Reference no: EM132243358

Free Trade this is the lowest level, and in this type, tariffs ( which are taxes that are imposed on imported goods) between members are reduced to a large extent, and many are abolished. Each member country keeps its tariffs when it comes to none member countries. The overall goal of a free trade agreement is to have economies of scale and comparative advantages, which helps promote economic efficiency.

Custom Union- Member countries Sets common external tariffs, implying that the same tariffs are applied to none member countries; a common trade regime is also achieved. Custom unions are very beneficial in leveling the competitive playing field it also addresses, re-exports (using special tariffs in one country to enter another country).

Common Market- at this level, there is free movement of capital and services within member countries, which helps to expand scale economies and achieve a comparative advantage. However, each countries national market keeps its regulations and standards.

Economic Union- All member tariffs are abolished for trade between member nations, which creates a single uniform market. Workers are also allowed free movement, enabling them to work in any member country.   Monetary and fiscal policies are harmonized between members, which implies political integration. Another step at this level is a monetary union where one currency is used, as the Euro in the European Union.

Political Union- It is the most advanced form of integration. This can be found within nation states. It is a sophisticated form of integration where there is a common government with reduced member country’s sovereignty.