Levels of economic integration - definition and examples
|Would you please explain the levels economic integrations ? Can you provide an examples for each economic integration stage ?|
|From economic perspective the international economic integration is based on reducing or removing of trade barriers between the participating countries. It may be also explained as unification of trade policies between more nations.|
There are more types or levels of economic integration with the following differences:
Preferential trade area - also known as preferential trade agreement, is a trading bloc, that gives preferential access to specific products from the participating members. It is done by reducing of the tariffs or quotas, but not by abolishing them. PTA represents the lowest stage of economic integration.
Free trade area - also known as free trade agreement, is a trading bloc, where tariffs and non-tariff trade barriers between member countries are abolished. FTA has no common trade policy toward non-member countries. Examples of free trade area are AfCFTA, EFTA or NAFTA.
Customs union - is a free trade area with common trade policy toward non-member countries. Members have the common external tariff.
Common market - is a free trade area with common external trade policy. It allows the free movement of goods, services and also resources like capital and labour within member countries. Each national market has its own regulations such as product standards etc.
Economic union - sometimes referred as single market, is a free trade area with common external trade policy and free movement of goods, services, capital and labour. Members have common economic policies. Example of economic union is European Union or Eurasian Economic Union.
Monetary union - is agreement between more countries to create a single currency area. It is accompanied by setting up a single monetary policy and establishing a single central bank. Example of monetary union is Eurozone, where member countries use Euro as a single official currency.
Political union - is probably the most advanced form of political-economic integration, where states have a common government. Political union is internationally recognized as a single political entity.