Theory question 108
International Economic Organisations(a) State two features each of: (i) free trade area; (ii) common market.
(b) Outline two advantages and two disadvantages of a common market.
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(a)(i) Free trade area: removal of tariffs and quotas among members; each member keeps its own external tariffs against non-members; rules of origin.
(ii) Common market: free trade among members; common external tariff; free movement of factors of production (labour and capital) among members.
(b) Advantages (any two): wider market and economies of scale; free movement of labour and capital; increased trade and specialisation; more competition and efficiency; stronger bargaining power.
Disadvantages (any two): loss of customs revenue; unequal sharing of benefits; loss of some national sovereignty over policy; weaker industries may collapse under competition; trade diversion from cheaper outside suppliers.
A common market goes beyond a customs union by freeing movement of factors.