Question

Discuss the difference between a Free Trade Area, a Customs Union, a Common Market and an Economic and Monetary Union. Provide at least one real-world example for each.

Answer 1

SOLUTION :-

• Free trade area is when countries agree to remove all tariffs against each other. Example NAFTA
• Customs union involves free trade agreement as well as common tariff against non-member nations. Example MERCOSUR
• Economic union involves free movement of factors of production (labour and capital) along with the features of Customs Union. Example: African Union
• Monetary union has all the features of an economic union. However, it has addtional feature of common currency. Example, European Union's Economic and Monetary Union.