TECHNICAL UNIVERSITY OF MOZAMBIQUE

ECONOMIC AND SOCIAL SCIENCES FACULTY

Course: Marketing Management and Public Relations

TOPIC: COMMON MARKET

Neidy Laurinda Chissano

Maputo, 23rd August of 2023

CONCEPT OF COMMON MARKET
The common market is a formal agreement, where participating countries adopt the same
tariffs in international trade. In addition, the intention is for there to be a free movement of
goods, capital and persons. Therefore, it is not considered only as a mere trade agreement.
In fact, it is seen as a kind of economic bloc.

In this way, the intention is that the economy of the countries involved can be strengthened
by encouraging free trade in goods and services and the movement of capital and people
across borders. An example of this type of agreement is the Southern Common Market
(Mercosur).

ORIGIN OF COMMON MARKET

The first economic bloc was the Benelux, formed by Belgium, the Netherlands and
Luxembourg in 1943. In 1951 it was the turn of France and West Germany to create the
European Coal and Steel Community. After a while, Italy and the countries of the Benelux
bloc also entered this common market.

Subsequently, in 1957 France, West Germany, Italy, Belgium, Luxembourg and the
Netherlands created the European Economic Community (EEC), which became known as
the European Common Market.

The EEC came into force in 1958 and over time evolved into the European Union.
Currently there are several economic blocs around the world, which have different rules.
The most famous are:
 Mercosur: Formed by Brazil, Argentina, Uruguay and Paraguay.
 NAFTA: Canada, Mexico and the United States.
 European Union: It is one of the largest blocs in the world and has 27 countries.
 SADC: Made up of 14 Southern African countries.
 Apec: It is the result of the union of 21 countries of the Asian continent.

HOW A COMMON MARKET IS FORMED

For a common market to be formed, countries must meet three requirements: (i) Dilution of
barriers: The first requirement is the reduction or elimination of barriers that hinder the
export and import of products and services between the countries that will be part of the
agreement.; (ii) Reciprocity: All member countries must adopt the same existing
 restrictions, such as tariffs; (iii) Free movement of capital and people: Finally, for a
common market to be formed, countries must have free movement of labor and capital.

If these three conditions are not met, then there is no common market.

TYPES OF ECONOMIC BLOCS

In general, the intention of the economic blocs is that the countries involved can be
strengthened. However, the characteristics of each economic bloc depend on the objectives
of the countries. These agreements can be simpler or more complex.

1. Free trade zone: In this type of economic bloc, the intention of the countries
involved is that they can trade their products and take advantage of the tariff
exemption between them.

2. Customs union: This type of economic bloc goes beyond the free trade zone and
enables the creation of the Common External Tariff. The intention is that this tariff
will be paid by countries outside the bloc, which wish to trade with the member
countries.

3. Common market: The common market is a type of economic bloc, but it is more
comprehensive than the blocks of free trade zone and customs union. Thus, in
addition to enabling trade between the bloc's participants and the creation of the
Common External Tariff, the common market also enables the free movement of
services and people.

4. Political and Monetary Union: Finally, we have political and monetary union,
which has only the European Union as its representative. This type of block is the
most complex of all, since it involves the adoption of a common central bank and
the use of a single currency.

ADVANTAGES AND RISKS

The first advantage of creating a common market is the strengthening and growth of the
economies of the countries involved.

In addition, with the free movement of people, the demand for goods and services in member
countries increases. Finally, we also have the advantage that competition between countries
becomes more fierce, which benefits consumers.
On the other hand, the common market may bring some risks to the member countries. One
of the main risks is the alliance between countries with very different socioeconomic
situations, which can result in the suffering of the most fragile country.

For example, companies in fragile countries may suffer from the arrival of imported products
with competitive prices.

Another risk is the displacement of people from one country to another, in search of better
living conditions. With excessive migration, the country that offered better living conditions
may not be able to serve everyone and the quality of public services, such as health and
education, lose quality.