CFA Level I · CFA Level I Exam · International Trade
A group of countries removes tariffs on trade among themselves but each member keeps its own separate tariff schedule on imports from non-members. This arrangement is best described as a:
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 would require a common external tariff, and a common market would also allow free movement of factors of production.
- Afree trade areaCorrect
- Bcustoms union
- Ccommon market
Explanation
A free trade area eliminates barriers among members while each member keeps its own external trade policy. A customs union adds a common external tariff, and a common market adds free movement of labor and capital.
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