These are the world’s biggest trading blocs

Rising levels of world trade have been a powerful means for countries to promote economic growth, development and poverty reduction, according to the International Monetary Fund (IMF).

“Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. The evidence on this is clear,” the IMF says. “No country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world.”

Indeed, there has been 400% growth in the value of global trade since the Global Agreement on Tariffs and Trade removed numerous trade barriers and quotas in 1947.

However, trade has been dented by the COVID-19 pandemic and its economic aftershocks.

“There is a widening chasm between the prospects of advanced economies and developing and emerging economies that had previously counted on globalization-enabled growth,” says the overview for the World Economic Forum’s 2023 Growth Summit.

Taking place on 2-3 May 2023 in Geneva, the Summit will explore ways of making economic growth inclusive and sustainable for all, including looking at how we can foster regional trade in a fragmenting world.

Trading blocs have historically been one key way of promoting regional relations and economic prosperity. Here are six of the world’s biggest trading blocs.

The 15-nation Regional and Comprehensive Economic Partnership is likely to deliver significant benefits for Cambodia, Vietnam and other low-middle-income countries in East Asia, the World Bank says. RCEP entered into force in January 2022 and also includes China, Australia, Japan, Malaysia, New Zealand and Singapore.

The agreement covers 30% of both global GDP and population, and the SwissRe Institute projects that it will account for 35% of global GDP by 2030 as the economies of its member nations grow. It describes the deal as “the most important new multilateral trade deal since the formation of the European Union single market”.

USMCA is the successor to the North American Free Trade Agreement (NAFTA), which launched in 1994 linking the US, Canada and Mexico. The Trump administration sought to change NAFTA, arguing that US jobs were being exported to lower-wage economies.

The US says the USMCA modernizes trade arrangements. It builds on NAFTA by adding new chapters covering digital trade, fighting corruption and regulatory standards. The countries involved in the USMCA account for 17% of global GDP.

The CPTPP launched in 2018 with Japan, Malaysia, Vietnam, Australia, Singapore, Brunei Darussalam, New Zealand, Canada, Mexico, Peru and Chile as members. The UK joined them in 2023 as part of a move to strengthen trading links after Brexit, and together the member nations account for 15% of global GDP.

The CPTPP started life as the Trans-Pacific Partnership and the United States was in talks to join. This would have made it the world’s biggest free trade area, covering 40% of global GDP. However, the US withdrew in 2017.

The European single market embraces all 27 members of the European Union (EU). Iceland, Liechtenstein and Norway are members of the European Economic Area with full access to the single market, which was launched in 1993. Switzerland has partial access.

EU nations account for 14% of global trade and have a combined GDP of €14.5 trillion ($16 trillion), making the EU the world’s third-largest economy after China and the United States.

Launched in 2020 to create a continent-wide market embracing 55 countries with 1.3 billion people, the AfCFTA’s founders say it could increase trade within the continent by 52.3% by eliminating import duties.

The free trade area is expected to expand Africa’s economy to $29 trillion by 2050. It also has the potential to raise incomes by 9% by 2035 and lift 50 million people out of extreme poverty, the World Bank says.

Mercosur was set up in 1991 by Argentina, Brazil, Paraguay and Uruguay. Venezuela joined in 2012 but was suspended in 2016 over its human rights record.

Suriname, Guyana, Colombia, Ecuador, Peru, Chile and Bolivia all have associate status. In 2021, the combined GDP of the Mercosur nations was almost $2.2 trillion, according to World Bank figures, making it the world’s fifth-largest economy.