Free International Trade

Free Trade: Definitions

The following are important definitions for understanding free trade:

• Open Economy: An economy that engages in international trade through importing and exporting goods and services.
• Trading Bloc: A group of countries that allow free trade among themselves, eliminating tariffs and trade barriers.
• Free Trade Area: An agreement where countries reduce or eliminate tariffs and barriers on trade between each other, allowing goods to move freely.
• Customs Union: An agreement where countries trade freely among themselves and adopt a common external tariff on imports from non-member countries.
• Common Market: A step towards economic integration where member countries remove trade barriers, harmonise economic policies, and allow free movement of goods, services, capital, and labour.

The European Union is an example of a single market and a customs union. Member States can trade freely with each other without any restrictions.