Question

What is the difference between a free trade association, a common market, and an economic union?

Short answer

They are all various types of economic integration.

Step-by-step solution

Step1. Introduction

With the rapid globalization across the globe, there are many various types of arrangements and agreements in terms of economic integrations which have come up. These include, Free Trade Agreements, Common Markets, and Economic Unions.

Step2. Explanation

The primary differences between the 3 economic integration forms are explained as under:

In a Free Trade Agreement/Association, an agreement is signed under which the participants let the imports of the member countries without any trade restrictions of tariffs and quotas.

Through a common market, along with the features of free trade of a Free Trade Agreement, participants also have a common external trade policy.

An economic union is an extension to the common market. Along with the characteristics of common market, the trade is further integrated by coordinating the monetary and fiscal policies of the member nations.

It can hence be concluded, that the integration of the member nations of such economic integration arrangement increases, i.e. they are more strongly integrated as we move from Free Trade Associations to Common Market to Economic Unions.