Country X and Country Y reach an agreement to boost bilateral trade. They agree to remove all barriers to trade of goods and services. They, however, are free to determine their own trade policies regarding nonmembers. Which level of economic integration is this an example of?

Question

BlackTom AI · Accepted Answer

The scenario describes two countries agreeing to eliminate barriers to trade for goods and services between themselves, while each country retains the right to set its own trade policy toward nonmembers. This pattern matches a free trade area, where member countries remove tariffs and restrictions among themselves but maintain independent external policies.

Option by option:
- a customs union: This would require not only removal of internal barriers but also a common external tariff and a shared trade policy with nonmembers. The described arrangement does not mention a common external tariff, so this is not a customs union.
- a common market: Beyond removing internal barriers, a common market enables free movement of factors of production (labor, capital) and often requires more harmonization of policies. The given text only mentions goods and services and no labor/capital mobility or policy harmonization, so this is not a common market.
- an economic union: An economic union involves deep integration, including a unified monetary policy, fiscal coordination, and possibly political institutions. The description does not indicate such level of integration, so this option is not accurate.
- a free trade area: This option correctly captures the essence of the scenario—trade barriers among the member countries are removed while each country keeps the freedom to conduct its own trade policy with nonmembers. This aligns with the standard definition of a free trade area.

Country X and Country Y reach an agreement to boost bilateral trade. They agree to remove all barriers to trade of goods and services. They, however, are free to determine their own trade policies regarding nonmembers. Which level of economic integration is this an example of?

View Explanation

Log in for full answers

Similar Questions

What are the two key economic or political impediments or disadvantages of greater economic integration among countries?

Why is the European Union considered an imperfect economic union?

_______ has no barriers to trade between member countries, includes a collective external trade policy, and allows factors of production to move freely between members.

Why might existing EU members support enlargement even if they anticipate increased competition in product and labour markets?

Empirical evidence on Gross Domestic Product (GDP) effects of SM accession suggests:

Country X and Country Y reach an agreement to boost bilateral trade. They agree to remove all barriers to the trade of goods and services. They, however, are free to determine their own trade policies with regard to nonmembers. Which level of economic integration is this an example of?

Which of the following is a reason the European Union is considered an imperfect economic union?

Which level of economic integration is limited to the elimination of trade barriers between member countries and the adoption of a common external trade policy?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler