Theory question 110
International Economic OrganisationsSection B (answer four questions only from this section)
(a) What is economic integration?
(b) Outline the characteristics of a customs union.
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(a) Economic integration is the coming together of two or more countries to remove trade barriers and co-operate on economic matters for mutual benefit, e.g. free trade area, customs union, common market, economic union.
(b) Customs union: member countries remove tariffs and other barriers on trade among themselves.
Members adopt a common external tariff on imports from non-members.
Goods move freely within the union.
Members agree on how to share customs revenue.
There is usually a common administrative body.
Factors of production do not necessarily move freely (that is a common market).
The common external tariff is what separates a customs union from a free trade area.