ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
Several countries agree to remove tariffs among themselves and also adopt a common external tariff on goods imported from non-member countries. Which type of trading bloc does this describe?
This describes a customs union. Members remove tariffs between themselves and apply a common external tariff to non-members. A free trade area lacks the common external tariff, while a common market also allows free movement of factors of production such as labour and capital.
- AA free trade area
- BA customs unionCorrect
- CA common market
- DAn economic union
Explanation
A free trade area removes internal tariffs only, with each member keeping its own external tariffs. Adding a common external tariff creates a customs union. A common market goes further by allowing free movement of labour and capital, which is not described here.
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