A free trade area and a customs union differ in the way in which member nations treat imports from nonmember nations.

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In a free trade area, member nations remove barriers to trade among themselves but each member retains its own external tariff policies towards nonmembers. In a customs union, member nations not only remove barriers to trade among themselves but also adopt a common external tariff policy towards nonmember nations.

A Free Trade Area and a Customs Union Differ in the Way