Strategies to reduce inequalities

Trade alliances

While all trade is between individual countries, some have grouped together to make it easier and cheaper to trade. Countries join together and create trade agreements or alliances, also known as trading blocs.

The most powerful trade alliances tend to be located in developed countries, eg the European Union (EU) and the North American Free Trade Agreement (NAFTA). However, there are trade alliances across the globe, eg Mercosur in South America and the West African Economic Union. These are also established trading alliances whose membership is made up of developing countries.

Advantages of trade alliances

Trade alliances encourage trade between member countries providing a much larger market to sell goods to and make larger profits. It also helps to safeguard the industries of member countries. This provides free trade between member countries, this means that there are no tariffs or quotas imposed on them.

This is good for member states as it means that the goods they are buying will be cheaper. It is though a disadvantage for non-members, as they will be charged taxes or a limit will be put on how much they can export to countries within the alliance.

Member governments also subsidise their own industries so that they can produce cheaper materials and goods. The removal of border controls, eg lengthy customs checks, means that it is easier and cheaper to import and export goods throughout different countries in Europe.

The EU provides a much larger workforce for industries so people can live and work in different member countries as they choose. Individual countries have more power, as they are part of a 'superpower' which has enormous influence on the world market.

Some countries which sell the same product form a selling alliance, for example the oil producing countries formed OPEC, Organisation of the Petroleum Exporting Countries.