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Free Trade Area
A group of countries committed to removing all barriers to the free flow of goods and services between each other, but are able to pursue independent external protectionist trade policies against non member countries.
USMCA
United States-Mexico-Canada Agreement aimed at the free trade in goods apart from agricultural goods. There is no free movement of labour and no common external tariffs.
UK-EU Trade and Cooperation Agreement / TCA
Free trade area setting out preferential tariff arrangements in the trade of goods between the UK and the EU alongside services and digital trade and judicial co-operation. Provisions underpinned by ensuring a level playing field with regards to subsidies and food standards and rights respect.
Comprehensive and Progressive Agreement for Trans-Pacific Partner Nations / CPTPP
Free Trade Agreement between 11 nations in the Asia-Pacific Union, includes the UK which joined in 2023.
Customs Union
Eliminates trade barriers between member countries and adopts a common external trade policy.
Mercosur
Pact among Argentina, Brazil, Paraguay, and Uruguay to establish a customs union.
Single Market
A market where almost all trade barriers between members have been removed, a common external policy has been established and common laws, regulations or policies aim to make the free movement of goods and services and the factors of production between countries as easy as the movement within member countries.
ASEAN / Association of South Eastern Nations
Free trade area which has developed towards a single market, consisting of South China Sea and Pacific nations. The single market has focused on common standards and rules for electronics, automotives but also services such as tourism.
European Union / EU
A common market created in Europe, consisting of 27 member states, among countries to lower tariffs between each other, establish a common external policy and create efficient trade between the countries and common policies such as on agriculture and fishery and common institutions such as the European Parliament and Council.
Monetary Union
A single market which shares a common currency and a common central bank which determines monetary policy.
Trade Creation
Trade created due to regional economic integration and removal of tariffs, occurs when high-cost domestic producers are replaced by low-cost foreign producers in a free trade area. This enables specialisation according to comparative advantage.
Trade diversion
Occurs when higher cost suppliers within the free trade area replace lower cost external suppliers upon economic integration. As economic integration beyond an FTA sees common external policies implemented, tariffs not previously applied to otherwise low cost competition before integration causes a rise in domestic prices, preventing specialisation according to comparative advantage.
Trade Friction
The resistance to trade created by leaving a single market where traders are less reluctant to trade outside the single market, causing a rise in inflation and shortages of goods in some areas. A key example of this is the impact of Brexit on Welsh ports, where Irish traders chose to sail onto France rather than dock and trade at Welsh ports in order to remain in the single market.
Patterns of Trade
The composition of a country's imports and exports, the country's main trading partners and the volume of its trade with the rest of the world, which is likely to change over a period of time.
Gravity Theory
The belief that countries tend to trade with those who are in closest proximity
Fiscal Union
A group of countries where a central body has powers over government spending and borrowing. There are also uniform tax rates across the union
Multilateral Trade Agreement
Trade agreement between three or more countries or trading blocs to reduce or eliminate trade and protectionist barriers between themselves, essentially entering into a trade bloc or an even bigger trade bloc.
Preferential Trade Agreement
An agreement between two or more countries to lower trade barriers between them on particular products and enter a trade bloc, resulting in an easier access to the markets of other members for selected products, compared with the access of countries that are not members.
Bilateral Trade Agreement
Any trade agreement involving two trading partners.
