A trading bloc is a formal agreement between two or more regional countries that remove trade barriers between the countries in the agreement while keeping trade barriers for other countries.
A Letter of credit is an obligation of a bank, usually irrevocable, issued on behalf of their customer and promising to pay a sum of money to a beneficiary upon the happening of a certain event or events.
Comparative advantage is a situation in which a country may produce goods at a lower opportunity cost than another country, but not necessarily have an absolute advantage in producing that good.
Purchasing power parity (PPP) is a theory that says that in the long run (typically over several decades), the exchange rates between countries should even out so that goods essentially cost the same amount in both countries.
According to Adam Smith, who is regarded as the father of modern economics, countries should only produce goods in which they have an absolute advantage. An individual, business, or country is said to have an absolute advantage if it can produce a good at a lower cost than another individual, business, or country.
There are four types of trade barriers that can be implemented by countries. They are Voluntary Export Restraints, Regulatory Barriers, Anti-Dumping Duties, and Subsidies.