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ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business

A group of countries agrees to remove tariffs on trade between its members, but each member keeps its own separate tariffs on imports from non-member countries. Which type of trading bloc is this?

This is a free trade area. Members remove tariffs on trade among themselves but each keeps its own tariffs on non-members. A customs union differs because it adds a common external tariff applied by all members to imports from outside the bloc.

  1. AFree trade areaCorrect
  2. BCustoms union
  3. CCommon market
  4. DEconomic union

Explanation

A free trade area removes internal barriers while each member keeps its own external tariffs. A customs union would also adopt a common external tariff, which is not the case here. Common markets and economic unions go further still.

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