Its particularity is that it includes the creation of a unified external tariff against non-members. The customs union refers to the elimination of tariff barriers between member countries.
However in this case, the agreements apply to all goods that are exchanged between them.
ADVANTAGES OF TRADING BLOCS FREE
Free trade areaįree trade areas, like the preferential trade areas, are those where countries in a region agree to eliminate or reduce barriers to trade. The objective is to facilitate trade between member countries but also serves as a first step towards the creation of a common market. The former are established between three or more countries and the latter, less frequent, are established only between two countries.įor example, the Economic Cooperation Organization (ECO) is a preferential trade zone established between Iran Pakistan and Turkey. There are multilateral and bilateral preferential trade zones. However, each country maintains its own tariffs against non-member countries. The areas of preferential trade are those where a group of countries agree to reduce or eliminate tariffs for trade in some products. In some cases, trade is only facilitated, but in others, important joint decisions are made and even currency is shared. These are classified according to the degree of openness of tariffs and the depth of established agreements. There are different types of economic blocks. Thanks to these types of blocs, it is possible to eliminate the economic barriers that exist between countries, allowing the growth of trade and greater circulation of labor and capital.
This is a phenomenon typical of Globalization.