In: Economics
Giving an example of each, what are the differences between a Free Trade Area, Customs Union, Common Market and Economic Union? Explain clearly. be as clear and specific as possible
(1) Free Trade Area -
Free Trade Area or FTA is generally considered that group of countries where there are not tariff, import quotas and non tariff barriers and this group allow to free movement of goods and services among group countries.
These countries have their own trade policy towards non member countries.
Examples -
The examples of free trade area are -
EFTA - (European Free Trade Association) having Norway, Iceland, Switzerland and Liechtenstein.
NAFTA - (North American Free Trade Agreement) having USA, Mexico, Canada,
SAFTA - (South Asia Free Trade Area) comprising India, Afghanistan, Bhutan, Bangladesh, Maldives, Nepal, Pakistan and Sri Lanka.
(2) Customs Union -
This is group of countries in which there is no imposition of tariff on import and agree to impose common external tariffs on goods and services on outside custom Union countries.
But the difference between Free Trade Association and Custom Union that in Custom Union participating countries set a common custom tariff i.e. A Single External Tariffs against outsider countries but in FTA there is not like that.
Examples -
EU - European Union
Custom and Monetary Union
Economic and Monetary Union
(3) Common Market -
Common Market refers to those market where there is free movement of resource such as labour, capital etc. among its member countries.
They are generally eliminate iternal trade barriers and follow common external trade barriers.
Examples -
Southern Cone Market
East African Common Market
West African Common Market
(4) Economic Union -
Economic Union means an agreement between countries or nations to allow free mobilization of goods and services, capital, labour or any other resources.
This is a kind of open market in which there is no barriers among nation countries. And these countries are increasing economic efficiency.
The best example of Economic Union is EU i.e. European Union.