4.1 International Economics

by Toby K.

Types of RTA

  1. Preferential trading areas (PTA): These are where tariff and other trade barriers are reduced on some but not all goods traded between member countries.

  2. Free trade areas (FTA): Two or more countries in a region agree to reduce or eliminate trade barriers on all goods coming from other members. Each member is able to impose its own tariffs and quotas on goods it imports from outside the trading bloc.

  3. Customs unions: Involves the removal of tariff barriers between members and the acceptance of a common external tariff against non-members. This means that members may negotiate as a single bloc with third parties such as other trading blocs or countries.

  4. Common markets: Members trade freely in all economic resources so barriers to trade in goods, services, capital and labour are removed. They impose a common external tariff on imported goods from outside the markets. For a common market to be successful there must also be a significant level of harmonisation of micro-economic policies, common rules regarding monopoly power and anti-competitive practices and the removal of custom posts. There may also be common policies affecting key industries such as the Common Agricultural Policy (CAP). The main goal of a common market is to establish a single market, the same way in which there is a single market within an individual economy.

  5. Monetary unions: Two or more countries with a single currency, with an exchange rate that is monitored and controlled by one central bank or several central banks with closely coordinated monetary policy. Some examples include the EU, the West African Economic and Monetary Union and the Economic and Monetary Community of Central Africa.


Toby K.


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