Edited by William A. Kerr and James D. Gaisford
Chapter 10: Trade Agreements: Depth of Integration
Nicholas Perdikis Introduction This chapter describes the principal forms of Regional Trade Agreements (RTAs) and compares and contrasts their particular features. To illustrate these issues existing and past RTAs will be referred to and used as examples. While the main focus of this chapter will be the economic characteristics of RTAs, political causes and eﬀects will also be touched upon. This is inevitable as the formation of even the simplest form of RTA requires the agreement of sovereign entities – countries – and has consequences for diﬀerent sections of society or interest groups within those countries. A simple taxonomy of Regional Trade Agreements Economists identify four basic forms of RTA (World Bank, 2000). These range from the most simple – the free trade area (FTA), to the customs union (CU), the common market (CM) and on to the ﬁnal and deepest form, the economic union. This last form is often referred to as economic and political union signifying not only the economic aspects of the relationship but also the depth of political integration that is required from member states to make it operational. The Free Trade Area The simplest form of economic integration is FTA. The FTA is the most popular form of economic integration amongst countries forming Regional Trade Agreements, accounting for approximately 90 per cent of them. In this form the member states agree to remove all barriers to trade in either goods or services, or both, between them. In its present theoretical form, artiﬁcial impediments to trade...
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