- Trading bloc
- A trading bloc is a regional agreement between pairs or groups of countries to reduce tariffs, import quotas and non-tariff barriers among themselves.
- WTO
- The WTO, or World Trade Organization, is the main international body through which nations negotiate their trade rules, though it cannot impose its decisions.
Stages of economic integration
Can you name the four stages of economic integration?
Each stage keeps everything the one before it has and adds one more thing members share.
A free trade area is an agreement in which members allow each other's imports without tariffs or quotas, while each sets its own tariffs on outsiders.
Can you think of an example?
If the UK and a partner form a free trade area, a British car enters the partner's market tariff-free, but each country still sets its own tariff on cars from China.
A customs union is a free trade area whose members also charge one common external tariff on imports from outside the union.
Can you think of an example?
A Chinese bicycle entering the EU pays the same EU tariff whether it lands in the Netherlands or Italy. Once inside, it can move to any member with no further tariff.
A common market is a customs union that also removes barriers to the movement of labour and capital between its members.
Can you think of an example?
In the EU single market a Polish plumber can take a job in Germany without a work permit, and a German firm can invest in a factory in Spain with no controls on moving the money.
An economic and monetary union is a common market whose members also coordinate monetary and fiscal policy, often sharing one currency.
Can you think of an example?
The countries of the euro area share one currency, the European Central Bank sets one interest rate for all of them, and their governments have agreed common rules limiting budget deficits and debt.