ACCA Applied Skills · Corporate and Business Law (Global) · International trade, international legal regulation and conflict of laws
Two neighbouring countries agree to remove tariffs on goods traded between them, but each keeps its own separate tariffs on imports from non-member countries. Which type of trade arrangement does this describe?
This is a free trade area. Members abolish tariffs on trade among themselves but each keeps its own tariffs against non-members. A customs union would also need a common external tariff, which these countries have not adopted.
- AA customs union
- BA free trade areaCorrect
- CA common market
- DAn economic union
Explanation
In a free trade area members remove tariffs between themselves but each keeps its own external tariffs. A customs union would require a common external tariff, which is absent here. Common markets and economic unions go further still.
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