Which of the following is a potential downside of trading blocs?

• A. Inefficiency (protect inefficient members)
• B. Retaliation
• C. Common tariff
• D. Increased consumer choice within member countries

Answer: (C)

Trading blocs often set a common external tariff for goods coming from non-members. This can be a downside because it creates a uniform barrier to outside imports, which can raise prices for consumers within member countries and limit the range of goods available. While blocs can boost trade among members, the common tariff reduces external competition and can lead to less efficient production across the bloc as well as higher costs for those buying imports from outside. Other effects, like increased consumer choice inside the bloc, are typically seen as benefits rather than downsides, and while retaliation is a risk, the direct impact of a common external tariff on prices and welfare is the clearest downside.