Common Markets and Economic Unions

Abstract

The analysis of customs unions (CUs) needs drastic extension when applied to common markets (CMs) and economic unions (EUs). Firstly, the introduction of free factor mobility may enhance efficiency through a more rational reallocation of resources but may also result in depressed areas, therefore creating or aggravating regional problems and imbalances — see Mayes (1983a) and Robson (1985). Secondly, fiscal harmonisation may also improve efficiency by eliminating non-tariff trade barriers (NTBs) and distortions and by equalising their effective protective rates. Thirdly, the coordination of monetary and fiscal policies which is implied by monetary integration may ease unnecessarily severe imbalances hence resulting in the promotion of the right atmosphere for stability in the economies of the member nations.