Economic Integration Answer Scheme

Explain all the levels of economic integration and explain briefly ;

These are 5 levels of economic integration.

1. Preferential trade arrangements

This is the phrase used at the World Trade Organization for unilaterally offered trade
preferences, such as lower or zero tariffs, to a trading partner. Among these are the Generalized
System of Preferences programmes, which allow wealthy nations to give advantageous tariffs to
imports from poorer nations. They also include non-reciprocal preferential arrangements made
possible by a General Council waiver, which exempts the member from the Most Favored
Nation principle.

2. Free trade area

A free trade agreement is an agreement between two or more countries to lower import and
export restrictions. With little to no restrictions from the government impeding their interchange,
goods and services can be bought and sold across international borders under a free trade
policy.
Free trade between neighbours, municipalities, and states is essentially the same as free trade
on an international scale. However, it enables companies in each nation to concentrate on
creating and marketing commodities that make the best use of local resources while importing
goods that are scarce or unavailable domestically. The combination of domestic production and
international trade enables economies to grow more quickly while better satisfying consumer
demands.

3. Customs union

A customs union is the third stage of economic integration. It allows no tariffs or other barriers
on trade among members (as in a free trade area), and in addition it harmonizes trade policies
(such as the setting of common tariff rates) toward the rest of the world. The purposes for
establishing a customs union normally include increasing economic efficiency and establishing
closer political and cultural ties between the member countries. The most famous example is the
European Union (EU),or European Common Market, formed in 1957 by West Germany, France,
Italy, Belgium, the Netherlands, and Luxembourg.
 4. Common market

A common market is a fourth form of economic integration where all participating nations
impose uniform external tariffs and eliminate trade barriers like tariffs and quotas on goods,
services and factors of production for instance labour and capital, between the countries.
Therefore all goods and services can flow freely under this trading bloc but uniform trade policy
is imposed to non-members. Besides that, factors of productuon can only move freely in
common market stage. If otherwise, economic integration is still in custom union stage. The
most well-known example of a common market is the European Common Market, which aims to
facilitate the free flow of goods, capital, services, and labour within the European Union.

5. Economic union
One of the various types of trade blocs is an economic union. It implies a pact between nations
that permits unrestricted trade in goods, services, and labor. With the purpose of boosting the
economies of all the member nations, the union aims to remove trade obstacles within its
membership. To ensure that member nations coordinate their policies, taxation, and government
expenditure connected to the agreement, the union needs the integration of monetary and fiscal
policies. They also share a single currency with fixed exchange rates.