1.

0 Introduction

A regional trading block is a group of countries within a geographical region that protect themselves
from imports from non-members. In general terms, regional trade blocks are associations of nations at a
governmental level to promote trade within the block and defend its members against global
competition. These markets form economies of scale. The competition as a trade blocs bring
manufacturers from various economies, resulting in greater competition. The competition promotes
efficiency within firms. Trade Effects in terms of overheads are reduced as most of tariffs are removed
thus the cost of imports goes down.

Trading blocs have become increasingly influential for world trade. They have advantages in enabling
free trade between geographically close countries. This can lead to lower prices, increased export
potential, higher growth, economies of scale and greater competition. One of the advantage of having a
regional economic bloc is the influx of Foreign Direct Investment (FDI). Foreign Direct Investment surges
in Trade Regional Blocs (TRB) and it benefits the economies of participating nations. In addition it can
achieve economies of scale. The hypothesis of economies of scales depicts that the larger markets
created results in lower costs due to mass manufacturing of products locally.

The Association of Southeast Asian Nations (ASEAN) is a regional grouping that promotes economic,
political, and security cooperation among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand, and Vietnam. This paper explores the regional trade bloc
in the world with attention to the formation and activities of ASEAN.