I was reading up on the history of the European Union recently. I would like to seek clarification on the following terms:
Free Trade Area
Common Market
Common external tariffs
Preferential tariffs
What are the differences between these concepts? Also, why did Britain really choose to create a Free Trade Area instead of joining the Common Market, apart from the consideration that her application would probably meet French opposition and her wish to stay out of the Continent?
Thanks!
xejkh
“Free Trade Area” means there are no tariffs or quota restrictions on trade from one FTA member country to another. The member nations, however, keep the right to set the external tariffs (the tariffs on imports from a non-FTA country) themselves, and the nations can fix monetary etc. policies on their own.
“Common Market” goes further. The countries form an economic area as if they were one single nation (economically, not politically). The flow of goods, services and money between the nations is fully liberalized, and there are no obstacles that prevent a company from one CM member to deal in another one.
“Common external tariffs” means the tariffs on goods imported from non-member nations are standardized (it doesn not necessarily mean the revenues go into one common coffer, just the rates are the same throughout all member nations). In this case the Free Trade Area turned into another, more deeply integrated, stage, the tariff union. The common market is the next stage.