Free Trade

Trade Blocs

A group of countries that agree to join together to increase trade amongst themselves.

Stage 1: Preferential Trading Area (PTA)

A type of trading block where certain types of products from participating countries receive a reduced tariff rate.

Example: France and the countries that they colonized.

Stage 2: Free Trade Area

Economic integration where countries seek to remove all barriers to trade among themselves but where each country determines its own barriers against nonmembers.

Example: North American Free Trade Agreement (NAFTA)

Stage 3: Customs Union

A group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy.

Example: Mercosur (South America)

Stage 4: Common Market

A customs union that also has a free movement of goods, services, capital and labor as well as common regulations on products.

Example: European Union (EU)

Stage 5: Monetary Union

A common market with a common currency.

Example: Eurozone

Stage 6: Full Economic Integration

A Monetary Union with a common fiscal policy

Example: USA before they united...

Globalization

the process in which people, ideas and goods spread throughout the world, spurring more interaction and integration between the world's cultures, governments and economies.