for cheaper and quicker manufacturing of products to be sold in the NAFTA zone.

Image Courtesy of Wikipedia

The European Union

The economies of the EU have been interdependent (reliant on each other to succeed) because they are all members of the Eurozone and use the same currency. The countries go through prosperity together when their economies flourish and when they have trade surpluses. They also go through rough times together like in Greece where the countryโ€™s economy has started to fail and default on all of their foreign investment.

Since Greece is struggling and they are an EU member country, the other EU member countries like France and Germany must support them. Since Greece was struggling and the UK was in a flourishing economy, the British wanted to โ€œBrexitโ€ or leave the EU since they were only losing money supporting Greece.

Image Courtesy of Wikipedia

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