(i) free trade areas, where the member nations remove all trade impediments among themselves but retain their freedom with regard to the determination of their policies vis-à-vis the outside world (the non-participants) — for example, the European Free Trade Association (EFTA) and the Latin American Free Trade Area (LAFTA);
(ii) customs unions, which are very similar to free trade areas except that member nations must conduct and pursue common external commercial relations — for instance, they must adopt common external tariffs on imports from the non-participants as is the case in the European Community (EC); the EC is in this particular sense a customs union, but, as we shall presently see, it is more than that;
(iii) common markets, which are customs unions that also allow for free factor mobility across national member frontiers, i.e. capital, labour, enterprise should move unhindered between the participating countries — for example, the East African Community (EAC), the EC (but again it is more complex);
(iv) complete economic unions, which are common markets that ask for complete unification of monetary and fiscal policies, i.e. a central authority is introduced to exercise control over these matters so that existing member nations effectively become regions of one nation;
(v) complete political integration, where the participants become literally one nation, i.e. the central authority needed in (iv) not only controls monetary and fiscal policies but is also responsible to a central parliament with the sovereignty of a nation’s government.
KeywordsTurkey Malaysia Egypt Indonesia OECD
Unable to display preview. Download preview PDF.