3. Which structure represents a higher degree of economic integration – a free trade agreement or a customs union? Explain the difference between the two.
A free trade union is just an agreement between two nations that they will not charge any tariff for the traded goods between them, or they will reduce the tariff to a minimum agreed level. They still charge tariff from the rest of the world and can have different tariff rates.Like NAFTA is a free trade area.
A custom union is the trade block which have a free trade area + they charge a common external tariff from the rest of the world. EU is custom union.
Custom union is more economically integrates between the two.
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