This is a hierarchy determined by the removal of restrictions to the free flow of goods, services,
and factors of production between member countries:
A free trade area
A customs union
A common market
An economic union
A political union
free trade area:
it eliminates all barriers to trade goods and services among member countries,
but members determine their own trade policies for non-members.
the European Free Trade Association (between Norway, Iceland, Liechtenstein, and
the North American Free Trade Agreement (between the US, Canada, and Mexico- now
superseded by USMCA)
the Closer Economic Relations CER (between Australia and New Zealand)
Member countries shave common policies among the members but have different policies
for the non-members.
it eliminates trade barriers between member countries and adopts a common
external trade policy:
The Andean Community (between Bolivia, Columbia, Ecuador, and Peru) is an example of a
Gulf Cooperation Council (between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the
has no barriers to trade between member countries, a common external
trade policy, and the free movement of the factors of production:
MERCOSUR (between Brazil, Argentina, Paraguay, Uruguay, and provisionally since 2006,
Venezuela) is aiming for common market status.
has the free flow of products and factors of production between members, a
common external trade policy, a common currency, harmonised tax rates, and a common
monetary and fiscal policy:
The European Union (EU) is an imperfect economic union.
involves a central political apparatus that coordinates the economic, social, and
foreign policy of member states:
The EU is headed toward at least partial political union, and the United States is an
example of an even closer political union:
-The United States of Europe