The main difference between a free-trade area and a customs union is that the members of a customs union ________.
A) agree to treat trade with all nonmember nations in a similar manner
B) agree to the free movement of all factors of production
C) harmonize their tax, monetary, and fiscal policies and create a common currency
D) accept a common stance on economic and political policies regarding nonmember nations

Question

Quizplus · Accepted Answer

In a free-trade area, members agree to eliminate tariffs and trade barriers on goods traded among themselves, but each member retains its own policies on trade with nonmember countries. In a customs union, members agree not only to eliminate tariffs and trade barriers among themselves but also to adopt a common trade policy with nonmember countries. This means that the members of a customs union agree to treat trade with all nonmember nations in a similar manner.

The Main Difference Between a Free-Trade Area and a Customs