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Preferential Trading,
Free Trade Area,
Custom union
Common market
Economic Union,
Economic & Monetary Union
Complete Economic Integration
Economic Union
Economic Union is a term applied to a trading bloc that has both a common market
between members, and a common trade policy towards non-members, but where
members are free to pursue independent macro-economic policies.
Monetary Union
Monetary union is the first major step towards macro-economic integration, and enables
economies to converge even more closely. Monetary union involves scrapping
individual currencies, and adopting a single, shared currency, such as the Euro for the
Euro-16 countries, and the East Caribbean Dollar for 11 islands in the East Caribbean.
This means that there is a common exchange rate, a common monetary, including
interest rates and the regulation of the quantity of money, and a single central bank,
such as the European Central Bank or the East Caribbean Central Bank.
Fiscal Union
A fiscal union is an agreement to harmonize tax rates, to establish common levels of
public sector spending and borrowing, and jointly agree national budget deficits or
surpluses. The majority of EU states agreed a compact in early 2012, which is a less
binding version of a full fiscal union.
Tariffs
The most common characteristic of free trade is the lack of state tariffs on
imports. A tariff is a tax placed on incoming goods by the host country. it
makes foreign goods, therefore, artificially more expensive than domestically
produced goods, giving the latter a competitive edge.
Markets
States
Free trade takes the state out of the economic equation. States are
disempowered to make any kind of economic decision concerning the global
economy. Consumers and companies are then empowered to make these
decisions based on their preferences rather than state policy.
Contracts
Economics
Globalism
CUSTOM UNION
Agreement between two or more (usually neighboring) countries to remove trade
barriers, and reduce or eliminate customs duty on mutual trade. A customs union (unlike
a free trade area) generally imposes a common external-tariff (CTF) on imports from
non-member countries and (unlike a common market) generally does not
allow free movement of capital and labor among member countries.
Market Economics
Economies of Scale
Shared Currency
Problems
UNION
An economic union typically will maintain free trade in goods and services, set common
external tariffs among members, allow the free mobility of capital and labor, and will also
relegate some fiscal spending responsibilities to a supra-national agency. The European
Union's Common Agriculture Policy (CAP) is an example of a type of fiscal coordination
indicative of an economic union.
MONETARY
UNION
POLITICAL UNION
Represents the potentially most advanced form of integration with a common government
The level of Economic integration as opposed to its complexity is illustrated in the graph below: