The form of economic cooperation that calls for countries to eliminate all internal barriers to trade among themselves even while maintaining independent trade policies vis-à-vis third countries is known as a(n):
A)Economic union.
B)Customs union.
C)Free trade area.
D)Common market.
E)None of the above

Question

Quizplus · Accepted Answer

The form of economic cooperation described in the question is that of a free trade area, where member countries eliminate internal barriers to trade but maintain separate external trade policies. Economic union (A) involves not only free trade, but also the harmonization of economic policies, a common currency, and a central governing body. A customs union (B) also eliminates internal barriers to trade, but establishes a common external tariff for goods entering the union. A common market (D) adds the factor of free movement of factors of production, such as labor and capital, in addition to free trade.

The Form of Economic Cooperation That Calls for Countries to Eliminate