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

Question

Quizplus · Accepted Answer

In a customs union, the member countries agree to treat trade with all nonmember nations in a similar manner by establishing a common external tariff. This means that all imports into the customs union from outside are subject to the same duties and trade restrictions, regardless of which member country they enter through. In contrast, a free trade area does not have a common external tariff and allows member countries to set their own trade policies with nonmember nations.

The Main Difference Between a Free Trade Area and a Customs