Types of Economic Agreements Between Countries

What is the most advanced form of economic integration?

In an economic union, member countries agree to a greater degree of harmonization in which of the following?

Which analogy is used to describe an economic union in the text?

What feature distinguishes an economic union from a common market?

Which organization is provided as the prime example of an economic union in the text?

How is an economic union like a giant store according to the text?

What is the main difference between a Preferential Trade Agreement (PTA) and a Free Trade Agreement (FTA)?

What distinguishes a Customs Union from a Free Trade Agreement (FTA)?

What sets a Common Market apart from a Customs Union?

Which characteristic is unique to a Free Trade Agreement (FTA) compared to other economic agreements?

What makes a Preferential Trade Agreement (PTA) different from other agreements?

Which aspect is shared by both Customs Unions and Common Markets?

Types of Economic Integrations

Economic Union is the most advanced form of economic integration, including harmonization in economic policies like taxation, monetary policy, and social programs.
European Union (EU) is the prime example of an economic union.

Analogies for Economic Integrations

Preferential Trade Agreement (PTA) is like a group of shops offering occasional discounts to each other's customers on specific items.
Free Trade Agreement (FTA) is like a shopping mall where all the shops remove barriers between them and allow customers to move freely.
Customs Union is like the mall agreeing on common closing hours and security measures for all the shops.
Common Market is like the mall allowing shop employees to freely move between stores.
Economic Union is like the mall becoming one giant store with a unified management system for pricing, staffing, and overall operations.

Preferential Trade Agreement (PTA)

Loosest form of economic agreement where member countries agree to give certain products from other member countries preferential treatment.
No common external trade policies, and restrictions might remain on many goods and services.

Free Trade Agreement (FTA)

Eliminates or reduces barriers to trade on a wider range of goods and services.
Typically includes eliminating tariffs and quotas.
Example: European Free Trade Association (EFTA).

Customs Union

Builds on an FTA, eliminating internal trade barriers and agreeing to a common external trade policy.
Sets the same tariffs and quotas for goods coming from non-member countries.
Example: Southern African Development Community (SADC).

Common Market

Takes things a step further than a customs union.
Allows for the free movement of factors of production like labor and capital between member countries.
Historical example: European Common Market (precursor to the EU).

Explore the differences between Preferential Trade Agreements (PTA) and Free Trade Agreements (FTA) in terms of integration levels and trade policies. Learn about preferential treatment, tariffs, quotas, and common external trade policies.