Economic Integration between Countries

There are many different types of economic integration between countries:-

Free trade areas

A free trade area is a form of integration where countries simply agree to remove tariff
and non-tariff barriers between them to promote free trade in goods and services.

e.g. The North American Free Trade Area (NAFTA).

Customs Unions

A customs union comprises two (or more) countries which agree to:-

Abolish tariffs and quotas between member nations to encourage free movement
of goods and services.

Adopt a common external tariff (CET) on imports from non-members

Preferential tariff rates apply to preferential or free-trade agreements which the Custom
Union enters into with third countries or groupings of third countries.

Single Market

Single markets are a deeper form of integration than a customs union. E.g. The EU

It involves the free movement of goods and services, capital and labour and the concept
is broadened to encompass economic policy harmonisation

Deeper economic integration requires some degree of political integration

The aim is to gain benefits from
trade creation and trade diversion.