ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
A manufacturer in a country outside a trading bloc builds a factory inside the bloc. Which is the most likely main reason for this decision?
The most likely reason is to avoid the bloc's common external tariff. By producing inside the bloc, the firm sells within the single market without paying tariffs on imports, although it must still meet the bloc's product regulations.
- ATo avoid the bloc's common external tariff on goods imported from outsideCorrect
- BTo benefit from the bloc's currency exchange rate fixing against non-members
- CTo remove the need to comply with the bloc's product regulations
Explanation
Producing inside the bloc gives access to the single market without paying the external tariff on imports. Product standards still apply to goods sold within the bloc, and trading blocs do not generally fix exchange rates for outsiders' benefit.
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