Distinction Between A Free Trade Area, A Customs Union, A Monetary Union And Full Economic Union
Economics notes
Distinction Between A Free Trade Area, A Customs Union, A Monetary Union And Full Economic Union
➡️ Free Trade Area: A free trade area is an agreement between two or more countries to reduce or eliminate trade barriers, such as tariffs and quotas, on the majority of goods and services traded between them.
➡️ Customs Union: A customs union is an agreement between two or more countries to eliminate tariffs and other trade barriers on goods traded between them, and to establish a common external tariff on goods imported from outside the union.
➡️ Monetary Union: A monetary union is an agreement between two or more countries to adopt a common currency and monetary policy. This means that the countries in the union have a single currency and a single central bank that sets monetary policy for the entire union.
➡️ Full Economic Union: A full economic union is an agreement between two or more countries to integrate their economies, including the free movement of goods, services, capital, and labor. This type of union is the most comprehensive form of economic integration.
What is the difference between a free trade area and a customs union?
A free trade area is a group of countries that have agreed to eliminate tariffs and other trade barriers between them, but each country maintains its own trade policies with countries outside the group. A customs union, on the other hand, is a group of countries that have eliminated tariffs and other trade barriers between them and have adopted a common external trade policy with countries outside the group.
What is a monetary union?
A monetary union is a group of countries that have adopted a common currency and a common monetary policy. This means that they share a central bank and interest rates, and their currencies are interchangeable. The most well-known example of a monetary union is the Eurozone, which consists of 19 European Union countries that have adopted the euro as their currency.
What is a full economic union?
A full economic union is a group of countries that have not only eliminated trade barriers and adopted a common external trade policy, but also have harmonized their economic policies, including fiscal policy, monetary policy, and regulatory policy. This means that they share a common economic framework and institutions, and their economies are integrated to a high degree. The European Union is an example of a full economic union, although it is not yet fully integrated in all areas.