Scribd
Upload
2 views

Learning Module 7_Monetary and Fiscal Policy

The document discusses various types of regional trading blocs, including Free Trade Areas (FTA), customs unions, common markets, and economic unions, highlighting their levels of integration and examples such as USMCA and MERCOSUR. It explains that FTAs eliminate barriers among members while maintaining individual policies against non-members, while customs unions add a common trade policy. The document also notes that economic unions require coordination of economic policies and can lead to monetary unions, as seen with the euro in the European Union.

Uploaded by

Jehan Alshahrani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
2 views

Learning Module 7_Monetary and Fiscal Policy

The document discusses various types of regional trading blocs, including Free Trade Areas (FTA), customs unions, common markets, and economic unions, highlighting their levels of integration and examples such as USMCA and MERCOSUR. It explains that FTAs eliminate barriers among members while maintaining individual policies against non-members, while customs unions add a common trade policy. The document also notes that economic unions require coordination of economic policies and can lead to monetary unions, as seen with the euro in the European Union.

Uploaded by

Jehan Alshahrani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

© CFA Institute. For candidate use only. Not for distribution.

206 Learning Module 6 International Trade

Types Of Trading Blocs


There are many different types of regional trading blocs, depending on the level of
integration that takes place. Free trade areas (FTA) are one of the most prevalent
forms of regional integration in which all barriers to the flow of goods and services
among members have been eliminated. However, each country maintains its own
polices against non-members. The USMCA among the United States, Canada, and
Mexico is an example of an FTA. A customs union extends the FTA by not only
allowing free movement of goods and services among members but also by creating
a common trade policy against non-members. In 1947, Belgium, the Netherlands,
and Luxemburg (Benelux) formed a customs union that became part of the European
Community in 1958.
The common market is the next level of economic integration that incorporates
all aspects of the customs union and extends it by allowing free movement of factors
of production among members. The Southern Cone Common Market (MERCOSUR)
of Argentina, Brazil, Paraguay, and Uruguay is an example of a common market. An
economic union requires an even greater degree of integration. It incorporates all
aspects of a common market and in addition requires common economic institutions
and coordination of economic policies among members. The European Community
became the European Union in 1993. If the members of the economic union decide
to adopt a common currency, then it is also a monetary union. For example, with
the adoption of the euro, 19 EU member countries also formed a monetary union.

EXAMPLE 3

Trading Blocs

1. Chile and Australia have a free trade with each other but have separate trade
barriers on imports from other countries. Chile and Australia are a part of
a(n):
A. FTA.
B. economic union.
C. customs union.
D. common market.
Solution:
A is correct. Chile and Australia do not a have customs union because they
do not have a common trade policy with respect to other trade partners (C
is incorrect). A common market or an economic union entail even more
integration (B and D are incorrect).

2. An RTA that removes all tariffs on imports from member countries, and
has common external tariffs against all non-members, but does not advance
further in deepening economic integration is called a(n):
A. FTA.
B. economic union.
C. customs union.

You might also like