economic integration: levels of integration

preferential trading areas

countries give preferential access to certain products of certain countries (lowest level of integration)

free trade areas

countries agree to trade freely amongst themselves and are free to trade with other countries any way they wish (second lowest level of integration)

customs union

countries agree to trade freely amongst themselves and they adopt common external barriers against any country trying to import into the customs union (middle level of integration)

common markets

countries agree to trade freely amongst themselves and they adopt common external barriers against any country trying to import into the common market while also having common policies on product regulations, and free movement of goods, services, capital, and labor (second highest level of integration)

economic and monetary union

countries agree to trade freely amongst themselves and they adopt common external barriers against any country trying to import into the common market while also having common policies on product regulations, and free movement of goods, services, capital, and labor and also a common currency and common central bank (highest level of integration)