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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 countries. 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. |