Three countries enter into an agreement to remove all tariffs and barriers for trade between them.They decide on a common trade policy with regard to nonmembers.Faced with political backlash,the countries stop short of allowing mobility of factors of production such as labor and capital.Which of the following best describes this arrangement?
A)Political union
B)Customs union
C)Common market
D)Economic union

Question

Quizplus · Accepted Answer

A customs union is a group of countries committed to (1)removing all barriers to the free flow of goods and services between each other and (2)the pursuit of a common external trade policy.Free flow of products and factors of production is possible in an economic union as well as a common market.

Three Countries Enter into an Agreement to Remove All Tariffs