If the United States and Canada implement a regional trading agreement that results in the two countries eliminating trade barriers between themselves while maintaining separate trade barriers against nonmember countries, they have formed a
A) common market.
B) customs union.
C) free trade area.
D) economic union.

Question

Quizplus · Accepted Answer

A free trade area is a group of countries that have agreed to eliminate tariffs, quotas, and preferences on goods and services traded among themselves, while maintaining their own external trade barriers against nonmembers. This description matches the scenario presented in the question, where the United States and Canada form a regional trading agreement that reduces trade barriers between themselves but maintains barriers against other countries. A common market involves not only the elimination of trade barriers but also the free movement of factors of production (e.g. labor, capital) across borders. A customs union involves the elimination of trade barriers between member countries and the adoption of common external trade barriers against other countries. An economic union is similar to a common market but with a higher degree of coordination and integration of economic policies among member countries.

If the United States and Canada Implement a Regional Trading