The difference between a free trade area and a customs union is that

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In a free trade area, members eliminate tariffs on each other's goods, but retain independent tariffs on goods entering their market from nonmembers. In contrast, a customs union involves not only the elimination of tariffs on members' goods but also the creation of a common external tariff on goods entering the union from nonmembers. Option B is incorrect because a common tariff is imposed on nonmember goods, not on members' goods. Options C and E are also incorrect because free trade areas do not eliminate tariffs on goods entering their markets from nonmembers. Finally, option D is incorrect because customs unions eliminate tariffs on both members' and nonmembers' goods.

The Difference Between a Free Trade Area and a Customs