Question

State shortly the different levels of economic integration with examples.

Answer 1

The different levels of economic integration are as follows:

--Free Trade Area: In this type of economic integration all barriers to the trade of the products and services among member nations will be removed. Each country, however, is allowed is allowed on determining its own policies on trade with regard to non-members. An example of free trade area is the European Free Trade Association, involving Iceland, Norway, and Switzerland.

-- Customs Union: A customs union eliminates the barriers on trade among the member nations and determines a common external policy. The example of a customs union is Andean Pact that involves Columbia, Bolivia, Peru and Ecuador.

-- Economic Union: An economic union eliminates the barriers on trade among the member nations and a common external policy, and allows a free move of the factors of production among the member nations. Also a full economic union adopts a common currency, harmonization on the rates of taxation in member countries, and a common fiscal policy and monetary policy. In the world today we have no true economic unions

-- Common Market: In this type of economic integration the trade barriers are eliminated among the member nations and determine a common external policy. Also the factors of production are permitted to freely move among the member nations. European Union is an example of a common market

-- Political Union: It is a central political apparatus that makes a co-ordination on the social, economic, and foreign policy of the member states. Consequently all of the components of an economic union will be applicable to the political coupling of the member nations involved. The example of a political union is United States because previously separate "states" combined into one nation