Scenario: Moonland Union
Twenty-six nations, A through Z countries of Moonland region, have decided to cooperate with one another to eliminate trade barriers among them and create Moonland Union. They are not sure, however, to what extent they want to cooperate.
-If these 26 nations remove all barriers to trade among themselves but erect a common trade policy against nonmembers, they would create a(n) ________.

Question

Quizplus · Accepted Answer

If the 26 nations remove all barriers to trade among themselves but erect a common trade policy against nonmembers, they would create a customs union. In a customs union, there is free trade among the member countries, but they have a common external tariff against nonmember countries. This means that they would have a unified trade policy with regard to non-members, which is the case in the given scenario. A free-trade area only eliminates tariffs among member countries, while an economic union involves the integration of economic policies beyond just trade. A common market is similar to an economic union, but also involves free movement of factors of production like labor and capital.

Scenario: Moonland Union Twenty-Six Nations, a Through Z Countries of Moonland Region, Have